The SEC managed to get several rulemaking projects off its desk and on to the OIRA website in advance of the upcoming Labor Day holiday. In addition to the long-anticipated proposal on executive comp disclosure reform that Dave blogged about last week, OIRA added two more SEC proposals to its dashboard on Friday.
The first proposal is currently titled “Shareholder Proposal Modernization,” but in case you’re wondering what the SEC intends to do with shareholder proposals, the dashboard includes the following statement: “we request the title appear on reginfo.gov as “Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4.” Yeah, I think we can pretty much count on participants in the shareholder proposal industry moving immediately to DEFCON 2 on this news.
The second proposal to hit OIRA’s website on Friday is currently titled “Amendments to Certain Proxy Rules.” The dashboard says that SEC also wants to change the title of this proposal to “Proxy Solicitation Modernization,” and its description says that Corp Fin is considering asking the Commission to “propose amendments to modernize certain rules regarding the proxy solicitation process, including certain filing and procedural requirements relating to proxy solicitations and shareholder meetings, to reduce costs and compliance burdens.”
Like the executive comp proposal, these two proposals appeared on the latest edition of the SEC’s Reg Flex Agenda and targeted an October 2026 date for their release. It looks like the SEC’s on track to hit that date, and we’ll be ready to address any proposals that are issued during our Proxy Disclosure and Executive Compensation Conferences to be held on October 12th and 13th in Orlando. In case you needed another reason to register now, I think the SEC just gave you three!
I also want to give a tip of the hat to all of the members who took time out from their weekends to reach out to us to make sure we were aware that these proposals had been posted to the OIRA site. Much appreciated!
This recent D&O Diary blog addresses the risks of leaving key management governance roles vacant for extended periods. It notes that when an employee in a governance-related position departs, someone quickly steps in to ensure the visible roles (organizing board materials, preparing minutes, meeting regulatory filing deadlines) are addressed. The blog says that using someone to fill these visible gaps works well in the short term, but that long-term vacancies create some significant risks that may be less obvious:
A prolonged vacancy can fragment responsibility for connecting earlier concerns, unanswered questions, management commitments, and recurring warning signs. The formal process may continue to look orderly while the company’s ability to demonstrate effective board oversight gradually weakens.
A vacancy does not create director liability, and temporary coverage can work perfectly well. The issue is whether the interim arrangement preserves not only the administration of governance, but also the continuity, authority, and follow-through that allow directors to understand emerging problems and show how they responded.
The blog goes on to highlight some specific risks, including the loss of prior work that provides context to current information provided to directors, the inability to continue to see connections between various oversight problems, and the false comfort about the continuity of oversight that may be provided by the continuation of an orderly process. It points out that when there is a failure of oversight, the board’s actions – and failures to act – are viewed with the benefit of hindsight.
The blog also discusses the questions that boards should ask when a governance vacancy becomes prolonged in order to avoid potential discontinuities in the oversight function.
An Importer of Record (IOR) is the legally designated entity or individual responsible for ensuring that imported goods comply with all US laws and customs regulations. Apparently, people may not be particularly meticulous about disclosing required information about the IOR. Here’s an excerpt from this Stinson memo:
On August 19, 2026, U.S. Customs and Border Protection (CBP) published a General Notice announcing the agency intends to take action against importers (or their customs brokers) who have provided inaccurate Importer of Record (IOR) information on file with CBP. The publication of this notice signifies that CBP is moving swiftly to implement the June 3, 2026, Executive Order (EO) 14411, “Strengthening Customs Enforcement.”
In order to obtain an IOR number and begin importing goods into the United States, individuals or entities (or a customs broker acting on behalf of an individual or entity) must provide identifying information, including a physical address, an email address, a phone number and a tax identification number on CBP Form 5106.
According to the notice, all information on CBP Form 5106 MUST be accurate, complete and belong directly to the IOR.
The memo notes that CBP is starting to verify the accuracy of IOR information on file and highlights the potential consequences of non-compliance. These may include enforcement actions under the False Claims Act. The memo also says that company’s shouldn’t expect leniency for errors in an importer’s IOR profile due to outdated information or clerical errors.
President Trump’s decision to institute a new tariff regime to replace the one that the SCOTUS tossed makes the DOJ & DHS’s new “Resource Guide for Trade Fraud Enforcement” a must read for any company engaged in international trade. This BakerHostetler memo provides an overview of the Guide and discusses some of the key compliance issues that companies should address. This excerpt discusses the central role that the False Claims Act is plays in the Trump administration’s trade fraud enforcement efforts:
The Guide provides a public roadmap for how federal agencies are likely to evaluate trade fraud, customs violations and supply chain misconduct. For companies that import goods, rely on third-party brokers, purchase from overseas suppliers, or resell imported products, the practical message is clear: customs compliance failures may now be evaluated through a broader enforcement lens that includes civil False Claims Act liability, criminal prosecution, forfeiture and whistleblower-driven reporting.
Although the Guide surveys a broad range of enforcement tools, its examples and enforcement discussion underscore a central point for companies engaged in international trade: the False Claims Act has become one of the government’s most significant vehicles for pursuing customs fraud, tariff evasion and duty underpayment cases.
The Trade Fraud Task Force also announced that it has surpassed $1 billion in civil and criminal recoveries, penalties, forfeitures and publicly charged losses since its August 2025 launch, emphasizing DOJ’s intent to treat customs fraud as a serious civil and criminal enforcement priority rather than a routine administrative compliance issue.
The memo goes on to identify some key takeaways for companies that result from the adminstration’s use of the FCA as its primary enforcement tool. These include the need to test supply chain due diligence against the demanding FCA standards, the importance of customs documentation that shows the analysis underlying the basis for the company’s decisions and the due diligence it conducted, and the potential to reduce damages through early disclosure of violations.
Over on The Business Law Prof Blog, Prof. Ben Edwards recently posted his analysis of midyear IPO trends. Here are some of his findings:
– SPACs are back in a big way. SPACs accounted for 112 of the 200 IPOs completed during the first half of 2026, raising $20.9 billion. While SPACs outpaced operating companies in the number of deals, the 88 operating company IPOs completed during the first half raised a total of $129 billion. Of course, that number includes SpaceX’s gargantuan $85 billion IPO, which distorts the stats quite a bit.
– Forget Delaware, Nevada and Texas – if you include SPACs, the Cayman Islands is the leading jurisdiction of incorporation for this year’s IPOs, with 109 issuers (54%) incorporated there. Delaware followed with 57 issuers (28%), while Nevada had six (3%) and Texas had four (2%).
– Excluding SPACs, Delaware remains the overwhelming favorite for the jurisdiction of incorporation of this year’s IPO issuers, with 67% of those issuers choosing to incorporate there. Nevada was the choice of 7% of issuers, and Texas was chosen by 5% of them.
– In terms of the proceeds raised, Texas outpaced everyone, thanks to Elon. IPO issuers incorporated in Texas raised $86.1 billion, while Delaware issuers raised $28.9 billion and Nevada issuers raised $5 billion.
Ben also includes a bunch of different league table measures for issuer’s and underwriters’ counsel and lead underwriters for this year’s IPOs, as well as some interesting data on where controlled companies that engaged in IPOs this year opted to incorporate (spoiler alert: Delaware still leads the pack, but not by as much).
It’s pretty apparent from looking at a quick tally of investor comments on the SEC’s semiannual reporting proposal that they are universally opposed to it and aren’t happy that it seems almost inevitable that the SEC will move forward with it, their opposition notwithstanding.
Investors who are angered that their comments are likely to be given short shrift may get some sympathy from an unexpected source – public companies and their advisors. That’s because, as Gunster’s Bob Lamm pointed out around the time the regimes changed, issuers found themselves in the same position during the Gensler era. Of course, people being what they are, not everyone may respond with sympathy. My guess is that there’s a healthy dose of schadenfreude among the issuer community as well.
There’s always tension between the SEC’s investor protection mandate and its desire to promote capital formation, so issuers and investors are unlikely to ever be unanimous in their support of the SEC’s regulatory initiatives.
Still, dramatic shifts in the regulatory climate every four years that leave one side or the other enraged at rule changes and chomping at the bit to undo them when their side gets back in power isn’t exactly an ideal model for financial regulation. Unfortunately, it appears to be one we’re going to be stuck with for a while.
I’m not going to pretend that I’ve waded through the avalanche of comments on the SEC’s semiannual reporting proposal, but with some notable exceptions, many of the comments I’ve seen shed more heat than light on the benefits and detriments of a semiannual reporting option for public companies. That’s why I found this recent study comparing Europe’s semiannual reporting regime with the United States’ quarterly reporting regime interesting.
The study, which appeared in The International Journal of Financial Studies, compared quarterly reporting DJIA firms with semiannually reporting STOXX 50 firms, to assess how the cadence of disclosures affects market reactions to earnings news. It’s worth noting at the outset that this study focused on some of the largest of the large caps, so caution is warranted before applying its conclusions across the public company universe. But with that caveat, here’s an excerpt from the study’s conclusion:
Our comprehensive analysis, comparing quarterly reporting DJIA firms with primarily semiannual-reporting STOXX firms, reveals a profound influence of disclosure frequency on the intensity, duration, and volatility of earnings-related price reactions. Quarterly reporting, for instance, compresses price discovery into shorter windows, significantly accelerating information assimilation and reducing the persistence of post-announcement mispricing.
This expedited information flow facilitates faster capital reallocation, enhancing market allocative efficiency. However, this substantial informational benefit is accompanied by a significant drawback: sharper short-term volatility spikes, particularly during periods characterized by high market volatility, in response to negative earnings surprises, and within cyclically sensitive sectors where investor expectations are inherently more susceptible to shifts.
Conversely, semiannual reporting presents a different set of trade-offs. While it effectively mitigates contemporaneous noise and lowers short-term volatility, thereby dampening apparent overreactions, these benefits come at the cost of slower and more gradual information absorption. When markets remain underinformed, this extended period can widen risk premium and delay crucial capital reallocation in response to fundamental information.
The authors conclude that the data indicates that the two alternative reporting cadences involve inevitable tradeoffs: quarterly reporting results in faster information processing by the market and more transparency, while semiannual reporting mitigates short-term market instability and overreactions.
Given the tradeoffs the study identified, the authors argue that a more complex regulatory approach than that embodied in the SEC’s current proposal may be optimal:
Advocating for a uniform or monolithic disclosure cadence across all market environments may not achieve an optimal outcome. Instead, a more adaptive regulatory framework, one that allows for tailored disclosure guidance based on specific factors such as sectoral sensitivity to economic cycles, the prevailing macroeconomic conditions, and the inherent complexity of information within an industry, could strike a more effective balance between market transparency and stability.
Honestly, this is where they lost me. This “adaptive regulatory framework” sounds like a complicated mess that only an academic could love. Sometimes, I think that people who read and write about disclosure for a living think that companies exist to satisfy their unending desire for an avalanche of trivial information more disclosure and more intricate disclosure requirements. Unfortunately for them, the people running those companies think they’re in business to make money.
Yesterday, the SEC announced that it had established a unit in the Division of Enforcement focusing on financial reporting and accounting cases. This excerpt from the SEC’s press release provides some background on the new unit:
The Securities and Exchange Commission today announced it is establishing a new specialized unit within the Division of Enforcement to provide the dedicated expertise, focus, and capacity to pursue accounting and financial reporting fraud cases as well as general misconduct in the accounting and auditing areas. The Financial Reporting and Accounting Unit will work in close collaboration with staff across all relevant SEC divisions and offices to ensure its approach to enforcing federal securities laws is consistent with the Commission’s policy goals.
“Since my return to the Division, I have been assessing every aspect of our staffing to ensure that we are aligned to deliver results in our core mission areas,” said David Woodcock, Director of the SEC’s Division of Enforcement. “This new unit – which expands on the Division’s current and historical efforts to crack down on bad actors in the accounting and auditing profession – will be critical in our efforts to pursuing financial reporting fraud, as well as accounting and auditor misconduct more generally.”
The SEC said that the unit will be staffed by lawyers and accountants with specialized skills related to financial reporting, accounting, and auditing. The unit will be led by Timothy Zimmerman, who joins the SEC from RSM US LLP, where he served as Deputy General Counsel. Prior joining RSM, Mr. Zimmerman spent more than a decade with Gibson Dunn in the firm’s Denver office.
Glass Lewis recently blogged about its observations on shareholder proposals during the 2026 proxy season. The excerpt notes that the early trend toward issuers including a greater percentage of shareholder proposals following the SEC’s withdrawal from the Rule 14a-8 process continued throughout the season:
One of the main trends that we observed mid-season appears to have been borne out: in the absence of no-action relief from SEC staff, companies were far less likely to exclude shareholder proposals. Compared to 2025, barely half the number of exclusion notices were filed. . .
When the SEC’s decision was announced in November 2025, there was speculation that far fewer shareholder proposals would go to vote in proxy season 2026, given that issuers appeared to have free rein to set their AGM agenda. Ultimately, issuers were reluctant to exclude proposals without SEC backing, largely offsetting the reported decline in the number of proposals being submitted.
Even though the number of shareholder proposals filed is down by as much as 47%, the number of shareholder proposals that went to a vote is only down by approximately 12.4% compared to 2025. That’s largely because over the same period, the number of exclusion requests filed by companies dropped by 48.5%.
When it comes to deciding which proposals to exclude, Glass Lewis said that the identity of the proponent mattered a lot. Issuers were much more likely to exclude proposals submitted by individual proponents – particularly those named John Chevedden – than they were to exclude proposals from asset managers, pension funds, and “mission-driven investors.” The blog also discusses, among other things, the basis upon which issuers excluded proposals, and how investors have responded to exclusions.
According to this survey from Deloitte and the Society for Corporate Governance, public companies boards are pretty far from being “all-in” when it comes to the adoption of AI tools for board business. The survey solicited input from corporate secretaries, in-house counsel, and other governance professionals at 92 public companies and 14 private companies. Here’s excerpt with some of the highlights:
– Board adoption of AI/GenAI remains early-stage and inconsistent. Many companies have not formally enabled or standardized AI/GenAI for board activities, with nearly half of public companies not expressly supporting its use. Respondents overall are “unsure” whether their boards use AI/GenAI for board activity, and known adoption and use cases vary across organizations.
– Current use and capability-building efforts are focused on practical applications and education. Boards that use AI/GenAI primarily apply it to administrative and analytical tasks such as reviewing reports, summarizing materials, preparing questions, and identifying discussion topics. Respondents report that their organizations are more commonly enhancing AI capability through management briefings and director education than through formal governance mechanisms, recruitment efforts, or board evaluation processes.
– Policies, guidance, and governance practices are still developing. Most respondents reported a lack of board-specific AI policies or governance practices. Where policies exist, they tend to focus on security, confidentiality, acceptable use, legal considerations, and recordkeeping.
One of the most striking findings was the degree of uncertainty among governance professionals at public companies concerning whether their boards were using AI tools. For example, 71% of respondents were unsure about whether directors had used AI/GenAI tools in meeting-related activities during the past six months, and 72% didn’t know whether the board or any of its committees used AI/GenAI to support key oversight activities during the same period.
Given the potential downside of ill-considered uses of AI tools, these are pretty disconcerting findings.
What about your own use of AI/GenAI tools? We’re very interested in learning how our members are using AI tools in their work, so please take a moment to complete the AI Usage Survey for Corporate & Securities Lawyers that we posted a couple of weeks ago.
