White & Case recently published a survey of publicly filed insider trading policies. One of the topics addressed was the frequency with which policies addressed the issue of “shadow trading.” This excerpt describes the survey’s findings:
“Shadow trading” is the practice of an insider trading shares of another company that is “economically linked” to the insider’s company, while in possession of MNPI about the insider’s company. Companies are “economically linked” when the MNPI about the insider’s company could influence the market price of shares of the other company. This issue came to the fore in SEC v. Matthew Panuwat, when the SEC successfully prosecuted an insider trading case based on shadow trading.
Companies may want to reconsider the extent to which their insider trading prohibitions apply to securities of other companies, considering the potential reputational consequences of an insider trading action. 20% of companies surveyed specifically prohibit “shadow trading” by insiders, which was an increase (by 2%) from what we saw in our 2024 survey.
Note that most companies’ insider trading policies already explicitly apply to trading in the securities of the company’s customers, suppliers, and strategic partners etc., based on any information about such other companies learned through the individual’s employment. This concept is drafted more narrowly than the concept of shadow trading.
Other topics addressed in the survey include the prevalence and duration of quarterly blackout periods, persons subject to quarterly blackouts and preclearance policies, and how hedging and pledging, exchange funds, and gifts are addressed.
The September-October issue of the Deal Lawyers newsletter was just sent to the printer. It is also available online to members of DealLawyers.com who subscribe to the electronic format. This issue includes the following articles:
– Integrated Agreements: It’s Not Always About Conflicts
– Biotech Spin-Off Transactions
– New State Notification Requirements for Mergers and Acquisitions
– Advance Notice Bylaws: Delaware Court of Chancery Gives Dissidents Another Bite at the Apple
– Renewal Season is Here! Is It Time to Renew Your Membership?
The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at info@ccrcorp.com or call us at 800-737-1271.
ExxonMobil’s recently announced retail voting program has prompted a negative reaction from certain segments of the corporate governance industrial complex, so I guess it was inevitable that somebody would eventually cobble together a lawsuit challenging the program. According to this Investment Executive article, “eventually” is now:
The City of Hollywood Police Officers’ Retirement System has filed a proposed class action in U.S. district court on behalf of Exxon shareholders, against the company and its board of directors, alleging that they are breaching their fiduciary duties in connection with the company’s adoption of its “retail voting program.”
The program, which was approved by the U.S. Securities and Exchange Commission (SEC) last month, enables the company to automate retail investors’ votes in favour of management.
The proposed lawsuit is seeking an injunction to prevent the company from introducing the program, which it alleges infringes on shareholders’ voting rights and is designed to stifle shareholder dissent and entrench management.
It argues that the program impairs the voting rights of shareholders that opt into the program, “based on inadequate disclosures.” It also argues that the votes of shareholders that can’t or don’t opt in will be diluted.
By adopting the program, the lawsuit alleges that the company’s directors breached their fiduciary duties.
“By attempting to weaponize a largely disengaged body of retail shareholders … the [program] affirmatively violates federal law, and constitutes both an unlawful entrenchment device and a breach of fiduciary duty under New Jersey law,” the plaintiffs’ filing alleged.
As I mentioned in my earlier blog, I was already planning to enroll in any similar program that the companies I invest in offer, but now that I know I’m allegedly being “weaponized,” I’m even more eager to sign up. I’ve never been weaponized before, and frankly, it sounds kind of sexy. (I don’t get out much.)
It didn’t take long for Prof. Ann Lipton to flag one of the potential problems with this lawsuit – the uncertainties concerning whether shareholders have a right of action to bring claims alleging violations of the proxy rules. I don’t know all of the intricacies about implied private rights of action, but my guess is that this is very much a live issue in the case. The federal courts haven’t been kind to claims asserting private rights of action under Rule14a-9 in recent years, and to the extent that other provisions of the proxy rules are claimed to provide such a right, my guess is that they’ll be equally skeptical.
By the way, check out this blog from Broc Romanek highlighting a Cooley Alert that contends some of the arguments asserted against Exxon’s program are misleading.
As far as public sector and public sector adjacent jobs go, being a PCAOB director is a pretty lucrative gig. Currently, the PCAOB’s Chair makes $673,000 and the other board members make $574,000. If you think that’s a lot of money, you’re not the only one – SEC Chairman Paul Atkins thinks so too. In fact, he thinks it’s too much money. In a July 2025 statement soliciting PCAOB board candidates, he criticized the growth in the PCAOB’s budget in recent years and set his sights squarely on board member compensation, noting that “an evaluation of Board member compensation will be among the items the Commission considers in connection with its review of the Board’s 2026 budget.”
According to an article in Friday’s WSJ, the PCAOB appears to have gotten the message in preparing its fiscal 2026 budget:
The Public Company Accounting Oversight Board has proposed a 20% cut to the salaries of its board members as it faces scrutiny from the Securities and Exchange Commission over compensation levels.
The cut was part of a preliminary 2026 budget the U.S. audit regulator submitted to the SEC in recent weeks, people familiar with the matter said. The plan suggests shrinking the overall budget by roughly 10% from the anticipated 2025 amount. This year’s spending is expected to come in below the $399.7 million the SEC approved last year.
The SEC, which oversees the PCAOB, has until Oct. 31 to propose revisions to the preliminary budget, followed by an audit-board vote in November and SEC vote in December, according to SEC rules. The process could be delayed by the government shutdown.
Is this cut big enough to satisfy Chairman Atkins & his colleagues? I don’t know, but it is worth noting that even with the proposed cuts, the WSJ article says that PCAOB board members would still be much more highly compensated than their counterparts at the SEC. It cites 2022 figures showing that Atkins’ predecessor, Gary Gensler, earned about $168,000, while commissioners Caroline Crenshaw and Hester Peirce earned roughly $158,000.
All things considered, I think I’d prefer to be the head of the other SEC – the Southeastern Conference. According to media reports, that SEC Chairman, Gary Sankey, earns $4 million a year.
If you’re traveling to Las Vegas today for our “Proxy Disclosure and 22nd Annual Executive Compensation Conferences,” be sure to join us at 4 pm in the Primrose Hallway at The Virgin Hotels for a casual evening reception celebrating CCRcorp’s 50th anniversary. You’ll be able to collect your credentials for the PDEC Conferences, network with other 2025 PDEC attendees and sponsors, and enjoy complimentary drinks, appetizers and entertainment – plus a celebratory toast to 50 years of our corporate counsel resources!
There’s still time to register to attend our PDEC Conferences in person or virtually. Just email us at info@ccrcorp.com, call us at 800-737-1271, or visit our online store. We look forward to seeing you there!
Still not sure if you want to attend? Well, we’ve given you plenty of our own sales pitches over the past several months. Now, we ask that you consider some advice from an independent third party:
“Buy the ticket, take the ride…and if it occasionally gets a little heavier than what you had in mind, well…maybe chalk it up to forced consciousness expansion. . .” – Hunter S. Thompson, Fear and Loathing in Las Vegas
One of the things we used to be able to count on was a surge in SEC enforcement settlements during the last several weeks of September. The agency always seemed to time a healthy chunk of high-profile enforcement actions to coincide with the government’s September 30 fiscal year end, but that didn’t happen this year – and I’m not the only one who noticed. Here’s what Michelle Leder from Footnoted.com had to say:
For as long as I’ve been covering the SEC, September has always been something of a sprint, with the agency racing to file charges before the end of its fiscal year. Sometimes, there would be 5 or 6 enforcement actions on the same day! But not this year. While the SEC has put out 19 press releases this month, almost all of them have been about rule changes. I counted only a single enforcement action, which seems almost unbelievable! Compare that to last year, when there were 51 releases and 41 of those were enforcement-related.
This didn’t happen during the first Trump Administration under SEC Chair Jay Clayton. In September 2018, roughly two-thirds of the SEC’s releases were enforcement related.
It looks like the enforcement hiatus isn’t just a September phenomenon either. On LinkedIn, William Floyd pointed out that the SEC issued only one Accounting and Auditing Enforcement Release in the last 99 days – and that release involved the reinstatement of a previously barred person.
The Division of Enforcement’s inactivity on the settlement front may have something to do with the fact that a new Director was named just a little more than a month ago and may just be getting her feet on the ground. However, Enforcement was one of the areas that was particularly hard hit by the SEC’s staff reductions earlier this year, so resource constraints also may be a factor.
According to the various law profs who make up the “Shadow SEC,” it isn’t just the Division of Enforcement where things appear to be moving a little slowly. Citing an August 2025 OIG report on Corp Fin’s disclosure review program and research from Olga Osvyatsky, a recent blog from the Shadow SEC says that there’s been an alarming decline in the number of comment letters and points to this year’s staff reductions as the cause:
Data document that there has been a dramatic, and worrisome, decline in 2025 of staff comment letters and that there are longer delays in the letters. We note here that the SEC historically has managed its mandated Disclosure Release Program with fewer than 300 employees; this task is challenged by the report of Chair Atkins that since the beginning of 2025 there has been about a 10% reduction in the disclosure review staff and that he “did not rule out further reductions.”
SEC comments are valued by the market and contain new information that is not already priced into stock prices. As observed, we are witnessing a sharp decline in the number of SEC comment letters released on EDGAR between January and August 2025.
The SEC has lost 27 of its 299 disclosure review employees since February according to an August 26 Office of Inspector General Report. “When experienced regulators depart in large numbers, the SEC will have fewer employees with a deep understanding of securities regulation and agency practices. With these experienced employees leaving so abruptly, the remaining staff will find it difficult to take overactive cases or begin new investigations both due to knowledge gap and the increased workload.”
Olga’s a little more circumspect when it comes to attributing the decline in comment letters to staff reductions, noting that it’s “difficult to attribute the decline in released comment letters to a specific cause because both the total number of reviews conducted and the SEC staff’s materiality judgments about whether to issue comments are unobservable.”
On the other hand, Olga says the delay in the release of comment letters is very evident. Olga points out that in the past, the Staff usually adhered to its internal guidance calling for those letters to be released within 20 business days following the issuance of a closing letter. That dissemination lag grew from 28 days in April 2025 to 100 days in August 2025.
Of course, the government shutdown isn’t going to improve this situation one bit. According to this Government Executive article, the SEC’s Shutdown Operations Plan calls for over 90% of the agency’s employees to be furloughed during a government shutdown.
It’s only been a couple of days since the government shutdown began, and there’s already been significant collateral damage. Fresh on the heels of a triumphant farewell tour with the rest of The Wu-Tang Clan, Ghostface Killah was set to go on tour with his new album this month. Unfortunately, that’s been delayed by the shutdown. This HotNewHipHop.com article has the details:
In support of the new project, Ghostface Killah was set to go on tour starting this month. Unfortunately, however, plans have changed. Last night, he took to Instagram to announce that the tour has been postponed. According to him, the decision was made due to the United States government shutdown.
“Peace family,” the post begins. “I gotta let y’all know — because of this government shutdown, we’re postponing the upcoming Supreme Clientele Sessions. This one hurts me, because I was looking forward to building with y’all face-to-face — sharing the stories, the laughs, the jewels. But I also know everybody’s feeling the weight of what’s going on right now.”
It turns out that Ghostface Killah’s tour may not be the only Wu-Tang Clan adjacent matter that might face shutdown-related delays. As you may recall, an outfit called PleasrDAO acquired the only copy of The Wu-Tang Clan’s “Once Upon a Time in Shaolin” from the DOJ a few years ago, and sold NFTs last year in order to raise sufficient funds to release the album to the public.
That Wu-Tang Clan album was originally owned by convicted fraudster Martin Shkreli (which is how it came into the DOJ’s possession), and he was prohibited from copying it. However, he apparently did, and PleasrDAO sued him. Last month, a federal judge ruled that PleasrDAO could proceed with trade secrets claims against Shkreli, but there’s unlikely to be much action in the lawsuit with the government shut down.
Barnes & Thornburg’s Jay Knight flagged a comment letter exchange in which the Staff questioned the timeliness of a company’s Form 8-K reporting a director’s resignation. Form 8-K CDI 117.01 says that an Item 5.02 8-K reporting obligation is triggered by a director’s notice of a decision to resign. The guidance is pretty clear, but as Klotho Neurosciences’ response to a Staff comment challenging its S-3 eligibility illustrates, the trick is applying it:
The Company respectfully submits that it is eligible to use Form S-3 at this time.
While the Company’s Form 8-K filed on August 30, 2024, originally stated that the resignation of director Edward Cong Wang occurred on August 25, 2024, this was later clarified and corrected in Amendment No. 1 to the Form 8-K, filed on July 22, 2025. As explained in that amendment, although Mr. Wang submitted a written resignation via e-mail on Sunday, August 25, 2024, the Company contacted him on Monday, August 26, 2024, to confirm his resignation and ask whether he intended to exercise his contractual right to designate a successor. Mr. Wang responded later that day and confirmed that he would not be appointing a replacement. Accordingly, the Company reasonably determined that the resignation became finalized and effective on Monday, August 26, 2024—the date on which the necessary corporate steps were complete and the Company could determine the resulting board vacancy and compliance implications.
Thus, the Company filed the original Form 8-K within four business days of August 26, 2024, consistent with Item 5.02 of Form 8-K and Instruction I.A.4 to Form S-3, which requires timely filing of all required reports. The correction made in the amended Form 8-K/A was intended solely to clarify the effective date in line with the Company’s good-faith interpretation of when the resignation was finalized.
The good news is that the Staff didn’t comment further on this issue, but Jay says there are some lessons in this comment letter exchange that all public companies should keep in mind. These include the need to provide directors and officers with a “rules of the road” memo that helps them understand nuances associated with determining when a director resignation triggering event has occurred, and the need to ensure that appropriate disclosure controls and procedures are in place related to director resignations.
If you’re looking for some guidance on director and NEO resignation issues, check out our Form 8-K Handbook. We have Q&As in the Handbook that address a bunch of different “did they or didn’t they?” scenarios.
According to Woodruff Sawyer’s “Looking Ahead Guide 2026,” the D&O market remains favorable for mature public companies, but not quite to the same extent that it has in recent years:
Pricing continues to decline for mature public companies, though the rate of those decreases has steadily moderated. This trend is especially evident when focusing on pricing for the primary layer of coverage. In 2025, the median premium reduction in this segment is 5%. That’s a notable shift from the high single-digit decreases seen in 2024 and the steeper 14%–22% median reductions experienced in 2023. The market appears to be stabilizing, even as buyers continue to benefit from favorable conditions.
For the excess layers on D&O program towers, two dynamics are shaping the market. For starters, new entrants are still struggling to gain traction and market share. In a competitive soft market, these unproven carriers are rarely chosen for primary layers or for critical excess positions. That’s because established carriers are aggressively moving down the tower to secure layers with more rate. As a result, buyers are seeing reductions across their total programs—but carrier appetite for the high excess layers could be close to capacity.
The Guide also has good news for less mature companies, finding that premiums for IPO issuers and mature public companies have converged and that the large gap in premium rates that existed prior to the first quarter of 2024 has mostly been eliminated.
Despite the continuing good news for D&O buyers, there may be storm clouds on the horizon. The Guide says that 83% of underwriters surveyed said that the risk environment is increasing, and ” an overwhelming majority of underwriters believe that increasing complexity and global volatility will inevitably lead to more D&O claims.”
