Liz recently blogged about KPMG’s efforts to obtain approval to provide legal services in Arizona. Earlier this week, Arizona’s Supreme Court refused to approve KPMG’s request, and instead asked for more information. Here’s an excerpt from a Bloomberg Law article:
The Arizona Supreme Court on Tuesday requested more information on KPMG’s application to practice law in the state, declining for now to approve the company’s request. The court met to consider the application Tuesday after an Arizona committee earlier this month recommended KPMG’s approval, which would make it the first Big Four accounting firm to practice law in the US.
“The KPMG application remains under review,” court communications director Alberto Rodriguez said in an email. The court has requested “additional information or clarification on aspects of the application.” There are “no specifics or timeframe” as to when the court will make a final decision, Rodriguez said.
KPMG didn’t immediately respond to a request for comment.
– Outlines key digital asset policy objectives, including: (i) protecting and promoting access to and use of open public blockchain networks “for lawful purposes” and without “persecution,” including developing and deploying software, mining and validating activity, transacting without “unlawful
censorship,” and maintaining self-custody of digital assets; (ii) promoting the growth of “lawful and legitimate” U.S. dollar-backed stablecoins; (iii) protecting “fair and open access” to banking services for “law-abiding” individuals and firms; (iv) providing regulatory clarity and certainty “built on technology-neutral regulations”; and (v) protecting against the risks associated with CentralBank Digital Currencies (“CBDCs”);
– Establishes the President’s Working Group on Digital Asset Markets (the “Working Group”), chaired by the Special Advisor for AI and Crypto and including the Treasury Secretary, SEC Chairman, CFTC Chairman, Attorney General, and various national security and technology officials;
– Instructs the Working Group to: (i) within 30 days, identify all “regulations, guidance documents, orders, or other items that affect the digital asset sector”; (ii) submit recommendations to the Chair within 60 days with respect to those regulations and guidance (e.g., to rescind or modify); (iii) submit a report to the President within 180 days proposing a Federal regulatory framework for
digital assets; (iv) evaluate a potential national digital assets stockpile; and (v) consult with the National Security Council and digital asset market experts, as appropriate; and
– Prohibits agencies from undertaking any action to establish, issue, or promote CBDCs.
The Trump administration’s crypto czar David Sacks touted the order, but crypto skeptics are less enamored with it. Here’s what one industry watcher had to say:
“Any crypto regulation should actually protect investors rather than defending the ability of cryptocurrency issuers to stuff the public with another useless digital currency,” says James Royal, Bankrate principal investment and wealth management reporter. “Given the crypto industry’s sizable donations to the Trump campaign and the Trump family’s own personal stake in newly launched cryptocurrencies, I’m not optimistic that any regulation proposed here will do much more than pave the way for legalized scams.”
Media reports suggest that crypto backers are likely to be disappointed that the order merely calls for a study to evaluate a national cryptocurrency stockpile, instead of immediately creating one.
In addition to President Trump’s executive order, and the SEC’s creation of a crypto task force to study how to regulate digital assets, the crypto industry received more good news last week with the SEC’s Accounting Staff issued SAB No. 122, which rescinded its controversial SAB No. 121. That interpretation required crypto platforms to treat their obligations to safeguard the crypto-assets held for its platform users as liabilities. Critics contended that it deterred financial institutions from serving as custodians for digital assets and deprived owners of more secure alternatives for holding those asset. This excerpt lays out the substance of SAB No. 122:
This SAB rescinds the interpretive guidance included in Topic 5.FF in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users. Upon application of the rescission of Topic 5.FF, an entity that has an obligation to safeguard crypto-assets for others should determine whether to recognize a liability related to the risk of loss under such an obligation, and if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies in Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Subtopic 450-20, Loss Contingencies, or International Accounting Standard (“IAS”) 37, Provisions, Contingent Liabilities and Contingent Assets under U.S. generally accepted accounting principles and IFRS Accounting Standards, respectively.
The new interpretation goes on to say that entities should effect the rescission of SAB No. 121 on a fully retrospective basis in annual periods beginning after December 15, 2024, and that they may elect to effect the rescission in any earlier interim or annual financial statement period included in SEC filings after the effective date of SAB No. 121.
A recent CoinDesk article co-authored by former Corp Fin Director Bill Hinman has some suggestions for the SEC’s crypto task force concerning actions that the SEC should take right now to regulate crypto. Topping the list is providing guidance on airdrops:
The SEC should provide interpretive guidance for how blockchain projects can distribute incentive-based crypto rewards to participants — without those being characterized as securities offerings. Blockchain projects typically offer such rewards — often called “airdrops” — to incentivize usage of a particular network. These distributions are a critical tool for enabling blockchain projects to progressively decentralize, as they disseminate ownership and control of a project to its users.
If the SEC were to provide guidance on distributions, it would stem the tide of these rewards only being issued to non-U.S. persons — a trend that is effectively offshoring ownership of blockchain technologies developed in the U.S., yet at the expense of U.S. investors and developers.
What to do:
Establish eligibility criteria for crypto assets that can be excluded from being treated as investment contracts under securities laws when distributed as airdrops or incentive-based rewards. (For example, crypto assets that are not otherwise securities and whose market value is, or is expected to be, substantially derived from the programmatic functioning of any distributed ledger or onchain executable software.)
The article’s other recommendations for immediate SEC action include modifying crowdfunding rules to make them more crypto-friendly, enabling broker-dealers to operate in crypto, providing guidance on custody and settlement, reforming standards for exchange traded products, and implementing a certification requirement for ATS listings.
Yesterday, Corp Fin issued three new CDIs and updated two existing CDIs addressing Notices of Exempt Solicitations (aka, PX14A6G filings). Here are the three new CDIs:
Question 126.08
Question: Can a person submit written soliciting material under the cover of a Notice of Exempt Solicitation on EDGAR if the written soliciting material has not been sent or given to security holders?
Answer: No. The submission of a Notice of Exempt Solicitation on EDGAR is not intended to be the means through which a person disseminates written soliciting material to security holders. Rather, its purpose is to notify the public of the written soliciting material that the person has sent or given to security holders through other means. See Release No. 34-30849 (June 23, 1992) (proposing the notice requirement so there would be public notice of extensive soliciting activity made in reliance on the Rule 14a-2(b)(1) exemption); Release No. 34-31326 (Oct. 16, 1992) (adopting the notice requirement in response to commenters’ concerns that, absent such a requirement, the Rule 14a-2(b)(1) exemption would permit large shareholders to conduct “secret” solicitation campaigns). [January 27, 2025]
Question 126.09
Question: Can a person submit a Notice of Exempt Solicitation on EDGAR for a written communication that does not constitute a “solicitation” under Rule 14a-1(l)?
Answer: No. Because Rule 14a-6(g) only applies to solicitations made pursuant to the Rule 14a-2(b)(1) exemption, only written communications that constitute a “solicitation” should be submitted under the cover of a Notice of Exempt Solicitation. For example, a written communication solely about matters that are not the subject of a solicitation by the registrant or a third party for an upcoming shareholder meeting generally would not be viewed as a solicitation and, therefore, should not be submitted under the cover of a Notice of Exempt Solicitation. [January 27, 2025]
Question 126.10
Question: Does Rule 14a-9, which prohibits materially false or misleading statements, apply to written soliciting materials sent or given to security holders in reliance on the Rule 14a-2(b)(1) exemption and filed under the cover of a Notice of Exempt Solicitation?
Answer: Yes. Rule 14a-2(b) does not provide an exemption from Rule 14a-9. As a result, written soliciting material attached to a Notice of Exempt Solicitation is subject to liability under Rule 14a-9. See also Release No. 34-31326 (Oct. 16, 1992) (“Pursuant to the [Rule 14a-2(b)(1)] exemption, solicitations by or on behalf of eligible persons would be exempt from all of the proxy statement filing, delivery and information requirements imposed by the proxy rules but remain subject to Rule 14a-9, which prohibits false or misleading statements in connection with written or oral solicitations.”). [January 27, 2025]
Updated CDIs are usually the most difficult ones for us to blog about, because we usually have to try to figure out the changes without any indication from the Staff about what they were. That’s not the case with this batch, because the Staff has included marked copies of each updated CDI showing the changes from the original version. This is a huge help to everyone who is trying to keep up to date on Corp Fin’s guidance and I sure hope it becomes a standard practice. Anyway, here are links to the marked versions of the updated CDIs, and you folks can see for yourselves what changes were made:
Question 126.06 – Addresses the circumstances under which the Staff will permit soliciting persons owning less than $5 million of the subject class of securities to voluntarily submit a Notice of Exempt Solicitation.
Question 126.07 – Addresses the presentation requirements applicable to the identifying information required by Rule 14a-103 in a Notice of Exempt Solicitation.
Gibson Dunn’s blog on the new & updated CDIs points out that public companies may find them helpful in dealing with some of the shenanigans that have plagued the exempt solicitation process in recent years:
The new and revised C&DIs will be welcome by companies in light of concerns that PX14A6G filings have become a bit of a “Wild West” where shareholder proponents or their representatives use PX14A6G filings to assert arguments or claims in support of their proposals without disclosing their involvement with the proposal, and without verifying or taking responsibility for claims set forth in their PX14A6G filings. In its annual “stakeholders meeting” with shareholder proponents, proponent representatives, and public companies, the Staff has confirmed that it will take appropriate action when informed of problematic PX14A6G filings. These C&DIs go a long way to help address those practices.
Yesterday, Commissioner Hester Peirce kicked off the Northwestern Securities Law Institute by offering a preview of what public companies might expect to see from the SEC over the next few years. Her remarks were accompanied by the usual disclaimers, but both Commissioner Peirce and Acting Chair Mark Uyeda worked closely with Paul Atkins during his previous time with the SEC, so it’s probably not much of a stretch to suggest that her views on the agency’s priorities likely align with those of her current and future Republican colleagues.
Commissioner Peirce is well known for colorful analogies in her speeches, and she didn’t disappoint yesterday. She opened her remarks by comparing the environment that public companies have to navigate today with the “steep, varied” terrain “fraught with danger” that Sierra Nevada Bighorn Sheep confront every day. She then provided a prescription for actions that the SEC should take to help provide public companies with “a path toward more level, predictable terrain.”
Commissioner Peirce called for the SEC to recognize that both the public companies and the SEC have limited missions. Public companies exist to build long-term value for shareholders, and the SEC’s role is to “ensure that investors have the information they need to channel funds to the companies that can put that money to the best use.” In her opinion, these limited missions require the SEC to prioritize the following policy objectives:
– Fend off efforts to commandeer the SEC’s disclosure regime by people who “want information from companies for reasons other than deciding whether to invest” by returning to a position that “materiality from the perspective of the reasonable investor is the sine qua non for disclosures.”
– Stop pressuring asset managers to push public companies into contentious social and political issues through voting disclosure obligations that make them “sitting ducks” for social and political activist campaigns and scrutiny from ESG rating agencies.
– Protect investors from having their resources diverted to deal with shareholder proposals that are not aimed at maximizing corporate value by reexamining Rule 14a-8’s ownership thresholds and taking “a fresh look at how Rule 14a-8’s consideration of social significance under two bases of exclusion has affected the number, type, and excludability of shareholder proposals.”
– Refrain from using enforcement actions to override managerial decisions through an expansive definition of “internal controls” that enables the SEC to “insinuate itself into corporate management.”
– Enhance Corp Fin and OCA’s efforts to provide disclosure guidance to public companies, to engage with them on difficult disclosure issues, and to communicate early and often on the timing of reviews of registration statements in order to permit issuers to have increased confidence in their offering timelines.
– Ensure that the capital markets function in a way that is agnostic to the political party in power and serve all Americans regardless of their political ideology.
Your mileage may vary on the reasonableness and achievability of at least some of these objectives from a public policy perspective, but I think anyone who works with public companies would concede that there’s a lot to like about them from a public company perspective.
President Trump has been firing off executive orders like his pen is a machine gun ever since taking office last Monday, and it can be very hard to keep up with the pace he’s setting. Fortunately, Akin Gump has set up this page on its website to help you keep track of those orders. The page contains links to the text of specific orders and indexes them by topic and chronologically. Check it out – it’s a very helpful resource!
On Friday, Meredith blogged about the SCOTUS’s decision to lift the 5th Circuit’s nationwide injunction against enforcement of the Corporate Transparency Act. However, she also noted that a separate injunction issued by a Texas federal district court remained in place. That left potential filers asking a familiar question: “What the heck are we supposed to do?” Fortunately, FinCEN weighed in later in the day and said filers can sit tight for now. Here’s what FinCEN posted on its website:
On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
It’s possible that the injunction in Smith v. Treasury could soon meet the same fate as the one in Texas Top Cop Shop. As Gibson Dunn observed in their recent update on the status of the CTA, “given the Supreme Court’s recent order staying the Top Cop Shop order, the government could obtain a similar stay of the district court’s order in Smith if the government requests that relief (or if the district court stays its order unilaterally) in light of the Supreme Court’s decision.” Stay tuned.
One item that doesn’t deserve to get lost in the avalanche of last week’s news is the joint statement from Commissioners Uyeda, Peirce and Crenshaw on the departure of former SEC Chair Gary Gensler. This excerpt gives you a sense of its tone:
Although as Commissioners we approached policy issues from different perspectives, there was always dignity in our differences. Chair Gensler has been committed to bipartisan engagement and a respectful exchange of ideas, which has helped facilitate our service to the American public. For that we are deeply grateful.
We have finalized rules that have promoted market integrity and corporate governance, streamlined open-end fund disclosures, reduced settlement times, and passed needed reforms to the plans corporate insiders use to buy and sell company stock, among many other policy changes. Together we have returned billions of dollars to investors harmed by violations of the securities laws and helped educate the public on the risks and rewards of investing their savings. This record helps cement Chair Gensler’s legacy of unwavering commitment, not only to public service, but to the American investor.
It’s no secret that Commissioner Uyeda and Commissioner Peirce disagreed strenuously with many of the actions taken by the SEC under Gary Gensler’s leadership, so the graciousness of their statement saluting his service is notable. As I read it, I couldn’t help thinking about the old “Looney Tunes” cartoons featuring Ralph Wolf and Sam Sheepdog. Our Boomer & Gen X readers may recall that Ralph’s job was to steal sheep, and Sam’s job was to clobber Ralph. Both gave it their all during working hours, but they were chums before and after the whistle blew. You know, I think there’s a pretty good civics lesson for all of us baked into those old cartoons!
On Friday, the SEC announced that Acting Chair Mark Uyeda appointed several new acting senior staff members to fill vacancies created by recent departures. Here’s the new lineup, as laid out in the SEC’s press release:
– Jeffrey Finnell, Acting General Counsel
– Robert Fisher, Acting Director of the Division of Economic and Risk Analysis
– Kathleen Hutchinson, Acting Director of the Office of International Affairs
– Samuel Waldon, Acting Director of the Division of Enforcement
– Ryan Wolfe, Acting Chief Accountant
If you’re wondering about Corp Fin, remember that Cicely LaMonthe was appointed Acting Director when Eric Gerding announced his departure last month.