Yesterday, the “President’s Working Group on Digital Asset Markets” – which was established by Executive Order back in January – released a 166-page, multi-agency report that is intended to provide a framework for regulatory oversight and allow more people to access “digital asset markets.”
Page 44 of the report summarizes in a handy bullet-point list all of the actions the SEC and CFTC have already taken this year on crypto issues. In addition to recommending that Congress pass legislation for a crypto regulatory framework, which would build on the legislation that was recently adopted for stablecoins, the working group recommends that the agencies coordinate together and do even more. For example, for the SEC, the report recommends that it consider using its rulemaking & exemptive authority to:
• Establish a fit-for-purpose exemption from registration under Section 5 of the Securities Act for securities distributions involving digital assets.
• Establish a time-limited safe harbor or exemption from certain securities law requirements for transactions involving digital assets that may be subject to an investment contract because they are not yet fully functional or associated with a sufficiently decentralized network to allow for progressive functionality or decentralization.
• Establish a safe harbor for certain airdrops from characterization as “sales” under Section 2(a)(3) of the Securities Act or an exemption from the corresponding registration requirements under Section 5 of the Securities Act. Consider also an exemption for distributions of digital assets by decentralized physical infrastructure (DePIN) providers in securities transactions for purposes of rewarding participation in DePIN networks, as well as distributions of certain offerings.
The report also envisions a tailored disclosure regime for digital asset issuers:
Issuers of digital asset securities, and of securities involving digital assets, should be subject to disclosure requirements that are appropriately tailored to address the novel characteristics of digital assets and blockchain technology. Digital asset trading platforms, brokers, dealers, and other CFTC registered intermediaries that make available non-security digital assets should be required to disclose any such information that the CFTC determines to be appropriate for non-security digital assets.
Further, these parties should not be subject to ongoing disclosure requirements other than those required by Congress in future legislation or by the relevant market regulator. Furthermore, any such ongoing disclosures should be fit-for-purpose and guided by publicly available information, such as open-source code, whenever possible.
The report’s other themes are summarized in this fact sheet, and SEC Chair Paul Atkins issued this statement applauding the recommendations. Buckle up!
The bitcoin treasury strategy pioneered by billionaire Michael Saylor’s MicroStrategy, which now calls itself Strategy, remains dominant: more than 70 public companies around the world currently hold over $67 billion worth of the asset. But the sheer velocity of capital deployment for crypto treasuries at large is jaw-dropping. Since April, more than 30 public companies have announced plans to adopt similar strategies, targeting about $19 billion in capital raises, according to Elliot Chun of Architect Partners, a Palo Alto-based financial advisory firm.
That’s from a Forbes article published earlier this month – so the number is higher now, and it’s hard to visit any news site that is even tangentially related to business or finance and not run into an article about the “crypto treasury” craze. (I say “crypto” here because in the time since that Forbes article was written, there have been deals that focused on currencies other than bitcoin.) This newsletter from Bloomberg’s Matt Levine explains how the “path to public” for the crypto entrepreneurs involves – what else? – SPACs:
…we talk a lot around here about small public companies that get gobbled up by crypto entrepreneurs so they can pivot to being crypto treasury companies. But this is inefficient and haphazard: If you want to take a pot of crypto public on the stock exchange, why should you have to find some defunct public biotech company, negotiate with its executives, strike a deal, lay off the biotech researchers, etc.? Why shouldn’t an investment bank just be in the business of supplying pristine public listings, so instead of pivoting some biotech/toy/liquor/whatever company to crypto, you can just start with a blank slate?
Of course banks are in this business. This business — the business of supplying a publicly listed shell company — is the SPAC business (special purpose acquisition companies).
If you’re working on these deals, you may be having déjà vu from the SPAC heyday. Lucky you! Of course, there may be a couple differences this time around. For one, you’ll need to consider the SPAC disclosure rules that went into effect last summer – with the aim to make SPAC/de-SPAC deals more akin to traditional IPOs. But there are a couple of potentially mitigating factors there:
– Some deal teams had baked in some of these requirements already as a matter of practice.
– SEC leadership has changed! I haven’t heard too much specifically on how the Staff proceeds on SPAC-related reviews under the new regime, but with the crypto angle, it wouldn’t be surprising if this falls under the directive in yesterday’s Working Group Report to encourage SEC registrants to “engage in innovative new business models.”
The other thing that adds new wrinkles is that for many of the “crypto treasury” companies, in addition to not being a traditional business in the first place, this isn’t a buy & hold strategy for the crypto. This Bloomberg article explains how the new players are “chasing yield.” That sounds complicated to explain to some investors and various regulators – maybe even to some of the company’s directors! The companies are including a whole new category of risk factors, which I imagine were fun for the first few trailblazers to draft and continue to require careful reading for each company’s circumstances.
Lastly, some people are questioning how long the “crypto treasury / SPAC” play can last. “How is the market not already saturated?” I am not sure whether that’s a distinguishing feature of this new twist, or something that makes it just like the last round, where very similar questions seemed to spark a level of FOMO that only prolonged the trend.
If today’s crypto theme isn’t your cup of tea, I’ll leave you with this recent post from our colleague Meaghan Nelson on The Mentor Blog:
David Hamm, Former SVP, Deputy GC at Summit Materials, is back at it offering insightful and free content on LinkedIn—this time in article form: “Practical Wisdom for Getting Board Support Right.”
His article highlights the crux of supporting the board: “For legal professionals and corporate leaders alike, doing it well means more than just checking boxes—it means building trust, anticipating needs, and mastering a rhythm that allows your board to focus on the business, not the process.”
David offers tips in the following areas:
Calendar planning
Agenda management
Preparing board materials
Meeting execution
Managing post-meeting tasks and deliverables
And more
In addition to everything that David mentions, you also have to be thoughtful about meeting your board’s expectations where they are. If you’re a GC/Corporate Secretary at a startup or even a later tech company, for example, you’ll likely be servicing a much more casual, tech-savvy board and so you need to avoid being overly process-oriented. On the flip side, if you’re the Corporate Secretary or assisting that function and your company is public and has been around for decades, you might have a more formal board dynamic and board members that would balk at an online board portal or digital D&O questionnaires.
A key part of being a thoughtful corporate secretary is reading the room and adjusting to your company’s board members so they can “focus on the business, not the process”.
For more practical tips related to the corporate secretarial function, check out our recently updated Corporate Secretary’s Department Handbook, which is part of our In-House Essentials Treatise.
For intel on supporting your board through today’s latest issues, make sure to register for our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences.” One of our sessions covers “Your 2026 Board Agenda” – Kirkland’s Pippa Bond, KPMG’s Rani Doyle, and Cooley’s Brad Goldberg will be discussing perennial and emerging issues boards need to focus on right now and suggestions to improve understanding and oversight – so you are not leaving major risks to chance. Email us at info@ccrcorp.com or call us at 800-737-1271 today to reserve your seat. You can also register online.
Last week, Staff from the SEC’s Division of Economic and Risk Analysis posted this reminder about double checking XBRL tags on “public float” figures. Here’s an excerpt:
Staff recently conducted an assessment on the public float data in Forms 10-K for the fiscal year ending in 2024. Staff has continued to observe scaling errors in certain filings. For example, one filer reported a public float of $78 million in its HTML filing, but reported a public float of $78 in its XBRL data. Staff also observed inconsistencies in the date information between the HTML filing and the tagged data. For example, certain filers disclosed the public float date in the HTML filing as the last business day of the most recently completed second fiscal quarter but tagged the public float value with the fiscal year end date.
Filers should carefully review their public float data to ensure accuracy and consistency. For more data quality reminders, see Staff Observations and Guidance.
This reminder might look familiar to folks who regularly read this blog or track Staff announcements – I blogged about DERA’s prior notice on this specific public float issue several years ago, and a sample comment letter from Corp Fin that raised the broader issue of scale in XBRL tags. And we’ve blogged about other aspects of XBRL requirements (too) many times.
This latest announcement is a good reminder that while disclosure lawyers may not be on the front lines of the tagging process, it’s worth getting slightly outside your lane here – since the QA is apparently falling through the cracks for some companies. We have a very helpful checklist for members that identifies all of the disclosures that are required to be tagged in various forms. If you aren’t already a member with access to that resource (and many others), make sure to sign up today by calling 800.737.1271, emailing info@ccrcorp.com, or visiting our membership center.
Glass Lewis has launched its annual policy survey – joining ISS, which Dave blogged about last week. The survey is geared towards investors – since that’s the customer base for the proxy advisor – but it’s open to anyone willing to spend 45 minutes of their time. Glass Lewis’s announcement gives this additional color:
The goal of this survey is to inform Glass Lewis’ policy development along with our processes and understanding of the governance landscape by gathering a wide range of perspectives. The topics included should be relevant to all parties involved in corporate governance. However, some of the questions are directly related to proxy voting, and their phrasing reflects Glass Lewis’ role supporting investors in their proxy voting and broader stewardship work, as well as our understanding of investor expectations.
We have indicated where questions may not be applicable to non-investors, but nonetheless welcome their perspective on these topics. In addition, we have indicated where questions are relevant to specific markets.
The survey should be understood in the context of Glass Lewis’ approach to proxy research, which combines broad initial filters, used to identify outliers based on market best practices and investor expectations, with nuanced, case-by-case analysis. We do not employ (nor does this survey seek to establish) one-size-fits-all rules in determining ultimate vote recommendations – every recommendation reflects the company’s unique circumstances.
Responses will be accepted until 5pm PT on September 15th.
Here’s something Meredith wrote yesterday on The Proxy Season Blog: Last week, Dave shared that Glass Lewis is taking legal action following the enactment of Senate Bill 2337, which he blogged about back in June. We now know that ISS filed a lawsuit the same day. This alert from Meridian Compensation Partners has more on the challenges:
Glass Lewis and ISS allege the Texas law is unconstitutional by violating their First Amendment right to advise clients even if the state does not agree with the advice.
In addition, both proxy advisors claim that the Texas law will (i) impose significant costs on their business and (ii) require the firms to provide misleading warnings to their clients that their proxy advice was against their clients’ financial interests. Glass Lewis further claims that the law exposes its clients to the risk of unwarranted litigation by private parties and the Texas Attorney General. Moreover, ISS alleges the law is designed to protect corporate directors and will harm shareholders whose votes are an “important check and balance” against boards.
Meridian expects the Texas court will rule on the cases before the law takes effect in September.
After reading over the weekend that DOGE is using an AI tool to identify thousands of rules that could be ripe for elimination, it struck me that the government is really serious about this “deregulation” thing. While DOGE’s presentation about the tool doesn’t call out the SEC as a case study, it does say there’s a September 1st goal for all agencies to complete the “DOGE AI Deregulation List.” The overall goal, according to DOGE, is to delete 50% of all federal regulations.
At this point, we can only speculate what might be on the “delete list” at the SEC. My crystal ball says there could be a couple executive compensation disclosure rules – but we don’t yet have a Reg Flex agenda that shows Chair Atkins’ top priorities.
What do the tea leaves say? In addition to recent PCAOB changes, Matt Kelly at Radical Compliance pointed out that a recent GAO report about the money companies are spending to comply with Section 404 of the Sarbanes-Oxley Act could be laying the groundwork for reform of that statute. The GAO analysis found what everybody already knows, which is that:
Larger (nonexempt) companies generally incurred higher overall Sarbanes-Oxley compliance costs, but these costs were proportionally more burdensome for smaller (exempt) companies. Nonexempt companies (generally those with $75 million or more in publicly held shares or companies not qualifying as emerging growth companies) had higher costs (19 percent) than their exempt counterparts, according to GAO’s analysis of a nongeneralizable sample of 96 companies.
Companies generally experienced increased audit costs when they transitioned from exempt to nonexempt status (became subject to auditor attestation because their public float or revenues grew above exemption thresholds). Audits of nonexempt companies involve more work because the incremental auditing standards that apply to them require more planning, control testing, and quality review. GAO’s analysis found a median increase of $219,000 (13 percent) in audit fees in the year a company became nonexempt. Audit fees generally leveled off in the year after transition.
Some aspects of Sarbanes-Oxley could be easy to refine. As John recently shared, the Society for Corporate Governance had suggested improvements to auditor attestation requirements as part of its recent comment letter on filer status & scaled disclosure, which would make things easier for some smaller companies.
As Matt highlights on his blog, the cost savings from a dramatic overhaul are less certain. The GAO report also cites a correlation between weak internal controls and intentionally misleading reports – and we know that even in this deregulatory environment, the SEC is still very interested in preventing and punishing fraud.
It’s rare these days to see members of Congress agree on something. But as this Mayer Brown blog reports, the House passed several bills last week on capital formation – with bipartisan support! Here’s an excerpt:
– H.R. 3343, the Greenlighting Growth Act, would establish that an EGC, as well as any issuer that went public using EGC disclosure obligations, would only need to provide two years of audited financial statements even when such EGC acquires another company.
– H.R. 3382, the Small Entity Update Act, would direct the SEC to conduct a study, followed by a rulemaking consistent with the results of such study, to define “small entity” under the Regulatory Flexibility Act (the “RFA”). Currently, the RFA requires federal agencies to consider the impact of regulations on small entities (including small businesses, small governmental units and small non-profit organizations). The RFA would mandate that agencies conduct regulatory flexibility analyses, explore less burdensome alternatives and explain their choices, especially when a particular rule is expected to have a significant economic impact on a substantial number of small entities.
– H.R. 3395, the Middle Market IPO Underwriting Cost Act would require the Comptroller General, in consultation with the SEC and FINRA, to study and report on the costs encountered by small- and medium-sized companies when undertaking IPOs.
This builds on legislation that passed the House last month. And as Dave shared last week, the House of Representatives also passed a bill – H.R. 3339 – that would allow more people to qualify as “accredited investors” under Regulation D.
There may be even more on tap, but it’s at the earlier stages. The House Financial Services Committee has advanced legislation that would lower the WKSI threshold and require the SEC to give more consideration to small companies when writing rules, among other things. Last year, the full House approved much of this as part of its effort to build on the JOBS Act of 2012, but the legislation didn’t advance in the Senate.
Earlier this month, I joined Cooley’s capital markets team as a Senior Strategic Advisor. Like the headline says, being surrounded by people at the heart of the action with deal flow, emerging issues and fast-moving clients feels to me like being a kid in a candy shop. Not to mention, every single person has given me such a warm welcome! For longtime members and readers here at TheCorporateCounsel.net, you’ll know that Broc & I are also thrilled to team up once again.
Of course, something that was important to me with this move was to be able to continue in my role as Senior Editor of TheCorporateCounsel.net and CompensationStandards.com. Thankfully, I’ll be sticking around and continuing with the rest of the awesome CCRcorp team to bring practical guidance to our community. Thanks to those who reached out to say they hoped that would be the case and to everyone who sent notes of encouragement during this time of transition! Hope to see many of you in Vegas in a few months!!!
In light of Andreessen Horowitz’s loud DExit a few weeks ago, late-stage companies are giving serious thought to the “where to incorporate” decision. Some public companies are also more open to exploring reincorporation than they would have been a year ago, especially if there are controlling shareholders in the mix.
This Cooley memo gives a thorough recap of where things stand and factors that companies are considering when deciding whether to (re)incorporate in Delaware versus Nevada or another state. It also summarizes important process issues for public and private companies to map out before getting too far down the path of changing domicile. Here’s an excerpt on that piece:
– While a controlled public company may be able to effect a move with board approval and written consent (see, for example, Dropbox’s information statement), public companies without a controlling stockholder will likely have to obtain a full stockholder vote through a proxy solicitation at an annual or special meeting. This can be onerous and time-consuming (not only to prepare the proxy statement but also to solicit the votes) and comes with the risk that stockholders will not ultimately approve the move.
– The company must determine which consents it will need in connection with a reincorporation and review its governing documents, contracts, equity plans and other documentation to ensure it is soliciting and receiving all required consents to move.
– A public company will likely need to establish a special committee to evaluate whether and where to reincorporate, have a clear rationale for why a reincorporation is good for the company, and ensure the board understands and is supportive of this rationale. Is the company trying to protect its culture of innovation? Does a different state give the board more certainty in corporate decision-making without the specter of litigation or a second-guessing of board decisions? And is this rationale ultimately compelling to the company’s stockholders?
– Keep a clear record of the board’s consideration of the decision, and ensure the board has reviewed and adequately evaluated both the benefits and risks of a move. Bring in experts and/or legal advisers to help clarify issues or considerations.
– Statutory appraisal rights of stockholders under DGCL Section 262 apply in the context of a conversion of a Delaware corporation to a foreign corporation. In the public company context, the DGCL so-called “market exception” (whereby appraisal rights do not apply to any class of stock listed on a national securities exchange or held of record by more than 2,000 stockholders) usually exempts public companies from stockholder appraisal rights in a conversion. However, the market exception does not apply to private companies, and stockholders will most likely have appraisal rights in connection with a private company conversion. Such rights can be waived, but serious consideration should be given to appraisal rights and the related process for a private company considering a reincorporation away from Delaware. Public companies with dual-class structures where a high-vote class is not listed on a public market will also have to consider appraisal rights with respect to that high-vote class.
– Proxy advisory firms may also weigh in on redomiciliation proposals by public companies. While both Glass Lewis and Institutional Shareholder Services (ISS) review such proposals on a case-by-case basis, Glass Lewis generally recommends voting against a redomiciliation if it results in a decline in shareholder rights, has minimal financial benefits and offers significantly weaker shareholder protections, while ISS will recommend voting against a proposal if the move would result in a deterioration of shareholder rights or governance standards.
It’s too early to know how much market share Delaware may lose in the coming years, but it’s safe to say that the question of where to incorporate has captured the attention of executives & directors. That means the First State is no longer a “no brainer.” Right now, it’s one of a few leading options that corporate lawyers need to understand & be prepared to work with.
