Here’s something that Meredith blogged last week on DealLawyers.com:
Sidley recently analyzed all late-stage director contests at Russell 3000 companies in the last eight years — which includes five years pre-UPC and three years post — to understand the impact of the SEC’s universal proxy rule on contested elections. As these excerpts from their report show, the assumption that UPC would make it easier for activists to win seats didn’t exactly come to fruition as expected. The impact has been more nuanced.
The “floor” on activists’ electoral success has risen. At least one activist nominee was elected in 48% of UPC elections, up from 39%. Half of these successes have been limited to a single seat, an increase from 10% to 24% of total elections.
The “ceiling” on activist success has collapsed. Shareholders have supported at least half of the dissident slate in only 24% of UPC elections, down from 39%.
The average number of activist candidates elected under the UPC is down 22% (1.1 to 0.9 seats), and the average when a dissident wins at least one seat is down 37% (from 2.9 to 1.8 seats).
Management success has ticked down while remaining typical. “Clean sweeps” (full-slate elections) by management continue to be a majority of contested elections under the UPC (52%, down from 61%).
Activists are more often withdrawing their slates after ISS and Glass Lewis back management (13% of late-stage proxy contests under the UPC withdrew after proxy advisor recommendations, up from 9%)
Activists are more often withdrawing their slates after ISS and Glass Lewis back management (13% of late-stage proxy contests under the UPC withdrew after proxy advisor recommendations, up from 9%)
Activist clean sweeps have effectively vanished, falling from 29% of pre-UPC contested elections to none aside from the proxy contests at Masimo.
The memo says the “net effect” of these data points is that “activist victories have increased in frequency but compressed toward single-seat outcomes.” This memo and others analyzing UPC are posted in our “Proxy Fights” Practice Area on DealLawyers.com. If you aren’t already a member of that site, it is full of good info about Delaware case law, deal trends, and more. To get access, you can sign up online, email info@ccrcorp.com, or call 800.737.1271.
This week, I am at the American Bar Association Business Law Section’s Fall Meeting in Toronto, and there has been a lot of discussion at the meeting about President Trump’s Truth Social post earlier this week calling on the SEC to adopt rules that change the frequency of periodic reporting from quarterly to semiannual. As I noted in this blog, the possibility of making this type of change to the SEC reporting system was considered during the first Trump administration, but no changes were ultimately made to SEC requirements. It appears that the SEC is now prepared to reconsider the issue – this CFO Dive post notes that the following statement on the topic was received from the SEC:
“At President Trump’s request, Chairman [Paul] Atkins and the SEC are prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies,” according to a statement sent to CFO Dive late Monday by an SEC spokesperson. The spokesperson in an interview Tuesday declined to comment further on what steps need to be taken by the SEC to change the quarterly reporting requirement.
The dialogue about this topic and the potential for the SEC’s renewed focus on a potential rule proposal prompted me to take a spin through the comment file from 2018-2019, and the input was decidedly mixed. Here are some highlights:
1. As might be expected, there were some reporting companies (such as this example) that were in favor of a shift to semiannual reporting, focusing on the cost savings and the ability to provide material information to investors through other communications such as earnings releases and Form 8-K filings.
2. One company suggested that the Commission consider a “triannual” reporting framework, where companies would report to the SEC every four months, instead of every three months.
3. Accounting industry commenters (such as this one) noted that companies may continue to seek auditor review of quarterly financial statements even if they do not have to file a Form 10-Q on a quarterly basis because of investor demands for that information and the need for such information when conducting securities offerings. It was also noted in comment letters that a shift toward earnings releases would complicate the ability of auditors to provide negative assurance to underwriters.
4. Investors (such as this one) expressed concern with the possibility of moving to a semiannual reporting framework, noting that a reduction in the frequency of financial information would make it difficult to manage their investment portfolios, and that earnings releases and quarterly reports provide different and valuable pieces of information.
5. Some commenters (such as this one) noted that less frequent reporting would be likely to increase the risk of insider trading, and as a result companies may be forced to reduce the length of their open trading windows.
6. One commenter suggested that the SEC conduct a pilot program that would allow a select group of companies to opt-out of Form 10-Q reporting so the agency could collect data about the approach before making any changes.
7. Some commenters (such as this one) suggested that the SEC consider revisiting the information required in quarterly reports, rather than changing the frequency of filing such reports.
8. Commenters (such as this one) suggested that the SEC consider pursuing a scaled approach to the issue, moving to semiannual reporting for smaller companies.
9. Many commenters (such as this one) resisted any suggestion that the SEC should adopt specific regulations concerning earnings releases and guidance practices, beyond the existing requirements in Item 2.02 of Form 8-K.
10. Not surprisingly, commenters expressed concerns about the problem of short-termism, but commenters were often skeptical as to whether a change in the frequency of periodic reporting would have any impact on a short-term focus by companies and investors.
Based on the comments and the SEC’s questions that prompted those comments, it is unlikely that any change in the frequency of periodic reports will mean a significant change in the frequency of financial and other information being provided to the market. We can envision a “private ordering” approach to periodic disclosure, where the earnings release will become the vehicle for updating investors and permitting companies to open their trading windows, repurchase their own shares and conduct securities offerings. This approach would likely put more pressure on current reporting, where companies may choose to file more Form 8-K filings or issue press releases to communicate material developments that they might have waited to report in the Form 10-Q under today’s reporting regime. Consistent with some of the items on the Commission’s regulatory agenda, the SEC might consider a scaled approach, where it reduces the quarterly reporting burdens for smaller companies, while retaining quarterly reports for larger companies. With all of that in mind, let’s sit back and see where this potential proposal goes from here!
As this Goodwin Public Company Advisory Blog notes, the SEC recently issued new Exchange Act Rules CDI Question 130.05, which provides guidance on when an issuer may become an accelerated or large accelerated filer after it loses its status as a smaller reporting company. The new CDI states:
Question: An issuer is a smaller reporting company under the revenue test in paragraph (2) or (3)(iii)(B) of the “smaller reporting company” definition in Rule 12b-2. On the last business day of its second fiscal quarter of 2025, the issuer conducts its annual determination of smaller reporting company status and determines that it no longer qualifies as a smaller reporting company. When the issuer assesses its accelerated filer or large accelerated filer status, as of the end of fiscal year 2025, will this issuer become an accelerated filer or large accelerated filer?
Answer: No. When determining its accelerated filer or large accelerated filer status as of the end of its fiscal year, the issuer must assess, among other things, whether it is “eligible to use the requirements for smaller reporting companies under the revenue test in paragraph (2) or (3)(iii)(B) of the ‘smaller reporting company’ definition” in Rule 12b-2. See paragraph (1)(iv) of the definition of “accelerated filer” and paragraph (2)(iv) of the definition of “large accelerated filer” in Rule 12b-2. In this case, the issuer would be eligible to continue to use the requirements for smaller reporting companies through the end of fiscal year 2025 and until its Form 10-Q for the first fiscal quarter of 2026. See paragraph (3)(i)(C) of the definition of “smaller reporting company” in Rule 12b-2. Accordingly, the issuer would not satisfy the condition in paragraph (1)(iv) of the definition of “accelerated filer” or paragraph (2)(iv) of the definition of “large accelerated filer” as of the end of fiscal year 2025. The issuer would be a non-accelerated filer for filings due in fiscal year 2026 and would be ineligible to use the requirements for smaller reporting companies beginning with its Form 10-Q for the first fiscal quarter of 2026. [August 27, 2025]
The Staff’s new guidance is helpful for companies analyzing changes in filer status, which can difficult to navigate at times given the complexity of the rules.
On Wednesday, the SEC announced that the Commission has approved generic listing standards for commodity-based trust shares as part of the agency’s continuing efforts to take regulatory action in the digital asset market. The announcement notes:
The Securities and Exchange Commission today voted to approve proposed rule changes by three national securities exchanges to adopt generic listing standards for exchange-traded products that hold spot commodities, including digital assets. As a result, the exchanges may list and trade Commodity-Based Trust Shares that meet the requirements of the approved generic listing standards without first submitting a proposed rule change to the Commission pursuant to Section 19(b) of the Exchange Act.
“By approving these generic listing standards, we are ensuring that our capital markets remain the best place in the world to engage in the cutting-edge innovation of digital assets. This approval helps to maximize investor choice and foster innovation by streamlining the listing process and reducing barriers to access digital asset products within America’s trusted capital markets,” said SEC Chairman Paul S. Atkins.
Division of Trading and Markets Director Jamie Selway said, “The Commission’s approval of the generic listing standards provides much needed regulatory clarity and certainty to the investment community through a rational, rules-based approach to bring products to market while ensuring investor protections.”
Yesterday, the Commission, by a three-to-one vote, approved a policy statement that revisits the decades-long approach of the Staff not accelerating the effective date of registration statements for companies with mandatory arbitration provisions in their organizational documents, citing Securities Act Section 8(a), which allows the Commission to refuse to accelerate the effective date of a company’s registration statement upon considering, among other things, the adequacy of the disclosure in the registration statement, the public interest, and the protection of investors.
Historically, mandatory arbitration provisions have been viewed by the SEC as being inconsistent with the “anti-waiver” provisions of the federal securities laws, notably Securities Act Section 14 and Exchange Act Section 29(a), which state that any condition that would bind a person to waive compliance with those laws is void. In two specific instances over the course of the past forty years, the Staff in Corp Fin has refused to declare Securities Act registration statements effective when the issuer had included mandatory arbitration provisions in its organizational documents. The possibility of revisiting the SEC’s policy regarding mandatory arbitration provisions has been discussed over time, including during the first Trump Administration, but the policy has remained in place until now.
In the new policy statement, the SEC states:
This statement concerns requests to accelerate the effective date of registration statements filed under the Securities Act of 1933 (“Securities Act”) by issuers with a mandatory arbitration provision for investor claims arising under the Federal securities laws (“issuer-investor mandatory arbitration provision”). As discussed in further detail in section II.C. there have been a number of developments involving the U.S. Supreme Court’s (“Supreme Court” or “Court”) interpretation and application of the Federal Arbitration Act of 1925 (“FAA” or “Arbitration Act”) that inform such acceleration requests. In addition, as discussed in further detail in Section II.B., potential uncertainty exists regarding the intersection of the FAA and state law. For example, Delaware recently amended its General Corporation Law in a way that may prohibit certificates of incorporation or bylaws from including an issuer-investor mandatory arbitration provision. Other states may adopt different approaches on this issue. Notwithstanding these developments and potential uncertainty, the Commission has not spoken publicly on this topic even though, during the registration process, issuers have on occasion sought to include such a provision in their Securities Act registration statements.
In order to provide issuers with greater certainty concerning the Commission’s approach to requests to accelerate the effective date of a registration statement disclosing an issuer-investor mandatory arbitration provision, we are issuing this policy statement. For the reasons explained in this statement, we have determined that the presence of an issuer-investor mandatory arbitration provision will not impact decisions whether to accelerate the effectiveness of a registration statement under the Securities Act. Accordingly, when considering acceleration requests pursuant to Securities Act section 8(a) and Rule 461 thereunder, the staff will focus on the adequacy of the registration statement’s disclosures, including disclosure regarding issuer-investor mandatory arbitration provisions.
The policy statement goes on to note: “[n]othing in this statement should be understood to express any views on the specific terms of an arbitration provision, or whether arbitration provisions are appropriate or optimal for issuers or investors.” In expressing his support for the policy statement, Chairman Atkins stated:
While many people will express views on whether a company should adopt a mandatory arbitration provision, the Commission’s role in this debate is to provide clarity that such provisions are not inconsistent with the federal securities laws. It will fulfill that role through the issuance of the Policy Statement.
Commissioner Crenshaw opposed the SEC’s action, noting in a lengthy statement:
Mandatory arbitration forces harmed shareholders to sue companies in a private, confidential forum, instead of a court and without the benefit of proceeding in the form of a class action. While, in theory, arbitration could cut costs for companies, there are real downsides for investors. Arbitrations are typically more expensive for individual shareholders; they are not public; they have no juries; they lack consistent procedures; arbitrators are not bound by legal precedent; arbitration precludes collective action among shareholders; there are limited rights of appeal; and, ultimately, there is no assurance that two identical investors would get the same outcome. If that collection of things transpired in a courtroom without a party’s consent, judges would not hesitate to call it what it is: a violation of due process.
Today, the Commission takes two steps to advance this policy goal. First, the Commission issues a policy statement dictating that staff make public-interest findings without considering whether a corporation has forced its shareholders into mandatory arbitration. And, second, we amend the Rules of Practice to ensure that no Commissioner or third party can effectively intervene to challenge those public-interest findings.
The policy statement fails on many fronts. It fails to identify a problem. It fails to adequately address numerous and complex legal and economic issues. And it fails entirely to discuss the practical consequences of allowing public companies to mandate arbitration. If, however, we actually were to consider whether mandatory arbitration is in the public interest—an analysis required by the Securities Act—we would face overwhelming evidence that it is not. So, to start there, what are some of those consequences?
For public companies and companies that are contemplating going public, the change in SEC policy now raises the question of whether the adoption of mandatory arbitration provisions for securities law claims is a possibility. As the Commission noted in the policy statement, whether issuer-investor mandatory arbitration provisions can be included in a company’s organizational documents depends on state corporate laws, and some states, such as Delaware, have enacted laws that may prohibit the implementation of such provisions. The Commission’s action will likely also prompt a broader debate over whether mandatory arbitration provisions are advisable from the perspective of issuers and investors. Through the policy, the Commission is not necessarily weighing in on this debate, but is rather getting out of the way (for better or worse) by not using the acceleration of effectiveness process to discourage the use of such provisions.
In an action related to the adoption of the policy statement on mandatory arbitration provisions, yesterday the Commission, by a three-to-one vote, adopted an amendment to Rule 431(e) of the SEC’s Rules of Practice, which is the rule addressing the Commission consideration of actions made by the Staff pursuant to delegated authority.
Many routine SEC matters that require Commission action are handled by the Staff pursuant to delegated authority from the Commission. This includes the acceleration of the effectiveness of a registration statement under the Securities Act. The Commission maintains the power to affirm, reverse, modify, set aside or remand for further proceedings, in whole or in part, any action made pursuant to delegated authority, and Rule 431 specifies the process by which the Commission considers any such action, which can be prompted by the filing of a petition for review by a third party or upon the Commission’s own initiative. Rule 431(e) provides for an automatic stay of an action made pursuant to delegated authority upon filing with the Commission of a notice of intention to petition for review, or upon notice to the SEC’s Secretary of the vote of a Commissioner that a matter be reviewed, except in specific circumstances. In the rulemaking action yesterday, the Commission added the acceleration of the effectiveness of a registration statement to the list of circumstances excepted from this automatic stay provision.
In his statement in support of the change, Chairman Atkins notes:
Currently, declaring a registration statement effective is not among the exceptions to a stay. However, stays of an effective registration statement may be extremely disruptive. A company, its underwriters, and other market participants may commence sales of the securities once the registration statement is effective. A stay of effectiveness could fundamentally interrupt the sales process. Investors – selling securities holders as well as purchasers — might be extremely disadvantaged. Market participants could incur costs as a result. A stay could also create uncertainty for issuers and underwriters that have sold securities. Rather than automatically trigger such adverse consequences, the Commission should have the opportunity to carefully weigh the equities involved before taking such a significant step.
Adding declarations of effectiveness of registration statements to the limited list of exceptions to the automatic stay requirement will help to alleoviate some of the aforementioned concerns. In the execution of its mission, the Commission should provide as much regulatory certainty as possible to market participants raising capital. Today’s amendments to rule 431 further that mission.
As with the policy statement on mandatory arbitration provisions, Commissioner Crenshaw opposed this action, noting in her statement:
It would be bad enough if all the Commission did today was issue the mandatory arbitration policy statement. But we simultaneously propose amendments to our Rules of Practice in order to eviscerate the procedural rights of those who might choose to challenge an issuer’s inclusion of mandatory arbitration.
Currently, when either a Commissioner or a third-party requests Commission review of almost any staff action made pursuant to delegated authority, those actions are automatically stayed pending Commission consideration. This consideration is an important backstop to delegated staff action. That all goes away with today’s amendments. From now on, the automatic stay, which provides the mechanism for meaningful Commission review of registration statements before an offering hits the market, vanishes. Accordingly, I also cannot support today’s amendments to the Commission’s Rules of Practice.
I must admit that in three decades as a practicing securities lawyer, including a decade spent inside Corp Fin, I never encountered a situation where a Commissioner or another party sought review of the Staff’s action in declaring a registration statement effective, so I am comfortable in concluding that the Commission’s amendment to Rule 431 of the Rules of Practice will likely not make much difference in our day-to-day practice.
It has been just eight months since Inauguration Day and a change in leadership at the SEC, but quite a lot has been going on during that short time! Here are some highlights:
– Beginning in February 2025, the Corp Fin Staff issued seven statements addressing various aspects of the application of the federal securities laws to crypto assets.
– On February 11, the Staff provided updated guidance regarding the filing of beneficial ownership reports by investors on Schedules 13D and 13G that had a significant impact on engagement during the 2025 proxy season.
– On February 12, the Staff issued Staff Legal Bulletin No. 14M on Rule 14a-8, rescinding previously-issued Staff Legal Bulletin No. 14L and signaling a return to a “case-by-case” approach on environmental and social proposals.
– On March 3, Corp Fin issued updated guidance that enhances the accommodations available to companies for nonpublic review of draft registration statements.
– On March 12, the Staff issued guidance regarding the verification of an investor’s status as an accredited investor when an issuer is relying on Rule 506(c) of Regulation D when conducting a securities offering.
– On March 20, the Staff revised its approach to declaring registration statements effective in the “gap period” between Form 10-K and proxy statement filings.
– On March 27, the SEC announced that it had voted to discontinue its defense of the climate disclosure rules in litigation pending in the Eighth Circuit.
– On June 4, the SEC issued a concept release soliciting public comment on the definition of foreign private issuer.
– On June 12, the SEC withdrew proposed amendments to Rule 14a-8.
– On June 26, the SEC convened a Roundtable on Executive Compensation Disclosure Requirements.
– On September 4, the SEC released its Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions.
– On September 10, the SEC announced the appointment of Jim Moloney to as Director of Corp Fin.
– On September 17, the SEC adopted a policy statement and amendments to its Rules of Practice revisiting the Commission’s policy on mandatory arbitration provisions.
Given all of these SEC developments and our expectations about what is coming from the SEC and its Staff, now is the time to sign up for our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” to be held on October 21-22 at The Virgin Hotels in Las Vegas. Be sure to check out our packed agenda and our outstanding lineup of speakers. You can register online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
I have admittedly reached a stage of my life where technology, for all of its many benefits, has become a persistent burden. I am bombarded with requests to update my hundreds of passwords in accordance with ever-increasing complexity standards, implement two-factor authentication, check multiple devices for authentication codes, download numerous authentication apps and avoid phishing emails like the plague. My rational mind recognizes that we live in an extraordinarily active cybersecurity threat environment, and all of these requests are prompted by a genuine desire to protect me from the bad guys. My irrational mind (which is prone to screaming “get off my lawn,” but only to myself) feels under siege as a result of this avalanche of protective measures, and inevitably encourages me to unplug and retreat to somewhere off the grid, where the oppressive cybersecurity infrastructure would leave me alone to whittle sticks and churn butter.
It is against this complicated emotional backdrop that many of us received the news of the SEC’s EDGAR Next initiative at around this time last year. As we note in the July-August 2025 issue of The Corporate Executive:
EDGAR Next replaces the current approach of utilizing EDGAR access codes to file on EDGAR with a more secure, two-factor authentication access security system. EDGAR Next generally limits filing access to persons specifically authorized by the filer and requires everyone that accesses the EDGAR filing system to have individual login credentials that are supplied by the U.S. federal government’s Login.gov service. The enhanced EDGAR Next security facilitates the tracing of every filing to the specific individual who made the filing.
While we knew that this significant change in approach was ultimately good for us, the prospect of migrating filers to the new EDGAR Next platform rightfully seemed daunting, and inspired a sort of Y2K-style panic in some quarters of the filer community. While the SEC gave us a generous year-long transition period, that somehow did not seem like enough time in our collective irrational minds for herding the appropriate cats to accomplish the objective. For a variety of reasons, the transition was not always easy. As Liz noted in this blog from June, a post on the Q&A Forum described the transition as “truly horrendous,” citing persistent system problems, delays and issues dealing with an overwhelmed SEC Staff.
For those of you who may have been off-grid whittling sticks of churning butter for the past year, we reached a major EDGAR Next milestone last Friday, and at least anecdotally it seems that generally the filer community has made the transition without too much drama. Legacy access to the SEC’s EDGAR filing system ended at 10:00 p.m. Eastern Time last Friday, and as of Monday morning this week, the SEC’s EDGAR Next filing platform is the exclusive means to electronically file documents with the SEC. As we noted in our last-minute EDGAR guide in the latest issue of The Corporate Executive:
There is no reason to panic if you have somehow missed the EDGAR Next train so far this year, but now is the time to enroll. The enrollment period for EDGAR Next opened on March 24, 2025, and will remain open until December 19, 2025. During this time, filers can avail themselves of the SEC’s short-form enrollment process that does not require the submission of a power of attorney or a notarized Form ID, and instead just requires the submission of basic contact information and the designation of initial account administrators for the filer’s EDGAR account. The enrollment process does require Staff action, but such action typically occurs promptly following submission of the required information.
It is important to note, however, that those existing filers who have not completed the EDGAR Next transition process by 10 p.m. ET on Friday, September 12, 2025, will no longer have access to the EDGAR system as of 6 a.m. ET on Monday, September 15, 2025. Therefore, to avoid any interruption in a filer’s access to the EDGAR system, it is advisable to complete the enrollment process before the September 12 cut-off date.
Even if a filer misses the September 12 deadline, filers with their current EDGAR access codes could still complete the streamlined enrollment process before December 19 and obtain their EDGAR Next filing credentials in a timely manner to then reestablish their ability to submit filings on EDGAR; however, filers that do not have access to their EDGAR access codes, including the passphrase, will need to follow the long-form Form ID process before making any electronic filings.
In our last-minute guide in The Corporate Executive, we offer some suggestions for what to do now if somehow you missed the EDGAR Next boat as the final December 19 deadline approaches. It you do not have access to all of the practical guidance that we provide in The Corporate Executive, I encourage you to give it a try – during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. To subscribe to this essential resource, please email info@ccrcorp.com or call 1.800.737.1271.
Yesterday, the SEC announced four new members to fill vacancies on its Investor Advisory Committee. These new members join the 16 current members of the committee and will serve four-year terms. The announcement notes:
The newest members of the Investor Advisory Committee are:
– C. Rodney Comegys, Global Head of Equity Investment Group at Vanguard
– James R. Copland, Senior Fellow and Director, Legal Policy at Manhattan Institute
– John A. Gulliver, Executive Director, Committee on Capital Markets Regulations and Program on International Financial Systems
– Sergio G. Rodriguera Jr., Co-Founder, Straylight Systems, Inc.
The Investor Advisory Committee was established pursuant to Section 39 of the Securities Exchange Act of 1934, and it “advises the Commission on regulatory priorities and initiatives to protect investors and promote the integrity of the U.S. securities markets.”
One of the many aspects that I am looking forward to at our upcoming “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” to be held on October 21-22 at The Virgin Hotels in Las Vegas is that we will be celebrating 50 years of practical guidance from The Corporate Counsel and all of the related publications and websites in the CCRcorp universe.
On Monday, October 20 from 4:00 to 7:00 pm, we will host a casual evening reception for 2025 PDEC attendees, sponsors and exhibitors to network, collect credentials, and enjoy CCRcorp’s 50th Anniversary. At the reception, we plan to hoist our glasses for a celebratory toast to 50 years of corporate counsel resources!
If you are interested in the history of our publications and websites, check out this Deep Dive with Dave podcast from 2022, where my guest was Jesse Brill, who is the Founder & Former President of EP Executive Press (now known as CCRcorp). You can also check out this Special Supplement to the March-April 2010 issue of The Corporate Counsel, which marked the 35th Anniversary of The Corporate Counsel by including Jesse’s memories and highlights of the development of our community!
To be a part of our October Conferences (either in-person or online), you can register online or reach out to our team by emailing info@ccrcorp.com or calling 1.800.737.1271.
