The days of big whistleblower payouts appear to be on pause at the SEC, according to this Bloomberg Law article:
The commission, now with a Republican majority, denied awards in 31 consecutive orders issued between April 21 and July 15 – covering at least 55 different tipsters, Bloomberg Law found in a review of all 65 final orders issued this year. It’s the longest drought in the history of the program, which was created by the Dodd-Frank law of 2010 to encourage tips about financial wrongdoing.
Approximately $20 million has been awarded so far this year, including three awards totaling about $9 million that the agency made on July 16, two days after Bloomberg Law asked it about the lack of approvals.
The 31-0 trend is pretty striking on the SEC’s page for final orders on whistleblower claims – with the “denied” entries going on and on for several months.
The Bloomberg article says that the decline is partly due to the fact that the (much leaner) Staff is working through a backlog of questionable claims. Additionally, the Commission is applying whistleblower restrictions more strictly when it comes to people publishing their tips online or sharing them with media before coming to the SEC.
While companies obviously want to avoid any type of whistleblower or investigation if they can, it may be good news that there’s more incentive these days for disgruntled folks to go quietly to the regulator instead of also airing their grievances all over the interwebs. The downside for a company that is the subject of a whistleblower tip is that the SEC can quietly build a case and choose when to surprise you with the news.
In this 28-minute podcast, Meredith interviewed Ani Huang from the HR Policy Association and Center On Executive Compensation and Dr. Anthony Nyberg from the University of South Carolina about a report they recently co-authored on CEO succession planning.
Their research focused on 10 of the most common pitfalls in CEO succession, the risks they pose to companies and the role of Chief Human Resources Officers in supporting boards through leadership transitions. The info goes beyond CHROs, though – it’s also useful to anyone supporting boards with succession planning. In the podcast, they discussed:
1. Why the CHRO can be even more critical than the outgoing CEO in ensuring an effective succession planning process
2. What makes or breaks CHRO effectiveness in succession planning
3. Gaining buy-in on the importance of succession planning when a transition isn’t imminently expected
4. The importance of starting early – even on day two of a new CEO’s tenure
5. Identifying “future-fit capabilities” and revisiting the CEO profile as business needs evolve
6. Defining the role of the incumbent CEO in the succession planning process and avoiding the CEO “preordaining” a successor
7. Deepening the board’s engagement and understanding so succession planning doesn’t become a “check the box” exercise
8. Getting boards meaningful exposure to internal talent to evaluate critical competencies
9. Setting up the successor and the board for success when the transition happens
10. Developing internal talent and navigating challenges that arise when candidates are asked to stretch beyond core competencies
11. The criticality of considering external talent, even when there are many reasons to promote internally
12. Taking that first step.
If you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share, email John at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com.
Yesterday, ISS announced the launch of its Annual Global Benchmark Policy Survey. The ISS announcement notes:
This year’s survey begins with core governance topics, including shareholder rights in relation to multi-class capital structures, considerations with regard to shareholder proposals, and board governance, with a focus on director overboarding. It then solicits views on both non-executive director pay and on executive compensation, including equity time-based vs. performance-based long-term executive incentives, say-on-pay responsiveness policy in the U.S., modification or removal of ESG metrics for in-flight awards in the U.S. and Canada, and hybrid equity incentive plans in the United Kingdom. The survey then covers evolving potential governance and risk management issues with regard to artificial intelligence, biodiversity, cybersecurity, and human rights. Finally, the survey invites views on board diversity and on shareholder proposals on diversity, equity and inclusion topics in the U.S.
In addition to the survey, ISS will be conducting a series of “regionally-based, topic-specific roundtable discussions and other engagements.” The survey is scheduled to close on August 22, 2025, at 5:00 p.m. ET.
Glass Lewis has announced that it is taking legal action following the enactment of Senate Bill 2337, which I blogged about back in June. Glass Lewis noted in an email sent to clients:
Glass Lewis always tries to work constructively with policy makers. We attempted that here, but Texas legislators chose not to engage with us or the broader institutional investor community in developing their new, unprecedented law.
Therefore, on July 24, 2025, Glass Lewis filed a complaint in the U.S. District Court for the Western District of Texas against Ken Paxton, the Texas Attorney General. The complaint seeks an order declaring S.B. 2337 unlawful and an injunction against its enforcement by the Attorney General. At the same time, Glass Lewis filed a motion for preliminary injunction asking the court to enjoin, or stop, enforcement of the law before it becomes effective on September 1, 2025.
We assure you that this decision was not made lightly. However, given the law’s extreme measures and serious flaws, we believe that trying to comply with it would impose significant and pointless costs on us and our clients, force us to provide highly misleading warnings to our clients, as well as subject Glass Lewis and its clients to the risk of unwarranted litigation by private parties and the Texas Attorney General. We therefore felt compelled to take this step to defend our ability to continue to serve our clients in the manner they expect.
It is perhaps not too surprising that yet another effort to regulate proxy advisory firms will become mired in litigation.
Before hightailing it out of Washington for the summer, on Monday the House of Representatives passed The Equal Opportunity for All Investors Act of 2025, which, if enacted, would direct the SEC to establish a test that individuals can take to qualify as an “accredited investor” as defined in Regulation D. As contemplated by the Act, the SEC’s accredited investor test would evaluate a prospective investor’s understanding of topics such as financial statements, risks associated with investments in private companies and different types of securities.
If this sounds familiar, the House passed a similar bill back in 2023. The push for an accredited investor exam that would go beyond the current wealth/income criteria for natural persons is part of a Republican effort to democratize access to private offerings.
Earlier this week, I noted that the SEC had appointed an Acting Chair for the PCAOB to serve following the departure of Erica Williams. Yesterday, Chairman Atkins issued a statement, on behalf of the Commission, soliciting candidates for all five Board positions, including the Chairperson, of the PCAOB. The statement notes:
The Act requires that PCAOB Board members be “appointed from among prominent individuals of integrity and reputation who have a demonstrated commitment to the interests of investors and the public, and an understanding of the responsibilities for and nature of the financial disclosures required of issuers under the securities laws and the obligations of accountants with respect to the preparation and issuance of audit reports with respect to such disclosures.”
Each Board seat is associated with a set five-year term; any nominee selected by the Commission to fill a seat will serve for the remainder of the term associated with that seat. If eligible, the Commission may reappoint such person to a second, full term. Any Board member, including the Chairperson, may be appointed to any seat. The Chairperson’s seat may be filled by either a CPA or a non-CPA, though any member who is a CPA is eligible to serve as Chairperson only if that individual has not been a practicing CPA for five years preceding possible appointment as Chairperson.
The statement from Chairman Atkins further notes that the PCAOB Board member selection process is administered by the SEC’s Office of the Chief Accountant. Submissions should be emailed to the SEC and the deadline for submissions is August 25, 2025.
As John noted back in March, the SEC voted to discontinue it defense of the climate disclosure rules in litigation pending in the U.S. Court of Appeals for the Eighth Circuit. Liz indicated back in April that state intervenors filed a motion to hold the case in abeyance, and on April 24, 2025, the Eighth Circuit granted the intervenors’ motion to hold the litigation in abeyance. In the order granting the motion, the Eighth Circuit directed the SEC to file a status report within 90 days advising whether the SEC intends to review or reconsider the rule. The court stated that if the SEC determines “to take no action, then the status report should address whether the Commission will adhere to the rules if the petitions for review are denied and, if not, why the Commission will not review or reconsider the rules at this time.”
The SEC filed its status report yesterday, and Commissioner Crenshaw was not happy with what it said. In a statement, Commissioner Crenshaw noted: “The Commission has effectively ignored the Court’s order and thrown the ball back at the Court. The Court should decline to play these games.” She further stated:
The Court “directed” the Commission to advise whether it “intends to review or reconsider the [R]ules at issue in this case.” And, if the Commission has determined to take no action, the Court ordered the Commission to explain whether it “will adhere to the [R]ules if the petitions for review are denied and, if not, why it will not review or reconsider the [R]ules at this time.”
The Court’s directive was straightforward; our answer is not.
The Commission’s Status Report, filed today, states plainly enough that it has no intention of revisiting the Rules at this time. That, however, is where our responsiveness ends. The Status Report goes on to argue that we cannot expound on what the Commission’s future plans might be in the event the rulemaking petitions are denied, because we would be “prejudging” those policy decisions. And, the Status Report explains, any future rulemaking should benefit from a court ruling on our statutory authority.
We also weigh in on a number of questions that the Court did not ask of us – for example, we opine that there are “no obstacle[s]” to reaching the merits of the case and that a “live controversy” remains.
This purported response is wholly unresponsive.
It remains to be seen what the Eighth Circuit will do in response to the SEC’s status update, but needless to say, it appears that no resolution is in sight for the future of the climate disclosure rules.
Our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” are less than three months away, and you have until tomorrow to take advantage of our “Early Bird” rate, which is a 20% discount on the single in-person attendee fee. You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
With all that is going on these days, you do not want to miss our October Conferences, which are taking place on October 21 and 22 at The Virgin Hotels in Las Vegas (and via webcast). This year, we mark the very special occasion of CCRCorp’s 50th Anniversary with a Welcome Party + CCRcorp’s 50th Anniversary Celebration, which will take place from 4:00 pm to 7:00 pm PT on October 20. After we celebrate, we will cover the wide range of topics highlighted in our agenda and hear from a fantastic group of speakers. I look forward to seeing you at the Conferences!
The question of what to do about “finders” has haunted securities regulators and practitioners for many years, much to the frustration of everyone who has sought to find a solution. For this purpose, “finders” refers to those persons who assist companies with capital-raising activities in private markets without being registered as a broker-dealer. When I was the Chair of the American Bar Association Business Law Section’s Federal Regulation of Securities Committee, I had the good fortune to work with an extraordinarily talented and dedicated Subcommittee that was entirely focused on this one topic, and over the years they have volunteered considerable amounts of time toward addressing this issue and proposing practical solutions. We then saw a glimpse of a path forward five years ago when the SEC took initial action on the issue, but as of today the Commission has not move forward with any regulatory solution.
At the SEC’s Small Business Capital Formation Advisory Committee meeting that took place yesterday at the SEC, the topic of finders was addressed, and the Chairman and Commissioners weighed in with their opening remarks. In his opening statement, Chairman Atkins noted:
We know small businesses seeking to raise less than $5 million in capital can struggle to attract funding from VC firms and institutions. Larger investors are often inclined to step in at later stages of growth, leaving fledgling businesses and their founders with limited avenues to capital. So, after exhausting their own network of family members and friends, businesses in the earliest stage of growth sometimes engage a finder to identify angel investors who target smaller, higher-risk investment opportunities. These finders may provide valuable introductions and facilitate access to much-needed capital. But the regulatory approach to this limited activity, when done outside of a registered broker-dealer, is quite opaque.
Commission staff have issued no-action letters over the years addressing very narrow circumstances under which persons have sought to act as finders without registering as a broker-dealer. Gray areas remain. And a lack of regulatory certainty can deter conscientious participants from helping small businesses to secure financing at a formative stage.
So understandably, many have called on the Commission to provide greater clarity over the years. In 2017, the Treasury Department recommended that the SEC work with the Financial Industry Regulatory Authority (FINRA) and the states to formulate a new regulatory structure. The SEC proposed an exemptive order with a request for comment in October 2020 but has since taken no further action. And the legal gray area that lingers can deprive small businesses of essential resources at a time when thirty-three percent of them launch with less than $5,000 in funding—and nearly forty percent fail due to lack of capital.
Commissioner Peirce raised some questions for consideration in her comments:
Though the 2020 Proposal was never adopted, as you consider the staff’s overview of the 2020 Proposal and discuss issues surrounding finders more generally, please consider the following questions:
1. Is the 2020 Proposal a good starting point for exemptive relief, or would a different approach be more effective? Have market practices changed since 2020 in a way that would warrant changes to the 2020 Proposal?
2. Would the 2020 Proposal, or any action related to providing clarity for finders, benefit from a full rulemaking process, as some commenters suggested in 2020?
3. Is the Committee still supportive of a blanket exemption for finders for offerings under a certain size?
4. Should any exemption for finders cover activities related to secondary offerings?
5. In 2020 commenters were divided on whether an exemption should be provided only to natural persons. Does this committee favor one approach over the other?
Let’s be clear: any activity, whether in the form of an exemption or a dramatically scaled down regulatory structure, remains subject to the antifraud provisions of the securities laws. But a person who merely provides a name and contact information to a company seeking capital in exchange for modest transaction-based compensation does not need to be regulated in the same manner as the largest Wall Street brokerage firms. Finders should be subject to an appropriately tailored set of guardrails that reflect their limited involvement in smaller scale private capital market activities. The 2020 Proposal included a number of exemptive conditions; perhaps there are others that should be considered.
The objective is to minimize burdens on legitimate intermediaries while decreasing the likelihood that illegitimate actors will engage in bad acts. As then-Commissioner Stephen J. Friedman observed forty-five years ago, “all regulation-deregulation decisions involve a trade-off between the abuse-prevention of a prophylactic rule and that rule’s interference with the activities of non-abusers.” In this instance, any framework should open doors to finders who serve as legitimate conduits for investment information flows without imposing disproportionately draconian broker-dealer regulatory standards. I look forward to reviewing the Committee’s recommendations.
Finally, Commissioner Crenshaw offered a different perspective on the Commission’s 2020 proposed exemptive order, stating:
First, we checked important investor protections at the door. The 2020 proposal did not attempt to marry the finder registration exemption with effective guardrails. If the Commission is to engage in policymaking that relaxes registration requirements on finders, then it must consider more than just the potential for issuer access to capital; due consideration must be given to the investor experience.
The 2020 proposal would have allowed finders to: contact potential investors; distribute offering materials; pitch those materials in meetings with issuers and investors; and effectively praise the benefits of that issuer (without expressly “advising” on the investment) – all in exchange for compensation premised on whether they make the sale. This is traditional broker activity.
If the Commission allows finders to engage in traditional broker activity without registration – or even with diminished regulatory responsibilities – we must build in guardrails. The 2020 proposal eschewed broker requirements under Regulation Best Interest (even though the Commission had just made clear in 2019 that Regulation Best Interest applies to accredited investors); it also sidelined books and records, basic sales practice, and examination requirements, among other things. The proposal did not even require finders to notify the Commission of their intent to utilize the exemption. Finders were essentially carved out of our registration regime without any mechanism for us to review whether they were complying with the requirements of the safe harbor, or to evaluate the success of the program.
The need for guardrails is important as the Commission considers expanding access to the opaque private markets, whose securities are less liquid, bear higher transaction costs, and whose valuation practices are less consistent (to name a few potential issues).
But, perhaps more importantly, the need for protections is even greater in this finders’ space which – again and again – has proven itself susceptible to microcap fraud, pump-and-dumps, front-end-fee scams, and other manipulative activity. Indeed, experts have noted that the enforcement actions and litigations exposing finder-related fraud likely represent only “the tip of the iceberg.”
We will be watching to see what recommendation the Small Business Capital Formation Advisory Committee comes up with on the topic of finders and whether the Commission elects to go forward with any efforts to address the regulatory grey areas in this realm.
I was shocked to recently learn when reading the PracticalESG.com Blog that The Conference Board has reported that the number of US public companies issuing sustainability reports fell 52% year over year (January 1–June 30) based on Russell 3000 companies. Editor Lawrence Heim notes in the blog:
Reasons for this include regulatory uncertainty, US governmental policy changes and a fundamental reassessment of sustainability reporting to begin with. Last month, I posed the question
“How often is reporting itself assessed for materiality [to external audiences]? Might be worth considering. I’ve written before about Robert Eccles and Tim Youmans 2015 ‘Statement of Significant Audiences and Materiality’ to specifically clarify the primary intended audiences for ESG reporting and context for materiality determinations – it can also be used to evaluate the importance of voluntary disclosures to begin with.”
Looks like there may be some momentum behind stopping (you physics folks – go ahead and explain that…)
On a related note: As we continue our research project on how companies present financial data on sustainability benefits, I have noticed exactly what The Conference Board found. The number of companies that have not updated reports since 2023 has been surprising.
This trend really took me by surprise, because the clients that I work with have been updating their sustainability reports as usual. If you do not have a subscription to PracticalESG.com, I encourage you to email info@ccrcorp.com to sign up today, or sign up online.
