Last Friday, Dave blogged about the SEC’s new e-delivery rulemaking proposal, which would permit, but not require, covered entities to use e-delivery as the default method of delivery for covered information under specified conditions. This Morgan Lewis alert goes into detail on what the proposed Regulation E-Delivery would mean for “covered entities.”
“Covered entities” are “virtually every entity with SEC-mandated delivery obligations,” including public companies.
“Covered information” is “information required to be delivered under the Securities Act, Exchange Act, Investment Company Act, Advisers Act, Trust Indenture Act, or other federal securities laws,” including “prospectuses, proxy statements, annual reports, shareholder reports, trade confirmations, Form CRS, privacy notices, investment adviser brochures, and tender offer materials.”
Two permissible methods of delivery include direct delivery and a statement of availability.
For materials that do not contain personal financial information (PFI), covered entities would be permitted to deliver the materials directly to an electronic address, such as via email attachments, documents embedded in emails, or a similar direct electronic transmission.
Reg E-Delivery generally would disallow direct email delivery for materials containing PFI. Instead, covered entities would be permitted to send a statement notifying recipients that materials are available through a secure website after completion of a process reasonably designed to protect personal financial information (e.g., password authentication). This approach also could be used for materials that do not contain PFI [. . .]
Covered entities generally would be required to:
– provide prominent disclosure regarding electronic delivery;
– permit recipients to opt out at any time;
– provide paper copies upon request free of charge;
– permit recipients to update their electronic address without charge;
– maintain written procedures to identify and remediate failed electronic deliveries;
– maintain website availability standards for electronically delivered materials; and
– comply with specified content, timing, and formatting requirements for electronic communications.
In the next blog, I’ll share specifics regarding the delivery of proxy materials and prospectuses.
The Morgan Lewis alert also discusses how Regulation E-Delivery, if adopted, would change the delivery of proxy materials and prospectuses. For proxy statements, it explains:
Currently, Exchange Act Rule 14a-16 generally permits issuers to satisfy proxy delivery obligations by either mailing a “full set” of proxy materials (either in paper or electronically for shareholders who previously opted in) or using the SEC’s “notice-and-access” model, under which shareholders receive a paper Notice of Internet Availability directing them to proxy materials posted online.
If adopted, Reg E-Delivery would eliminate the paper Notice of Internet Availability as a standalone delivery method and move issuers to a default e-delivery of proxy materials through Reg E-Delivery’s permitted delivery methods. Shareholders could opt to receive a full set of proxy materials in paper, which would be the only alternative to e-delivery under the proposed rules. Reg E-Delivery also would eliminate the longstanding prohibition on using the notice-and-access framework for business combination proxy solicitations, thereby extending electronic delivery to transactions that historically required delivery of a full paper set of proxy materials.
For prospectuses:
Reg E-Delivery does not replace Rule 172 (i.e., “access equals delivery”), which permits many issuers and other offering participants to satisfy the final prospectus delivery obligation via the filing of the final prospectus on EDGAR. The adoption of Reg E-Delivery would provide another avenue for issuers for e-delivery, including with respect to offerings that are excluded from relying on Rule 172, such as offerings on Form S-8 and the corresponding requirement to distribute Section 10(a) prospectuses. In this regard, the proposed rules may significantly ease the burden on issuers to provide paper copies to former employees and other participants in employee benefit plans who do not have access to company email.
Under the proposed rules, an issuer could satisfy many Securities Act delivery obligations electronically without first obtaining affirmative consent, provided that
– the investor has supplied an electronic address;
– the issuer has provided the required disclosures regarding electronic delivery; and
– the investor has not opted out of electronic delivery.
Note that Reg E-Delivery would not change substantive Securities Act prospectus delivery obligations. Rather, it would change the way those obligations may be satisfied. Issuers could choose to continue delivering paper prospectuses, and shareholders would retain the right to receive paper copies free of charge.
Last week, Dave dedicated a few blogs to addressing how our upcoming 2026 Proxy Disclosure and Executive Compensation Conferences will cover the rapidly unfolding SEC regulatory agenda that we expect will be playing out in real time as we assemble in Orlando on October 12th & 13th. With our early bird rate expiring this Friday (!!!), I wanted to highlight a few other panels that will help you understand how that evolving regulatory agenda might impact your 2027 proxy season, so you can see the value that you can get out of attending our conferences before that early bird rate expires.
– In “Trends in Tokenization & Blockchain,” our speakers, DLA Piper’s Era Anagnosti, Nasdaq’s Eun Ah Choi, Cooley’s Reid Hooper and Fenwick’s Ryan Mitteness, will bring us up to speed so we’ll all be able to speak confidently about the tokenization of securities and why it matters to public companies. Tokenization is quickly moving from concept to reality, and, as Liz said, it’s time to start paying attention.
– In “Shareholder Engagement & Proxy Voting: Turning Tides,” Davis Polk’s Ning Chiu, ExxonMobil’s David Kern, Jasper Street Partners’ Rob Main and Tumelo’s Edd Micklem will explore how stewardship, engagement and proxy analysis are changing and what the changes mean for companies as they engage with investors and prepare for proxy season.
– In “Bodyguards & Private Jets: Perks on the Radar,” Compensia’s Mark Borges, Davis Polk’s Kyoko Takahashi Lin and Sidley’s Corey Perry will tackle the latest developments in perks disclosure and where any rule amendments might be headed.
– Finally, to conclude day two, we’ll get to hear from representatives of ISS and Glass Lewis, Kevan Marvasti and Hannah Fasbender in our always popular panel, “Navigating ISS & Glass Lewis,” moderated by Davis Polk’s Ning Chiu.
Go check out our full agenda and speaker bios because I don’t have room to highlight all our panels here. I’m also super excited about the topics and speakers for our panels “Fireside Chat with Top Activism Defense Lawyers,” “Scary Stories to Tell in the (Securities Law Conference Spot)light,” “Keeping Governance In Focus When the Future Is Hazy” and “The Top Compensation Consultants Speak.”
Our early bird rates include discounts on both in-person and virtual attendance, so register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271 before it expires this Friday, July 24!
As John previously shared, Corp Fin recently released new CFIs addressing beneficial ownership reporting, the proxy rules, Regulation Crowdfunding & the tender offer rules. John provided a brief summary of each new CFI in his blog, and now I thought we’d do a bit of a deeper dive on some of the more interesting ones. Starting with the CFIs on Rule 13d-3, here’s more info from Alan Dye’s Section16.net Blog on Questions 105.08, 105.09 and 105.10, which “address the circumstances under which a holder of a total return swap (TRS) would (or would not) be deemed the beneficial owner of shares of the reference security held or acquired by the bank counterparty to hedge its position” and “address indirectly the more pressing concern whether ownership of a TRS could cause the holder to become subject to Section 16 as a ten percent owner.”
Consistent with the SEC’s 2023 guidance included in the release adopting amendments to the Section 13(d)/(g) rules, Question 105.08 confirms that a party does not acquire beneficial ownership of the reference securities, including any securities the counterparty may hold to hedge its risk, if it enters into a standard TRS that settles exclusively in cash, only refers to a class of equity securities (as described in Rule 13d-1(i)(1)) for purposes of identifying a reference security, and does not confer any voting or investment power with respect to, or any right to acquire, any securities. The CFI helpfully addresses an ambiguity noted in my blog about the recently issued BofA no-action letter (addressing whether a TRS holder and its counterparty are a “group”). Question 105.08 also confirms that:
– Entry into a TRS, absent any arrangement that confers such power or rights outside of the terms of the swap, is not, by itself, evidence of a plan or scheme to evade the reporting requirements of Section 13(d) or 13(g) for purposes of Rule 13d-3(b).
– Entry into a TRS solely for economic exposure to the reference security, without more, also does not prevent the vesting of, or create a false appearance regarding, beneficial ownership as part of a plan or scheme to evade.
Question 105.09 confirms that entry into a TRS would confer beneficial ownership pursuant to Rule 13d‑3(b) only if it was used in connection with an “arrangement” to prevent the vesting of beneficial ownership by the holder as part of a plan or scheme to evade the reporting requirements of Section 13(d)/(g). For example, the Staff said, if a person uses a TRS as a means to direct the counterparty how to vote its hedge securities or to pre-arrange the acquisition of hedge securities, the person may be deemed a beneficial owner under Rule 13d-3(b).
Finally, Question 105.10 confirms that the Staff remains committed to the position articulated in its “amicus letter” to the district court in the CSX case that the “mental state” contemplated by the term “plan or scheme to evade” is “generally the intent to enter into an arrangement that creates a false appearance or an illusion contrary to the actual facts.” In the context of a TRS, the analysis should focus on “whether the person knew or was reckless in not knowing that use of the total return equity swap would create a false appearance or illusion that the person’s interest is economic alone.” For example, the Staff said, entry into a TRS “for the purpose or effect of indirectly acquiring the power to vote or a future right to acquire the reference equity security may be viewed as part of” a scheme to evade.
The “grab bag” also includes CFIs on activist fund structures and Schedules 13D and 14A. This Cleary blog explains:
The guidance targets a specific but increasingly common activism structure: special-purpose vehicles that raise capital from investors to buy a single issuer’s securities and conduct an activism or proxy campaign. Activists who form these vehicles must now name the underlying investors in their 13D and contested proxy filings.
It also gives specifics on each related CFI:
Under the guidance provided by CFI 110.09, an entity (such as a special purpose vehicle) formed specifically to raise funds to acquire the securities of a specific issuer and engage in an activism campaign at that issuer must disclose the identities of its investors under Item 3 of Schedule 13D (Source and Amount of Funds or Other Consideration). Item 3 requires reporting persons to name all parties to any transaction through which they obtained funds “for the purpose of acquiring, holding, trading or voting the securities” of the issuer. Because investors in a purpose-built vehicle contribute capital for exactly that purpose, filers must identify them in the Schedule 13D filing.
CFI 110.10 confirms that Instruction C to Schedule 13D does not limit the information that must be disclosed about the reporting person itself. Instead, Instruction C identifies additional persons (such as general partners and their controlling persons) about whom Items 2-6 information must also be provided.
It says that many filers had been disclosing only the general partner or manager of the vehicle, and that reading of General Instruction C had some support from case law. It also notes that the CFI doesn’t address the related issue of investment vehicles whose limited partners do not contribute capital earmarked for a specific target.
CFI 155.02 addresses a parallel question applicable to disclosure on Schedule 14A in the context of a contested election. Where an investment vehicle is formed for the purpose of raising funds to acquire securities and engage in a proxy solicitation to change the board composition at a specific issuer, the SEC Staff confirms that investors in that entity who contribute more than $500 are “participants” in the proxy solicitation under Instruction 3(a)(iv) to Item 4 of Schedule 14A. That instruction defines a “participant” to include any “person who finances or joins with another to finance the solicitation of proxies,” excluding only those who contribute $500 or less.
This interpretation aligns with the SEC Staff’s position in CFI 110.09 and extends the same logic to a proxy context.
Last, but not least, new CFIs address the delivery method for required disclosures in issuer and third-party tender offers. This Arnold & Porter alert has more:
Question 104.03 and Question 131.04: Exchange Act Rules 13e-4(e)(1) (issuer tender offers) and 14(d)-4(a) (third-party tender offers) list three methods to publish, send, or give the disclosure required by Rule 13e-4(d) and Rule 14d-6, respectively, to security holders for a tender offer in which the consideration offered consists solely of cash and/or exempt securities.
This requirement may be satisfied by issuing a press release (instead of the summary newspaper advertisement contemplated by the Rules) as soon as practicable on the tender offer’s commencement date through a widely disseminated news or wire service, which contains the disclosure required by Rule 13e-4(d)(3) or Rule 14d-6(d)(2), as applicable, as well as an active hyperlink to a website address where security holders may access the tender offer materials, letter of transmittal (if any), and any other documents relating to the offer, provided that: (i) the tender offer is not subject to Rule 13e-3; and (ii) the issuer or bidder, as applicable, mails or otherwise furnishes promptly the tender offer materials to any security holder who requests such tender offer materials pursuant to the press release or otherwise.
I recently purchased a t-shirt that boldly proclaims “I’m from the 1900s.” As with any other impulsive purchase, I am not sure if I will ever actually wear this shirt, but for some reason that message spoke to me at the time. It evokes a bygone era before we had blogs, e-mail, social media and artificial intelligence models capable of threatening to wipe out humanity. In other words, from afar, those seem like much simpler times. In fact, the electronic communications age had already arrived in force by the 1990s, when the SEC was grappling with the concept of electronic delivery of securities information that was previously transmitted in paper by snail mail. This resulted in a pair of Commission interpretive releases from the mid-1990s that still serve as the operative guidance to this day.
Yesterday, the SEC announced proposed new Regulation E-Delivery, seeking to bring the delivery of materials under the federal securities laws into more modern times. In a statement accompanying the proposal, Chairman Atkins notes:
The world has changed dramatically since many of our rules were first adopted. But, all too often, our regulatory framework has remained static. Default paper delivery results in a constant source of unnecessary expenses that are paid for by American investors and reduce their investment returns. In an age of artificial intelligence and blockchain technology, a default to paper delivery should be a relic, not a standard.
If adopted, Regulation E-Delivery would establish requirements and conditions under which essential information could be delivered electronically to investors and others without first obtaining their affirmative consent to do so. Currently, much of the required regulatory information is delivered in paper form unless the recipient affirmatively elects otherwise. The modernized approach, if adopted, generally would supersede the Commission’s decades-old, guidance-based e-delivery framework while preserving investors’ ability to receive delivery in paper on request. Importantly, it would substantially reduce paper, printing, and postage costs for issuers, intermediaries, and, ultimately, investors.
Under my chairmanship, we will not remain tethered to the tools or the temperament of a bygone era. Regulation E-Delivery is not merely a proposed administrative adjustment; it represents a meaningful advancement toward aligning our rules with the needs of today’s markets.
In a Fact Sheet describing that proposal, the SEC notes:
Currently, many required regulatory disclosures and reports under the federal securities laws are delivered in paper format, unless the person with a right to receive these disclosures and reports affirmatively elects otherwise. Reg E-Delivery, if adopted, would be the Commission’s primary rule addressing e-delivery. It would generally supersede the Commission’s current guidance based e-delivery framework and would permit e-delivery as the default method of delivery to investors, clients, and others subject to certain conditions.
The Commission’s new e-delivery approach is designed to address concerns that issuers, market intermediaries and, ultimately, investors and other recipients of information under the federal securities laws may be bearing unnecessary costs and expenses associated with a default delivery method that no longer reflects the preference of most investors. Further, e-delivery offers the opportunity to provide recipients of required disclosures and reports with potentially more personalized, interactive, timely, and efficient experiences with disclosure than paper delivery. It also provides accessibility and retention benefits. The proposal builds on the Commission’s decades-old e-delivery guidance as well as the Commission’s understanding about investors’ use of and preferences for electronic media, including through recently conducted investor testing surveys.
Proposed Regulation E-Delivery would permit, but not require, covered entities to use e-delivery as the default method of delivery for covered information under specified conditions. The proposed regulation provides that a covered entity could rely on Regulation E-Delivery to satisfy its delivery obligations where: (1) the covered recipient has provided an electronic address; (2) the covered entity has provided a prominent disclosure to the covered recipient that it will send covered information to the electronic address provided; and (3) the covered recipient has not opted out of e-delivery.
Regulation E-Delivery would include a number of general requirements addressing the method and timing of e-delivery, as well as the ability to opt out, the ability to receive a paper version of covered information free of charge upon request. Proposed Regulation E-Delivery would also include specific requirements for those websites where the covered information is provided.
When you think about the fact that the guidance proposed Regulation E-Delivery would replace is from the mid-1990s, it definitely seems that we are due for a change!
Earlier this week, the SEC’s Office of the Advocate for Small Business Capital Formation and the Division of Corporation Finance co-hosted a virtual roundtable for the purpose of re-examining the IPO process and reassessing the framework for how companies of all sizes access public capital. As noted in the agenda for the program, the moderators were Courtney Haseley from the Office of the Advocate for Small Business Capital Formation and Ted Yu from the SEC Division of Corporation Finance, and the engaged with speakers from law firms, an investment bank, the NYSE and OTC Markets.
The panelists discussed the SEC’s current rulemaking agenda, and were generally supportive of the SEC’s proposal to permit companies to choose to provide semiannual reports rather than quarterly reports. The panelists noted that it is uncertain to tell at this point whether companies would embrace the semiannual reporting option if the rule proposal were ultimately adopted, noting that factors such as peer practices, contractual restrictions and capital-raising consideration would likely influence whether companies would choose the optional semiannual reporting approach. On the topic of capital raising, the panelists expressed support for the SEC’s recent proposal to reform the registered offering process.
The panelists also discussed ideas for improving the IPO process, and a number of topics were addressed. The panelists discussed how it would be helpful to eliminate regulatory differences between going public through an underwritten offering versus a de-SPAC or reverse merger process. They noted that the SEC should consider reducing or eliminating the 15-day waiting period from the time of making a public filing of a registration statement following confidential review to the launch of the IPO. The panelists discussed how the SEC might reconsider gun-jumping restrictions and other communications limitations in connection with the IPO process, as well as easing restrictions on the involvement of research analysts in the IPO process. Further, the group discussed the costs and effort necessary to get ready for an IPO, and in particular the impact of PCAOB requirements when preparing the required financial information.
This type of dialogue is always useful, and hopefully it will inform that SEC’s efforts as they proceed along the “Make IPOs Great Again” path.
I am wrapping up my week of focusing on our upcoming our 2026 Proxy Disclosure and Executive Compensation Conferences with a look at how we plan to cover the rapidly unfolding SEC regulatory agenda, which will be playing out in real time as we assemble in Orlando on October 12th & 13th.
Looking back at the nearly two decades of Proxy Disclosure and Executive Compensation Conferences that I have been a part of, I think that we have always done a great job of bringing you the latest insights on everything going on at the SEC that impacts your disclosures and engagement activities. As the political winds have shifted back and forth in Washington over the years, we experienced a very dynamic environment on the SEC front when planning many of our conferences, which definitely keeps things interesting for our conference planners, panelists and attendees! In fact, it seems like only yesterday that I was on a panel speaking about the SEC’s climate-related disclosure rules, only to have the SEC propose to rescind those rules just a month and half ago!
It is through this lens that I want to highlight for you all of our programming at the October Conferences that will be specifically focused on up-to-the-minute SEC developments:
1. We will kick off the first day of the October Conferences with my interview of Christina Thomas, who serves as Deputy Director of the SEC’s Division of Corporation Finance & Chief Advisor on Disclosure, Policy, and Rulemaking. Christina will share views on the latest developments and priorities for the Corp Fin Staff and expectations for the upcoming proxy season.
2. As I mentioned yesterday, the SEC All-Stars will convene at the Proxy Disclosure Conference to the set the stage with a focus on the big picture of the SEC’s rulemaking agenda when it comes to capital raising and public company regulation, delving into the filer status and semiannual reporting proposals, the registered offering reform proposal, some of the key Corp Fin policy changes and guidance that impacted the 2026 Proxy Season and the SEC regulatory focus on its “Make IPOs Great Again” campaign.
3. As I noted on Monday, our panel “The Fate of Shareholder Proposals” will engage in an in-depth discussion of the experiences with Rule 14a-8 during the unusual 2025-2026 proxy season, as well as the SEC’s efforts directed toward shareholder proposal reform.
4. At the Proxy Disclosure Conference, we have a panel titled “SRCs, EGCs & FPIs: What’s Next?” that will focus on the SEC’s semiannual reporting and filer status rulemakings, reviewing the proposed rules and public comments and sharing practical implications and key takeaways.
5. As I mentioned yesterday, the SEC All-Stars will get together at the 23rd Annual Executive Compensation Conference to discuss the SEC’s compensation-related rulemaking and guidance in 2026, including the SEC’s efforts to review and potentially change the executive compensation disclosure rules, as well as the impact of the SEC’s semiannual reporting and filer status rule proposals from a compensation perspective.
6. As I noted on Wednesday, the 23rd Annual Executive Compensation Conference features the panel titled “Your Compensation Disclosures: New & Improved (We Hope)!” that is built on our expectation that we will likely see a proposal to overhaul executive compensation disclosure requirements from the SEC in the Fall.
Throughout all of the other panels taking place over the course of our two days of conferences, you will hear additional perspectives on how the regulatory environment is influencing many other areas, including activism, ESG, perquisites, shareholder engagement, the use of technology, proxy advisory firms and so much more!
During this critical time when so many things are changing, you should come to our October Conferences so you can be fully informed as all of these developments unfold. If you sign up now, you can take advantage of our early bird discount, which is in effect until next Friday. You can register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271.
With the SEC set to go down to just two Commissioners this year, Meredith recently revisited the quorum rule that governs action by the SEC Commissioners that we have referred to time and time again when the number of sitting Commissioners shrinks. I encountered the smallest Commission during my time in the practice during my first go-round at the SEC, when Chairman Levitt and Commissioner Wallman served as a two-member Commission. Broc Romanek recounted those days in his Cooley blog from last month, where he talks about the “Rule of 2” that allows for a quorum of two Commissioners during personnel shortages, vacancies or recusals.
I was therefore surprised to see in yesterday’s Daily Update from Securities Docket that the CFTC is getting along just fine with only one Commissioner, initiating eight rulemakings in the month of June with a very short-staffed Commission! The Bloomberg Law story referenced in the Daily Update notes:
The US regulator in charge of derivatives trading is rapidly proposing rules to establish its authority over prediction markets and digital assets, charging ahead with formal policies on big-ticket issues even as four out of its five commissioner seats remain vacant.
The Commodity Futures Trading Commission has initiated rulemaking on eight items since June, roughly doubling its output from the rest of President Donald Trump’s second term, according to a list of published proposals.
That includes one last month to crack down on war-related bets, as the agency challenges states over who regulates prediction markets that allow users to bet on reality TV results, the midterm elections, and more.
Part of the CFTC’s rulemaking push includes increased harmonization with the Securities and Exchange Commission, which listed dozens of proposals in its semiannual regulatory agenda this month following a slow start to the second Trump administration.
Although both Wall Street regulators typically flex their rulemaking powers across administrations, the CFTC is doing so at a rapid pace that’s likely accelerated by its unusual single-member leadership, with Chairman Michael Selig serving alone at the top, agency veterans said.
“The speed in which the rules are coming out, and just the pace of it, is something I don’t think we’ve ever seen before,” said Elizabeth Lan Davis, a Davis Wright Tremaine LLP partner and former CFTC attorney.
“Every week there’s now two or three more rules proposed or a request for comment,” she said.
You have got to hand it to Chairman Selig for pulling off some one-man-band level of activity to keep such a robust rulemaking agenda on track!
