Last week, Corp Fin issued a statement clarifying the Staff’s position that certain crypto-related mining activities do not involve the offer or sale of securities for purposes of the federal securities laws. This statement descends almost immediately into jargon that’s pretty incomprehensible to those of us who aren’t among the crypto cognoscenti (or at least to me). Fortunately Mayer Brown posted a blog about the statement that is a little easier to understand. This excerpt summarizes the scope of the Staff’s statement:
The statement focuses on the mining of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless, proof-of-work (“PoW”) network, such as Bitcoin and Dogecoin, and are used to participate in, and/or are earned for participating in, such network’s consensus mechanism or otherwise used to maintain and/or earned for maintaining the network’s technological operation and security (such crypto assets, “Covered Crypto Assets” and, such mining activities on a PoW network, “Protocol Mining”). Importantly, the statement is narrowly tailored and only addresses certain types of mining activities. The statement is not dispositive as to whether any specific mining activity involves the offer or sale of a security, which the Division states is a fact-specific inquiry.
The Staff’s position is based on its conclusion that the Covered Crypto Assets aren’t securities under the Howey test, and is limited to (1) mining Covered Crypto Assets on a PoW network; and (2) the roles of mining pools (which involve miners pooling computational resources to increase their chance of success) and pool operators involved in the Protocol Mining process.
Commissioner Crenshaw issued a dissenting statement in which she criticized the logic underlying Corp Fin’s statement and contended that it doesn’t really move the needle in terms of “clarifying” its position, since it still requires everyone to look to the specific facts and circumstances of the particular situation in order to determine whether a security is involved in mining activities.
If watching the Atkins confirmation hearing isn’t your cup of tea, the SEC is hosting a roundtable tomorrow on artificial intelligence in the financial industry. The event includes panels on the benefits, costs, and uses of AI in the financial industry, fraud, authentication, and cybersecurity, AI governance and risk management, and what’s next/future trends. The roundtable will be held at the SEC’s headquarters starting at 9:00 am Eastern and a link to watch the event will be available on the SEC’s website.
It looks like the seemingly endless back-and-forth concerning the Corporate Transparency Act’s reporting requirements may finally be coming to rest. Earlier this month, Meredith blogged about Treasury’s announcement that it would not enforce any penalties or fines against U.S. citizens or domestic companies under the CTA and would propose a rule imposing reporting obligations only on foreign companies. On Friday, FinCEN announced that an interim final rule (IFR) has been adopted implementing this revised reporting regime. Here’s an excerpt from the press release summarizing the rule:
In that interim final rule, FinCEN revises the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.
Thus, through this interim final rule, all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.
If you’re unlucky enough to be a foreign reporting company, well, the U.S. appears to be looking to acquire some new territory, so you may want to ask your home jurisdiction to check out the possibility of becoming part of ‘Murica. Short of that, the announcement says that you’ll be subject to the following reporting deadlines:
– Reporting companies registered to do business in the United States before the date of publication of the IFR must file BOI reports no later than 30 days from that date.
– Reporting companies registered to do business in the United States on or after the date of publication of the IFR have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.
This Seyfarth memo summarizes the guidance contained in the two documents and identifies several specific areas of potential concern, including diverse interview slate policies, employee resource groups with membership restrictions, segregated training and programming, and mentoring or networking programs limited to members of protected classes.
It also notes that the EEOC guidance emphasized that no general business interest in diversity will justify race-motivated employment actions, and also clarified the EEOC’s position on how Title VII applies to other aspects of workplace DEI initiatives and practices. Here’s what the memo has to say about the EEOC’s positions on “reverse discrimination” and mixed motives:
Broad Application of Title VII and Rejection of the Concept of “Reverse” Discrimination: The EEOC’s technical assistance confirms the well-understood principle that Title VII’s protections “apply equally to all workers” and that “different treatment based on race, sex, or another protected characteristic can be unlawful discrimination, no matter which employees or applicants are harmed.” The EEOC rejects the concept of ‘reverse discrimination,’ stating that “there is no such thing as ‘reverse’ discrimination; there is only discrimination.”
Mixed Motive: The EEOC’s technical assistance confirms its position that the mixed-motive standard under Title VII applies fully to DEI-related employment decisions. The document states plainly: “An employment action still is unlawful even if race, sex, or another Title VII protected characteristic was just one factor among other factors contributing to the employer’s decision or action.” It explicitly rejects the argument that discrimination occurs only when protected characteristics are the “but-for” or deciding factor, making clear its position that even partial consideration of race, sex, or other protected characteristics in DEI initiatives can create Title VII liability.
The memo says that the EEOC’s guidance likely foreshadows its upcoming enforcement initiatives, and recommends that companies whose current or recent DEI practices may run afoul of this guidance should consider conducting privileged reviews of those initiatives.
Hey gang, our colleague Meaghan Nelson continues to blog up a storm over on “The Mentor Blog,” which is available to members of TheCorporateCounsel.net. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply clicking the link on the left side of the blog and entering their email address. Here are some of Meaghan’s recent entries:
You’ll love Meaghan’s stuff – she brings a unique perspective to our team and is confronting many of the same challenges a lot of our members face in juggling a career in corporate law with the responsibilities of a young family. She’s also very funny. I don’t usually pat myself on my back for my brilliant ideas (okay, that’s a lie), but I’m particularly pleased with myself for deciding to resurrect The Mentor Blog and to put Meaghan at its helm. It’s never been better!
One of the things that’s differentiated the AI boom from the dotcom extravaganza of the 1990s is the fact that most of what’s been going on in AI has been taking place in large, well-established public companies like NVIDIA. So far, we haven’t seen startup AI players try to tap the public capital markets through IPOs, but CoreWeave’s recent Form S-1 filing suggests that may be about to change.
CoreWeave is a cloud-computing company based in Livingston, New Jersey, that specializes in providing cloud-based graphics processing unit (GPU) infrastructure to artificial intelligence developers (okay, so I lifted that verbatim from Wikipedia – it’s a lot less fizzy than what’s in the S-1 and I can almost understand it). Anyway, the company is one of the fastest growing AI cloud infrastructure providers, and over the past three years, its revenue has risen from less than $16 million to nearly $2 billion. CoreWeave’s losses have grown even more impressively over that period, rising from $31 million in 2022 to $937 million in 2024 – which, with apologies to Gilbert & Sullivan, makes it the very model of a modern IPO candidate.
Staggering losses aside, this IPO filing is a lot less silly than what we’re accustomed to seeing from the previous generation of Unicorns. There’s no goofy mission statement or founder’s letter or unintentionally hilarious (see 2nd blog) related party transactions disclosure. Instead, as befits something new under the sun, the prospectus kicks off with four pages of “Selected Definitions” designed to acquaint investors with the jargon-rich world of AI cloud computing and includes nearly 60 pages of “Risk Factors.” While most of what’s in the Risk Factors section is pretty much what you’d expect, this one on negative publicity caught my eye because of the way they hit the whole “hypothetical risk factor” issue head on in the language I’ve highlighted below:
If negative publicity arises with respect to us, our employees, our third-party suppliers, service providers, or our partners, our business, operating results, financial condition, and future prospects could be adversely affected, regardless of whether the negative publicity is true.
Negative publicity about our company or our platform, solutions, or services, even if inaccurate or untrue, could adversely affect our reputation and the confidence in our platform, solutions, or services, which could harm our business, operating results, financial condition, and future prospects. Harm to our reputation can also arise from many other sources, including employee misconduct, which we have experienced in the past, and misconduct by our partners, consultants, suppliers, and outsourced service providers. Additionally, negative publicity with respect to our partners or service providers could also affect our business, operating results, financial condition, and future prospects to the extent that we rely on these partners or if our customers or prospective customers associate our company with these partners.
Another thing about the offering that’s worth noting – it doesn’t look like multi-class structures are going the way of the Dodo anytime soon. CoreWeave has Class A, Class B, and Class C shares, and another high-profile IPO filing from last week, StubHub, has Class A & Class B shares. Finally, these filings include a bit of good news for embattled Delaware – both of these companies are incorporated there.
Woodruff Sawyer recently blogged about how the burgeoning use of AI technology is influencing the market for property & casualty, cyber and D&O insurance. Here’s what the blog has to say about AI’s implications for D&O coverage:
AI’s impact on D&O insurance is multifaceted. The rapid growth and hype around AI have led to inflated valuations for some AI companies, raising concerns about potential securities class actions if these companies fail to deliver on their promises. New laws and regulatory scrutiny around AI—like what has been seen with privacy regulations—could lead to fines and penalties, further increasing D&O risk.
Given these dynamics, companies should reassess their D&O coverage, particularly the limits and scope of coverage for derivative claims. These claims, often filed when directors are accused of failing in their oversight roles and causing significant financial harm to the company, can result in substantial settlements. In most states, including Delaware, companies cannot indemnify directors for settlement in derivative cases—if adequate D&O coverage is not in place, the directors would be responsible for paying the settlement out of pocket.
The blog says that D&O underwriters will scrutinize the board’s oversight of AI risk and whether the company uses AI in a thoughtful manner. AI disclosures will also be front and center in the underwriting process, due to concerns about companies’ “AI-washing” to pump their stock market valuation.
Interested in more on AI risk management and compliance issues? Check out our free AI Counsel Blog, where we highlight useful resources and share guidance on best practices for front-line risk management and compliance professionals who are dealing with the challenges of artificial intelligence, cyber, and other emerging technologies. Be sure to click on the “subscribe now” button to ensure that you receive our latest blogs in your inbox!
Earlier this month, the American Bar Association issued a statement on actions by the Trump administration that the ABA believes have undermined the rule of law and the legal profession. Here are the concluding paragraphs of that statement:
We reject efforts to undermine the courts and the profession. We will not stay silent in the face of efforts to remake the legal profession into something that rewards those who agree with the government and punishes those who do not. Words and actions matter. And the intimidating words and actions we have heard must end. They are designed to cow our country’s judges, our country’s courts and our legal profession. Consistent with the chief justice’s report, these efforts cannot be sanctioned or normalized.
There are clear choices facing our profession. We can choose to remain silent and allow these acts to continue or we can stand for the rule of law and the values we hold dear. We call upon the entire profession, including lawyers who serve in elected positions, to speak out against intimidation. We acknowledge that there are risks to standing up and addressing these important issues. But if the ABA and lawyers do not speak, who will speak for the organized bar? Who will speak for the judiciary? Who will protect our system of justice? If we don’t speak now, when will we speak?
The American Bar Association has chosen to stand and speak. Now is the time for all of us to speak with one voice. We invite you to stand with us.
I’m in the twilight of my career and no longer face the pressures associated with practicing in a law firm or corporate law department, so my taking a stand on this issue is pretty far from courageous. Still, for what it’s worth, I believe the administration’s actions are inconsistent with the Constitution and the laws of the United States that I took an oath to support when I became a lawyer, and I’m adding my name to those much braver members of the profession who have already endorsed the ABA’s statement.
Yesterday, the Corp Fin Staff released another set of Compliance & Disclosure Interpretations updates. As the Goodwin Public Company Advisory blog highlighted yesterday, the big news here is that four CDIs were updated or withdrawn to allow all Form S-3 issuers, not just WKSIs, to go effective on Form S-3 registration statements between the Form 10-K filing and the filing of the proxy statement containing forward-incorporated Part III disclosure.
Securities Act Forms CDI 114.05 & Securities Act Rules CDI 198.05 were both updated, and related Securities Act Forms CDI 123.01 was withdrawn. (That CDI previously stated that a registrant filing a non-automatically effective Form S-3 had to either file its proxy or include Part III information in its 10-K before the Form S-3 was declared effective to have a complete Section 10(a) prospectus.) Plus Regulation S-K CDI 117.05 was updated to remove the reference to the withdrawn CDI.
The CDIs also reflect one other substantive change. The Staff added a CDI on Form 20-F (Exchange Act Forms CDI 110.10) that reads as follows:
Question: Item 16F(a) of Form 20-F requires disclosure about a change in a registrant’s certifying accountant. Instruction 2 to this item states the disclosure called for need not be provided if it has been “previously reported,” as defined in Exchange Act Rule 12b-2. The rule states that information has been “previously reported” if it has been reported in, among other things, a report under Exchange Act Sections 13 or 15(d). Would disclosure about a change in accountant that otherwise satisfies the requirements of Item 16F(a) of Form 20-F but has been included in a Form 6-K be considered “previously reported,” such that it does not need to be included in Form 20-F?
Answer: Yes, if the Form 6-K contains disclosure that satisfied the requirements of Item 16F(a), then it is considered “previously reported” and is not required to be included in Form 20-F. [March 20, 2025]
Finally, three CDIs were withdrawn to clean up old references to the share repurchase disclosure modernization rulemaking.
Transition to EDGAR Next starts on Monday! That means the new EDGAR Filer Management website will go live, and filers may begin to enroll. There are multiple important dates to remember for this transition, so here are some more details from the staff of the EDGAR Business Office for a quick refresher:
Amended Form ID will be effective and available on the dashboard.
Enrollment will open. Filers need current passphrase and CCC to enroll. Prior to March 24, 2025, filers without a current passphrase should obtain a new passphrase and filers without a current CCC should obtain a new CCC.
Enroll in EDGAR Next between March 24, 2025 and September 12, 2025 to avoid interruption in filing.
Compliance is required September 15, 2025 in order to file on EDGAR.
The implications of point 2 above are significant! This means that entities and individuals will need to complete the new Form ID application process beginning Monday. Also, just to clarify, points 4 and 6 mean that the current EDGAR platform and EDGAR Next will be running simultaneously between Monday and September 12.
If you feel like you’re already behind when it comes to EDGAR Next and missed Tuesday’s Section16.net webcast “How to Prepare for EDGAR Next,” do yourself a favor and listen to the archive (now available!) and peruse the slides. The speakers — NASPP’s Barbara Baksa, McKesson’s Jim Brashear and HPE’s Linda Epstein — are undoubtedly ahead of the curve and shared tons of practical tips that will help make your EDGAR Next journey a smooth(er) one.