As of the time of this blog, it’s looking pretty likely that our government will shut down this weekend. I’m not sure whether to call it “good news” that we still have muscle memory from the last time around – but if nothing else, those recent experiences help us know what to expect. As a refresher:
– Ahead of the shutdown, we typically see the SEC post an operations plan and the Corp Fin Staff post pre-shutdown guidance – the August/September 2025 documents are here and here, respectively. The catch is that the Staff has to wait for the green light from elsewhere in the government to be able to post the guidance – and with the last go-round, that came very late in the game.
– Last time, the Corp Fin Staff provided a helpful update mid-shutdown, which we expect to carry forward, and I won’t be too surprised if the guidance also addresses some other pain points that were under discussion last fall.
– The exchanges are likely to step into more of a gatekeeping role.
– The Staff is still working through a large backlog of registration statement reviews, which is affecting turnaround times. Those will continue to pile up if the Staff gets furloughed again. A shutdown may also affect rulemaking priorities.
– Thankfully, this year’s Rule 14a-8 process means that the shutdown won’t derail proxy season. In the past, a proxy season shutdown would not only exacerbate the backlog that the staff would need to address upon their return, but everyone would be waiting for no-action letters and wringing their hands over how to proceed.
– We have a handful of helpful post-shutdown insights into how things will work when the government eventually reopens, which clients will surely be asking about and will help you with your game plan.
Every shutdown is unique, so we can’t be certain that everything will be handled the same way as it was last fall. But at least we know the general playbook and what to watch for. Stay tuned.
As I wrote on Monday, the Corp Fin Staff issued a CDI last week that prohibits voluntary exempt solicitations. But how is that going to be policed? This Gibson Dunn blog points out a possible hook:
The revised interpretation does not directly address how the revised position will be monitored and enforced, but we note that Rule 15 of Regulation S-T provides the SEC with the authority to remove a submission from EDGAR if, among other things, the agency has reason to believe the submission is misleading or unauthorized.
Notably, the new interpretation does not prevent shareholder proponents and others from conducting exempt solicitations through platforms other than EDGAR. However, whether or not filed on EDGAR, exempt solicitations remain subject to the anti-fraud provision of Rule 14a-9, which makes it unlawful for any soliciting materials to contain false or misleading statements or omissions of a material fact, and the conditions set forth in Rule 14a-2(b)(1)(vi), under which the exemption from having to file a proxy statement is not available to “[a]ny person who, because of a substantial interest in the subject matter of the solicitation, is likely to receive a benefit from a successful solicitation that would not be shared pro rata by all other holders of the same class of securities.”
At this point, I think it’s a little murky what will happen if anyone tests the boundaries of the CDI. A stern finger-wagging, or something more? Even if the Staff would plan to pull down filings, there may not be anyone around to do that if the government shuts down. What we do know is that anti-fraud liability continues to apply. And in practice, companies should monitor their own EDGAR pages and alert the Staff if they see a problematic filing – providing a copy of the notice and information showing that the shareholder doesn’t own more than $5 million of stock of the company.
At least the CDI has finally given ESG and anti-ESG proponents something to agree on, with Jim McRitchie and the National Legal and Policy Center both publishing similar grievances yesterday. The NLPC screed is, to put it politely, “interesting.” I’ll note Jim Moloney wasn’t looking very wolf-like when I saw him this week. Yes, I deliberately linked to the Gibson Dunn blog to tie this all together.
Yesterday morning, I wrote that it’s time to start paying attention to tokenization. Yesterday afternoon, the Staff of the Divisions of Corporation Finance, Investment Management, and Trading and Markets published a statement on that very topic, which outlines the different ways that securities can be tokenized and which securities laws apply to each situation. Parts of the statement look remarkably similar to my notes from SRI! Here’s an excerpt:
Tokenized securities generally fall into two categories: (1) securities tokenized by or on behalf of the issuers of such securities; and (2) securities tokenized by third parties unaffiliated with the issuers of such securities. This statement is intended to assist market participants as they seek to comply with the federal securities laws and prepare to submit any necessary registrations, proposals, or requests for appropriate action to the Commission or its staff. We stand ready to engage regarding any questions.
This section describes the distributed ledger concept that I was referring to in yesterday’s blog:
A single class of securities could be issued in multiple formats, including tokenized format. Similarly, an issuer may permit security holders to hold a security in different formats and convert the security from one format to another. The format in which a security is issued or the methods by which holders are recorded (e.g., onchain vs. offchain) does not affect application of the federal securities laws. For example, regardless of its format, the Securities Act requires that every offer and sale of a security must be registered with the Commission unless an exemption from registration is available. Similarly, stock is an “equity security” under the Securities Act and the Exchange Act regardless of its format.
On the other hand, the tokenized security could be of a different class of securities from those issued in traditional format. For example, an issuer could issue one class of common stock in traditional format and issue a separate class of common stock as a tokenized security. However, if the tokenized security is of substantially similar character as the security issued in traditional format and holders of the tokenized security enjoy substantially similar rights and privileges, the tokenized security may be considered of the same class as the security issued in traditional format for certain purposes under the federal securities laws.
In addition to underscoring coming attractions, I appreciate the effort of three divisions working together to issue a joint statement, which helps with seeing the big picture. And speaking of cooperation, SEC Chair Paul Atkins and CFTC Chair Michael Selig are holding a joint event at 2pm ET today to:
[D]iscuss harmonization between the two agencies and their efforts to deliver on President Trump’s promise to make the United States the crypto capital of the world.
The event will be open to the public and webcast live on the SEC’s website.
If there’s a common theme I’m hearing out here at the Northwestern Pritzker School of Law Securities Regulation Institute, it’s to “think big” about modernizing the public company experience. That includes the infrastructure for trading and voting. If you’ve been ignoring the digital revolution, now’s a good time to start paying attention.
There’s strong sentiment that blockchain will completely change the game – for example, we could see instantaneous trade settlement and peer-to-peer trading. It could also resolve longstanding “proxy plumbing” issues that make it hard to know who owns and votes stock – and make it much easier for retail investors to vote.
As one sign that things are moving along, the SEC posted notice yesterday for a revised version of a proposal that Nasdaq initially submitted back in September. Here’s an excerpt:
The Exchange proposes to amend the Exchange’s rules to enable the trading of securities on the Exchange in tokenized form during the pendency of a pilot program to be operated by the Depository Trust Company (“DTC”) pursuant to the terms of a December 11, 2025 Commission No-Action Letter. Specifically, proposed rules Equity 1, Section 1 and Equity 4, Rules 4756, 4757, and 4758 will clarify how Nasdaq trades tokenized securities under this pilot program. This Amendment No. 2 supersedes the original filing, as amended by Amendment No. 1, in its entirety.
And:
The purpose of the proposed rule change is to establish clearly that Nasdaq’s member firms and investors that are eligible to participate in the DTC tokenization pilot program (“DTC Eligible Participants”) may trade tokenized versions of those equity securities and exchange traded products (“ETPs”) on the Exchange that are eligible for tokenization as part of the DTC tokenization pilot program (“DTC Eligible Securities”), pursuant to the terms of the No Action Letter. The filing describes and applies to one method by which DTC Eligible Securities can trade on Nasdaq within the current national market system, using DTC to clear and settle trades in token form, per order handing instructions that DTC Eligible Participants may select upon entering their orders for DTC Eligible Securities on Nasdaq.
Meredith recently blogged about how the DTC pilot works. And it’s not just Nasdaq and DTC that are investing in tokenization – several other recent developments suggest it’s a priority for a number of big market players, and that companies are starting to jump in too:
At this point, tokenization isn’t just “for the kids” – securities lawyers will need to understand it too. Whether that’s the death knell for it being edgy and cool, I can’t say – but blogging about “the blockchain”* does make me feel a lot like Colin Jost learning Gen Z slang. No cap.
– Liz Dunshee
*It’s just “blockchain” now. “The blockchain” is very 2019.
We last blogged about the Clarity Act back in June. It would be significant for the crypto industry as well as the SEC – among other things, it would establish the SEC’s role in regulating digital assets alongside the CFTC.
The legislation was on the verge of advancing earlier this month, but it fell apart at the 11th hour. This CoinDesk article says that people think the bill will still move forward eventually, but it could be a few months:
One of the individuals following the process said they would not be concerned if the Banking Committee still passed its version of the bill by Memorial Day in late March, and the overall Senate passed the legislation by around July 4. This timeline would still give the House of Representatives enough time to pass the legislation in September or during the lame duck session after this year’s midterm election.
In this blog, the team at Baker McKenzie explains the impact of the delay:
For lawmakers, the choice is unenviable: advance a bill that alienates influential market participants, or delay reform and accept continued regulatory uncertainty. For regulators, the vacuum reinforces reliance on discretionary enforcement and informal guidance. And for courts, it ensures that crypto law will continue to develop incrementally through litigation rather than comprehensive statute.
The Senate Agriculture Committee had been scheduled to vote yesterday on whether an updated version of the CFTC portions of the bill should move forward – but they bumped it to tomorrow due to the snow storm. The vote is now on tap for tomorrow – you can watch the hearing here. This article gives more color on the status of negotiations.
It was clear when former SEC Chair Gary Gensler departed the agency last year that we would see an about-face on crypto. A new Cornerstone Research report shows how that softer touch played out on the enforcement front. This press release highlights a few key findings:
· Of the 13 actions initiated in 2025, five were brought under Chair Gensler before his departure in January. Eight actions were initiated under Chair Atkins, all of which contained allegations of fraud.
· A total of 29 actions were resolved in 2025, seven of which were dismissed by the SEC under Chair Atkins.
· Monetary penalties imposed against digital-asset market participants totaled $142 million in 2025, representing less than 3% of the monetary penalties imposed in 2024.
As I noted elsewhere today, enforcement may be the main hook for crypto until a comprehensive regulatory framework is in place, but it doesn’t seem like the SEC is out to surprise anyone with novel legal theories right now. On the other hand, the same may not be true of state regulators, and that dynamic will be relevant until there’s a federal statute that preempts state law.
I’m happy to be reporting from sunny Coronado this week, for the Northwestern Pritzker School of Law Securities Regulation Institute. It’s pretty easy to be in high spirits when you’re enjoying ocean views. But why stop there? SEC Commissioner Mark Uyeda injected even more energy with his keynote address yesterday.
I interpreted Commissioner Uyeda’s remarks as permission to “dream big” when it comes to the comprehensive review of Regulation S-K that SEC Chair Paul Atkins announced earlier this month. In addition to stating that the Commission needs to refocus on financial materiality with the disclosure framework, Commissioner Uyeda recognized a few pain points that the Staff may review:
There are areas for improvement. For example, with regard to insider trading arrangements and policies under Item 408,[15] we could consider deleting the requirement in subparagraph (b) that mandates companies explain whether they have an insider trading policy or provide reasons if they do not. This would not change any underlying federal securities law obligations or liability thereunder, but would simplify disclosures.
Similarly, with regard to transactions with related persons under Item 404,[16] we could consider adjusting the de minimis threshold of $120,000 to a higher amount, which might better align the requirement with materiality considerations. Or we could consider replacing a static number with a more principles-based approach to materiality that has worked well in other contexts. Additionally, the narrative description of company policies under subparagraph (b) could be replaced with a requirement for companies to file their policies or make them readily available on their websites. This would maintain transparency while streamlining SEC filings.
In the cybersecurity area, we should re-consider our approach to the current mandated disclosures. We should consider whether Item 106[17] could be streamlined to simplify the narrative disclosures of cybersecurity policies and governance oversight. Our disclosure rules should generally not be the driver for what a company does or does not, but disclosure requirements such as these and others are likely shaming or indirectly compelling companies to change practices rather than eliciting material disclosure as to what the company is doing.
There are similar areas for potential improvement in Item 701 and disclosure of unregistered transactions.[18] We could evaluate whether the corresponding Form 10-K item, requiring a 3-year look-back for unregistered sales of securities by the registrant, could be eliminated or otherwise modified.
Simplifications could also be made to Item 201 for disclosures of the number of security holders and performance graphs. Perhaps we could delete the five-year graph of the issuer’s total cumulative return compared to a broad index and a line-of-business or peer group index under subparagraph (e). Given the wide availability of evaluative tools on the internet and mobile devices, do investors continue to need such disclosure?
And although not squarely within the scope of Regulation S-K, I would be remiss if I did not mention disclosure related to mine safety in Form 10-Q.[19] Surely, we can include such disclosure elsewhere than in a recurring quarterly filing—the most logical place would likely be in Form 8-K or Form SD. One important consideration is that each of these requirements feeds into evaluations under an issuer’s disclosure controls and procedures (“DCPs”), adding one more step in terms of identifying whether any transactions or events are reportable.
These are a few examples where we may be able to improve disclosure requirements to ensure they are relevant and efficient in the current regulatory environment. In the aggregate such revisions may reduce compliance burdens, improve our regulatory roadmap and—hopefully, minimize late nights spent by lawyers at public companies having nothing to do with mining but nonetheless wondering if they need DCPs for mine safety incidents.
He also addressed scaled disclosures, noting:
Over 40% of companies (42.5%) must comply with the full scope of the Commission’s disclosure requirements.[22] If the Commission were to reduce this number to approximately 20%, the total number of additional companies that would be able to provide scaled disclosure requirements would increase by almost 1,400.[23] From an investor protection standpoint, however, those 20% of the companies still subject to the full scope of our disclosure requirements would represent almost 93.5% of total market public float.
Commissioner Uyeda floated the notions of recalibrating the size thresholds and time periods for scaled disclosure eligibility, as well as expanding the use of Form S-3.
While this speech was subject to the standard disclaimer of being the Commissioner’s individual views, it’s well-aligned with remarks from Chair Atkins.
Corp Fin Director Jim Moloney also took to the stage at SRI yesterday. Another breath of fresh air! Of course, Jim had to be somewhat careful in what he could say, but he was candid and consistent with Commissioner Uyeda. Here are a few takeaways:
– Jim is working hard to refocus the Corp Fin Staff on activities that move the needle, such as clearing the shutdown-related registration statement backlog
– Corp Fin has worked through about half of the backlog, but new registration statements are also continuing to get into the queue. The Staff is focusing review resources on filings with substantive disclosures that matter to investors, and less on “basic” filings like universal shelf registration statements, etc.
– The Staff is aiming high with its Reg S-K review. Jim didn’t move from California to DC to move a few commas. When it comes to simplifying regulations, think more “Ozempic” and less “nip & tuck.”
– They posted job openings last week for a “strike force” of sorts – he’s looking for folks with real-world experience to participate in the Reg S-K review.
– Help the SEC help you. Don’t wait to react to a proposal, help jumpstart it. Submit comments in advance to inform the proposal, which you can do through this public form or by emailing rule-comments@sec.gov with “CLL-15” included in the subject line.
– The Staff is also receptive to suggestions for interpretive guidance. If you think there should be a CDI, draft it up in track changes and send it in.
– The SEC is open for business. It’s not “giving away the store,” they’ll be doing things thoughtfully. But there’s a drive to enhance investment options in public markets, by encouraging more companies to go and stay public.
One thing Jim suggested yesterday was that the issuer community gather feedback through surveys, which can help inform the questions posed in an eventual proposal. It’s important to note that other constituents will also be gathering their own feedback and submitting perspectives – but SRI is mainly an issuer audience, so the remarks were geared towards that.
Anyway, I’m here to do my part. We’ve blogged about the government’s “suggestion box” for deregulation, and we’ve solicited views on your favorite and least favorite Reg S-K items. But let’s take a more conceptual look. Where is the juice not worth the squeeze?
Please participate in this anonymous poll to weigh in on what could “move the needle” on decisions to go public and stay public. Are there line items that are boilerplate and that your investors have never asked about? Are there requirements that are resource intensive, burdensome, and not material? This list excludes Item 402 compensation disclosures since those are subject to a separate review effort. Check all that apply – and drop me an email if you have other suggestions:
On Friday, Corp Fin published a bunch of updates to its Compliance & Disclosure Interpretations for Securities Act Sections and Securities Act Rules – including withdrawals, revisions, and brand new interpretations.
The updates modernize the CDIs to reflect that a number of them had become obsolete with the adoption of Securities Act Rule 152 back in 2020. As Dave has noted, that Rule provided welcome certainty for integration issues that had been a source of stress for many years. Other updates provide clarity on determining accredited investor status. Here’s more detail (with links to the new and revised CDIs, and paraphrasing the topics):
– The CDI addresses sales to individuals under Rule 506(b) of Regulation D, following a general solicitation under Rule 506(c). This depends on whether the issuer established a substantive relationship with such prospective purchasers prior to the commencement of the Rule 506(b) offering. Because the issuer solicited the prospective investors through the general solicitation in the prior Rule 506(c) offering, the issuer cannot rely on Rule 152(a)(1)(i). The CDI describes factors to consider.
– This CDI doesn’t give a bright-line cleansing period for investors previously solicited under a general solicitation, which is an issue raised in a letter request that John blogged about last summer. It does say that being an existing investor may constitute a preexisting relationship. Perhaps we will hear more about this at SRI this week.
– The CDI explains that the mere fact that a registration statement is effective, in and of itself, does not automatically raise integration concerns under Rule 152.
– The refreshed CDI states that following an unsuccessful shelf takedown, an issuer may complete the offering privately, provided that the issuer complies with the general principle of integration in Rule 152(a).
3. Section 152. Rule 155 – Integration of Abandoned Offerings
– Withdrew Question 152.01 (superseded by Rule 152)
– Withdrew Question 152.03 (superseded by Rule 152)
4. Section 212. Rule 415 – Delayed or Continuous Offering and Sale of Securities – Withdrew Question 212.06 (superseded by Rule 152)
5. Section 255. Rule 501 – Definitions and Terms Used in Regulation D – Revised 255.06
– This CDI relates to looking through to natural persons when determining accredited status of entities, the update clarifies language and adds a reference to Note 1 of Rule 501(a)(8).
6. Section 256. Rule 502 – General Conditions to be Met
– Withdrew Question 256.01 (superseded by Rule 152)
– Withdrew Question 256.02 (superseded by Rule 152)
– Withdrew Question 256.34 (superseded by Rule 152)
7. Section 260. Rule 506 – Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering
– New Question 260.39 – This new CDI clarifies that in a Rule 506(c) offering, an issuer can use different methods to verify the accredited investor status for different investors.
