Last week, the SEC posted an order approving proposed rule changes to amend DTC’s Redemptions Service Guide and Operational Arrangements to update its Payment without Presentation process, which, the order explains, “permits Agents to remit maturity or full call proceeds to DTC without requiring delivery of the associated physical certificate and allows them to rely instead on DTC’s book-entry records of entitlements.” This is a technical rule change, but I found there were times in practice when I needed at least a cursory understanding of how DTC processes work. Here’s how the order explains the old process and the new process:
Under the current procedure for redeeming a debt security at maturity, DTC submits a physical debt certificate and a Letter of Transmittal (“LT”) to the Agent prior to the release of redemption proceeds from the Agent to DTC. After receiving both documents, the Agent releases the funds, and DTC then distributes the funds to Participants and deletes the Participants’ positions from DTC’s records. Alternatively, Paying Agents and Issuers currently utilizing DTC’s Redemption PWP process for Fast Automated Securities Transfer (“FAST”) and Book-Entry-Only (“BEO”) issues agree to accept DTC’s automated notifications instead of physical Shipment Control List and Redemption Payment Summary forms for redemption payments. The Agent and Issuer must agree to review relevant details prior to the redemption date and report any discrepancies at the CUSIP level prior to payment. Redemption payments are then remitted to DTC in accordance with the procedures described in the OA.
The Proposed Rule Change seeks to amend the Redemptions Guide and the OA to update the PWP process. The Proposed Rule Change would: (i) eliminate the need for a LT or the presentment of certain other physical documents; (ii) include in the Rules that Agents may receive automated notifications; (iii) make participation in the PWP process mandatory, with optout permitted only where necessary; (iv) establish retention and destruction protocols for physical certificates; and (v) make clarifying and conforming changes.
With respect to items (i), (ii) and (iv) above, the Proposed Rule Change would no longer require a physical certificate presentment or related physical documentation for eligible redemption and maturity events. Agents may continue to receive automated notifications that provide information on the relevant security (including CUSIP), payment date, and amount due. These notifications would be sent electronically to Agents prior to the event. An agent must optin to receive these notifications and does so by sending an email to the redemptions operations team.
Physical certificates related to these events would no longer be delivered to Agents. Agents would remit proceeds to DTC without receipt of a LT or other physical certificates, then DTC would allocate redemption proceeds to Participants based on its book-entry records and remove any positions from its records following payment. The associated physical certificates would be segregated and imaged for record retention purposes, retained for at least ninety days following redemption, and then destroyed according to DTC’s procedures.
With respect to item (iii) above, participation in the PWP process would be mandatory for all eligible fully registered debt securities represented by physical certificates held at DTC and registered under the name Cede & Co. Exceptions to participation are permitted solely to comply with a state statute, court order, or other legal or regulatory obligation, or if the Agent is a governmental entity or authorized representative requiring physical documentation.
As I recently shared on DealLawyers.com, the Chancery Court’s recent decision in Drakes Landing Associates v. Tilden Park Capital Management(Del. Ch.; 7/26) answered a significant issue of first impression — whether Revlon applies to the board of a public benefit corporation navigating a change-of-control transaction. The decision summarizes the facts as follows:
Two of a public benefit corporation’s lenders proposed a financing transaction that would provide the company with $20 million in urgently needed financing. As part of the financing, the debt owed by the company to the two lenders would convert into equity, increasing the lenders’ stock holdings from around 25% to nearly 85%, and diluting the other stockholders. The public benefit corporation appointed an independent and disinterested special committee to evaluate the transaction. The special committee in turn retained independent legal and financial advisors and ultimately approved the deal.
The parties agreed that the financing was a change-of-control transaction to which Revlon would apply if the company was not a PBC, but disagreed on whether and how a company’s status as a PBC impacts Revlon‘s application. VC Cook said that this turned on whether Revlon is treated as imposing a standard of conduct (obtain the best price reasonably available) or a standard of review (enhanced scrutiny). A Richards Layton & Finger alert on the decision explains his analysis:
The Court held that the traditional Revlon obligation to seek the best price reasonably available for stockholders does not apply as a standard of conduct to PBC directors because, under Section 365(a) of the Delaware General Corporation Law (the “DGCL”), PBC directors are required to balance stockholders’ pecuniary interests, the interests of persons materially affected by the PBC’s conduct and the public benefits stated in the PBC’s certificate of incorporation. The Court explained that Revlon’s price-maximization mandate conflicts with Section 365(a)’s express balancing requirement, and that PBC directors cannot be required to pursue the highest value reasonably available for stockholders to the exclusion of the corporation’s public-benefit purpose and affected stakeholders. The Court nevertheless left open whether a modified form of enhanced scrutiny—referred to by the Court as “PBC enhanced scrutiny”—could apply to a change-of-control transaction involving a PBC as a standard of review, under which the Court would examine whether the directors’ balancing of these interests fell outside the range of reasonableness.
The Court did not directly decide this question because it found that the challenged transaction, which was approved by an independent special committee, invoked the statutory protections applicable to decisions of PBC directors under Section 365(b) of the DGCL. Section 365(b) provides, in relevant part, that with respect to director decisions implicating Section 365(a)’s balancing requirement, a director “will be deemed to satisfy such director’s fiduciary duties to stockholders and the corporation if such director’s decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve.” Because the plaintiffs conceded that the special committee members were disinterested and independent, and their allegations regarding the adequacy of the committee’s market check expressed concerns only about stockholders’ pecuniary interests without challenging the committee’s consideration of the other interests implicated by the statutory balancing test, the Court dismissed the plaintiffs’ fiduciary duty and related aiding and abetting claims. The Court also suggested that even if the corporation were not a PBC, the fiduciary duty claims would have been dismissed under Delaware’s new statutory safe harbor, Section 144 of the DGCL.
RLF says the key takeaways are that:
– PBCs are never subject to a “singular obligation to maximize stockholder value.”
– Section 365(b) of the DGCL serves as a “statutory business judgment rule” that provides significant protection against challenges to the decisions of PBC directors.
If you don’t already, you should subscribe to get our daily DealLawyers.com blogs in your inbox. (The blog is free!) And if you regularly handle hostile – or friendly – M&A, the site is full of very useful & practical info that will come in handy when you’re on a tight time frame. It’s also a great training resource for new associates! If you don’t have access to DealLawyers.com, reach out to info@ccrcorp.com or call 1.800.737.1271.
The Corp Fin Staff’s November 2025 announcement that it didn’t intend to referee the Rule 14a-8 process during the 2026 proxy season was explicit that the process change applied to the 2026 proxy season (October 1, 2025 – September 30, 2026) and no-action requests received before October 1 that had not yet been addressed by the Staff. But, given commentary from Chairman Atkins and Staff statements, it probably comes as no surprise to any readers of this blog that the Corp Fin Staff announced on Friday that it has no intention of getting back into the game.
Chairman Atkins previously likened this process change to “removing the training wheels from the shareholder proposal bicycle.” With this most recent announcement, it seems we were all riding a balance bike during the 2026 proxy season and now we’re graduating to the 10-speed. That’s because this announcement goes a bit further.
[T]he Division has determined to discontinue responding to Rule 14a-8 no-action requests entirely, including those submitted under Rule 14a-8(i)(1), effective immediately, unless and until the Division announces otherwise.
It also will no longer respond to notices filed under Rule 14a-8(j) with a letter indicating that it will not object if a company omits a proposal from its proxy materials. Although the staff “has for many years engaged in the informal practice of expressing its enforcement position” in response to notices submitted under Rule 14a-8(j), the Commission has also long recognized that “[n]o response or other action by the Commission or its staff is required in regard to such communications.”
Not only does it go further, but, as Broc noted in this Cooley blog, unlike the November 2025 announcement, “There is no sunset for these updated Staff positions – unless the SEC announces a change in its position. So this is ‘new normal’ for the foreseeable future…”
As required by the rule, the announcement reminds companies that they must still submit notices under Rule 14a-8(j) containing the information required, which they should do using the Shareholder Proposal Form. That form will also be used for any questions or other correspondence that companies or proponents submit to the Staff. The Corp Fin shareholder proposal email address has been deactivated. Investment Management will take a similar approach for Rule 14a-8 notices by investment companies, except Rule 14a-8(j) notices will be submitted via email to IMshareholderproposals@sec.gov.
Last month, EY announced the results of a survey it conducted with the Society for Corporate Governance on the use of sub-certifications, which (for any new securities lawyers out there) are “attestations from personnel across the organization regarding the accuracy and completeness of information provided for disclosure purposes.” Here are some of the key findings:
– Sub-certifications are used by 92% of surveyed companies on a quarterly basis. 84% require over 11 employees to provide sub-certifications, with the largest group (31%) reporting that 11 to 20 employees are included in the process.
– 57% of companies have automated the process, and 26% took a hybrid approach. (Examples of a “manual” process were email, Word, Excel, etc.)
– 38% provided a formal summary or compilation to the disclosure committee, while 44% treat it separately from the disclosure committee process. 62% report the results to the Audit Committee in some form.
– The CAO or Controller is most often responsible for administering the process, and the Finance or Accounting Department is typically tasked with vetting concerns.
– Most respondents (68%) that use sub-certifications used one form for all functional areas, roles and organizational levels, and most (78%) distribute them after the end of the reporting period. EY notes that they are often distributed late in the reporting cycle, sometimes when books are substantially closed but before disclosure committee review, so certifiers can “reflect on period-complete information.”
EY shares three recommended best practices based on common gaps in sub-certification programs identified by the survey responses. Those include:
1. Strengthen the connective tissue between sub-certifiers and the disclosure committee
Build tighter, more consistent linkages so insights flow upstream earlier, gaps surface faster and those charged with governance gain clearer visibility into emerging issues. If processes are separately managed (between finance and legal or the sub-certification process and disclosure committee, as examples), confirm productive teaming and open lines of communication exist.
2. Evaluate questionnaires periodically and expand questions to capture emerging risks
Sub-certifications should evolve in tandem with the risk landscape. Treat questionnaires as living tools, periodically pressure-test them and add coverage for new technologies, operational shifts and regulatory developments.
3. Regularly educate sub-certifiers
Even brief refreshers reinforce expectations, sharpen judgment and prevent outdated assumptions from prevailing. Continuous micro-teach-ins keep the process accurate, efficient and audit-ready.
We’ve posted the transcript for our recent webcast, “The SEC’s Registered Offering Reform Proposal: What You Need to Know Now.” This program featured Valian Afshar and Ted Yu of the SEC’s Division of Corporation Finance, Sonia Gupta Barros of Sidley and Edwin O’Connor of Goodwin, with our colleague and Goodwin partner, Dave Lynn, moderating. They discussed:
Key changes to Form S-3 eligibility
Expanded communications flexibility
Modernization of registration processes and shelf offerings
Transition timing, open questions and practical implementation considerations
Impacts on capital-raising strategy
Members of TheCorporateCounsel.net can access the transcript of this program. If you are not a member, email info@ccrcorp.com to sign up today and get access to the full transcript – or call us at 800.737.1271.
Yesterday, the SEC issued notice of a proposed NYSE rule change that, if approved, will extend the transition period in which a listed company must establish an internal audit function. Currently, companies listing in connection with an IPO, carve-out or spin-off transaction have a one-year transition period to establish an internal audit function. The proposal would change that to 5 years. Here’s some color on why the NYSE is proposing this change:
Section 303A.07(c) of the Manual states that each company listed on the Exchange must have an internal audit function. The purpose of the internal audit function is to provide an issuer’s management and audit committee with ongoing assessments of the issuer’s risk management processes and system of internal controls. The function may be outsourced to a third-party service provider other than an issuer’s independent auditor.
Like other elements of the Exchange’s corporate governance rules, Sections 303A.00 and 303A.07 provide a transition period for certain issuers to become compliant with the internal audit function.3 Pursuant to Section 303A.07 issuers must have an internal audit function in place no later than the first anniversary of their listing date. Over time, issuers have expressed concern that developing a capable internal audit function within the first year of listing presents challenges as issuers adjust to life as a newly public company. Accordingly, the Exchange is proposing to extend the transition period to implement an internal audit function from one year to five years.
In expressing concern over the current one-year compliance period, issuers often cite competing business and regulatory obligations requiring management’s attention and the challenges of building an internal audit function to assess a company’s internal control environment while a company is still in its early stages and continuing to grow. The Exchange continues to believe that having a robust internal audit function is a key component of sound corporate governance, but agrees that providing issuers with additional time to develop such function will result in a more effective function.
In this regard, the Exchange notes that newly public companies are typically in the process of upgrading their accounting systems and internal controls and hiring additional staff to meet the greater demands placed on public companies. Given the oversight role of directors — and members of the Audit Committee, in particular — with respect to risk management and internal controls, the Exchange believes it is appropriate to extend the transition period for compliance in order to provide a new slate of directors with sufficient time to assess an issuer’s operations to help design a valuable internal audit function.
NYSE believes that other listing requirements will provide assurance that companies are sufficiently managing risk during the 5-year transition period. For example, companies must have an Audit Committee that receives an annual report from the company’s independent auditor describing internal quality control procedures, and the Sarbanes-Oxley Act requires assessments and (for some companies) attestations of the effectiveness of internal controls, as well as CEO and CFO certifications. NYSE says that SOX was adopted after the exchange had adopted its internal audit requirement – and because the internal audit requirement can now be viewed as a supplement to the statutory protections, a longer phase-in period shouldn’t raise investor protection concerns. NYSE also contends that its proposal to extend the transition period shouldn’t raise concern because Nasdaq doesn’t require listed companies to maintain an internal audit function at all.
Interested persons are invited to submit comments. To do that electronically, use the Commission’s internet comment form or send an email to rule-comments@sec.gov (include file number SR-NYSE-2026-37 on the subject line).
Never mind! Yesterday, the SEC announced that it had cancelled the open meeting that had been scheduled for today and was just announced on Monday evening (a departure from the typical 7-day notice). I will survive, but I’ve gotta say I had been kinda excited about the open meeting since there haven’t been very many with Chair Atkins!
As I shared earlier this week, the purpose of the meeting was to consider whether to issue a release proposing new rules to create a tailored offering regime for certain investment contracts involving crypto assets. An open meeting isn’t required to issue a proposal since the Commissioners can also vote by seriatim (see this 2015 statement from former Commissioner Commissioner Luis A. Aguilar for how that works). The SEC’s “crypto assets” proposal was still listed as pending review on the OIRA dashboard as of yesterday afternoon.
(At the Congressional level, the CLARITY Act vote has also been bumped to (at least) September and the WSJ editorial board published a piece that pointed out problems with it, which in turn has generated more commentary from those in favor of it, etc.)
A proposal from the SEC on Pay-to-Play Reform under the Investment Advisers Act is also on the dashboard now…
The latest issue of The Corporate Counsel newsletter has been sent to the printer. It is also available now online to members of TheCorporateCounsel.net who subscribe to the electronic format. The issue includes the following articles:
– SEC Proposes to Make E-Delivery the New Default
– Prediction Markets: What Should Companies Do Now?
– Stay In-the-Know with TCC & the 2026 PDEC Conferences
Email info@ccrcorp.com or call 1.800.737.1271 to subscribe to this essential resource!
As I recently shared in this Cooley CapitalXchange blog, the market seems to be receptive to a variety of types of securities offerings right now. That’s a good thing for highly levered companies, as this Weil alert notes:
A wave of near-term debt maturities, persistent covenant pressure, and a financing market that rewards speed and certainty over marketed processes have pushed balance sheet management to the top of the agenda for management and boards of highly levered companies. For companies navigating this environment, the equity capital markets offer a variety of means of raising new capital, including some effective but less frequently used alternatives. Used deliberately, they are balance sheet management tools in their own right, capable of improving liquidity, reducing leverage and strengthening a company’s position in creditor negotiations.
Three equity financing techniques are particularly well suited to these objectives, each addressing a different balance sheet need. At-the-market programs (ATMs) provide flexibility and low cost of capital, allowing companies to raise capital incrementally over time at prevailing market prices. Registered direct offerings trade some of that pricing efficiency for confidentiality and execution certainty, raising committed capital in a single negotiated transaction with terms that can be agreed upon before any public announcement. Debt-for-equity exchanges reduce leverage directly, retiring outstanding debt without requiring new cash. Together, these tools give public companies a range of options for managing liquidity, leverage and refinancing risk as financing needs evolve.
The alert points out that preparation is key: To use these alternative offerings effectively, companies need to understand their advantages and limitations ahead of time. The Weil team walks through that in detail in the memo for each alternative – and provides this handy chart to summarize key tradeoffs:
The alert also discusses how the SEC’s currently proposed changes to the shelf registration framework would affect companies’ access to capital. We’re continuing to post memos about the SEC’s proposal in our “Shelf Registration” Practice Area.
For the latest episode of “Mentorship Matters with Dave & Liz,” Dave and I were honored to talk with Chaka Patterson, who recently published the book “The Hot Seat: Mastering the Public Company General Counsel Role.” Chaka is Founder and CEO of Chaka Strategy, a leadership and strategic advisory firm that helps Chief Legal Officers and General Counsels of publicly traded companies become more effective enterprise leaders, and he is also a lecturer at the University of Chicago Law School.
During his career, Chaka has served in the roles of General Counsel, VP of Treasury and Investor Relations, outside counsel, and enforcement attorney for the Illinois AG’s office – so he has a well-rounded perspective and shared a lot of helpful advice during our 23-minute conversation. We discussed:
1. Mentors who influenced Chaka’s career path in private practice, enforcement, and in-house roles – and the important lessons they shared.
2. What inspired Chaka to write “The Hot Seat: Mastering the Public Company General Counsel Role” – and why he felt that now was the right time to publish this field guide.
3. Chaka’s advice for building and strengthening important relationships with the C-suite, board and other stakeholders.
4. Skills and experiences that lawyers should actively seek if they aspire to have a general counsel role and thrive in “the hot seat.”
5. How to overcome common patterns that hold lawyers back.
Among other takeaways, I appreciated Chaka’s advice to move away from the “volume mindset” and his thoughts on shifting from a technical expert to a strategist.
Thank you to everyone who has been listening to the podcast! If you have a topic that you think we should cover or guest who you think would be great for the podcast, feel free to contact Dave or me by LinkedIn or email.
