If today’s first blog was still a little too technical for you, this Ashurst Perkins Coie memo gets straight to the point. It lays out five reasons why public companies tend to be uneasy about third-party tokenization in particular:
– Market activity is imminent: Tech-forward exchanges and third parties are moving quickly to tokenize public company stock, often with little advance notice to public company issuers. From both market and regulatory perspectives, a public company’s inaction or delayed response to a third-party TSV’s notice of plans to tokenize and trade the issuer’s stock will be interpreted as consent that cannot later be revoked.
– Time-pressured response: The exemption requires rapid review and coordinated responses. Public companies have only 30 calendar days to object before token trading can begin.
– Investor relations and market complexity: Shareholder records, engagement, and communications will grow more complex if, and when, stocks circulate as tokens in digital wallets.
– Litigation and reputational risk: Misunderstandings regarding tokenized securities or an inadvertent failure by the issuer to object to a TSV’s notice could create uncertainty, or even possible liability, with respect to market participants, shareholders, or regulators.
– Strategic flexibility: Decisions about whether to object to or collaborate with TSVs, or explore self-tokenization, may significantly affect a public company’s future options and risk profile.
The memo also walks through practical considerations and suggests these action steps:
Audit and update SEC-listed contacts: Confirm that executive office addresses and emails in SEC filings are current and monitored frequently. Train your mailroom and other staff to escalate such notices immediately to legal and compliance teams.
Prepare rapid objection protocols: Draft template objections and establish internal review and escalation processes. The 30-day deadline is inflexible and strictly enforced—missing the deadline is irreversible.
Enhance investor and public communications: Prepare FAQs, market alerts, and public statements in advance to address company policies on tokenization. Actively monitor media and trading venues to detect market misstatements or investor confusion that may require clarification.
Cross-functional coordination: Ensure legal, compliance, finance, IT, governance, and IR teams are aligned and ready to respond together, including developing playbooks for rapid coordination if notice is received.
Regular monitoring: Employ technology and monitoring protocols to track the market for unauthorized or synthetic tokenized versions of your stock. Act promptly if you detect noncompliant offerings and consider legal, regulatory, and communications remedies.
Weigh strategic opportunities: If the company may wish to explore tokenization in the future, now is the time to consider criteria for partnership, potential use cases, and appropriate disclosures.
Engage in public comment: The SEC is actively seeking feedback concerning the Innovation Exemption. Submitting thoughtful comments will help shape the evolving regulatory framework, and it is important that public companies make their concerns heard.
There are still a lot of open questions on this topic, and we’ll be discussing them next week at our “Proxy Disclosure & 23rd Annual Executive Compensation Conferences.” Among other informative sessions on our agenda, join Era Anagnosti of DLA Piper, Eun Ah Choi of Nasdaq and Reid Hooper of Fannie Mae on Monday, October 12th at 1:30 pm ET to hear about the latest trends in tokenization & blockchain – and what they mean for public companies. You can still register. Sign up online, email info@ccrcorp.com or call our team at 800-737-1271 today.
In another example of “market modernization,” 23/5 trading is coming to US markets whether you like it or not – here are a couple of blogs about the SEC’s recent 24-hour trading roundtable. With December 6th only two months away, listing exchanges are continuing to update rules and procedures to accommodate extended overnight trading.
Yesterday, the SEC posted notice of this automatically effective Nasdaq rule change to the exchange’s market-wide circuit breaker procedures, which hopefully gives some comfort that the overnight session will not be a complete free-for-all. Here’s an excerpt:
The MWCB mechanism under Equity 4, Rule 4121 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when U.S. securities markets experience extreme broad-based declines. All U.S. equity exchanges and the Financial Industry Regulatory Authority (“FINRA”) (collectively, the self-regulatory organizations or “SROs”) adopted uniform rules relating to the MWCB mechanism in 2012, which are designed to slow the effects of extreme price movement through coordinated trading halts across U.S. securities markets when severe price declines reach levels that may exhaust market liquidity.5 Currently, market-wide circuit breaker rules provide for trading halts in all U.S. cash equities and equity options markets during a severe market decline as measured by a single-day decline in the S&P 500 Index during Regular Market Hours.
Pursuant to Equity 4, Rule 4121, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day’s closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt market-wide trading. If a Level 3 Market Decline occurs at any time during the trading day, trading in all stocks will halt on the Exchange for the remainder of the trading day and will resume the following trading day at 4:00 a.m. ET during the Pre-Market Hours Session.
In light of the move to 23/5 trading, Nasdaq (and other SROs) are proposing to preserve downtime when a Level 3 Market Decline is triggered. The notice states:
The MWCB mechanism described in Equity 4, Rule 4121 is an important, automatic mechanism that is invoked to promote stability and investor confidence during periods of significant stress when U.S. securities markets experience extreme broad-based declines. The proposed rule change would ensure that the Exchange’s resumption time following a Level 3 halt continues to apply when the Exchange and various other U.S. equities exchanges begin trading on a 23-5 basis, notwithstanding current rule text implying that the resumption time would coincide with the start of overnight trading on the Exchange.
Rather than leave the rule in place as is, which could result in an earlier resumption time than originally contemplated when the rule was adopted, the Exchange, the other U.S. equity exchanges, and FINRA met alongside industry representatives to determine the appropriate resumption time. Following those discussions, the Exchange determined, in coordination with other SROs, to retain a morning resumption time, notwithstanding the fact that an earlier resumption time would be possible with the introduction of 23-5 Trading. The proposed rule change codifies this decision into the Exchange’s rules. The Exchange understands that the other SROs will also be filing similar proposed rule changes. As a result, the market as a whole, including on- and off-exchange, will continue to be subject to harmonized rules for the resumption of trading following a Level 3 Market Decline.
The notice goes on to explain that while the SROs had previously decided to tie the resumption time following a Level 3 halt to an SRO’s normal hours of operation, the upcoming transition to 23/5 Trading raises various concerns that warrant a change from the current approach. For example:
– First, the MWCB mechanism was designed to provide a cooling off period where market participants would be provided with additional time to evaluate the market events that led to the decline before determining how to position their trading activity for the next day. With the introduction of 23-5 Trading and the start of the Night Session at 9:00 p.m. ET, however, this cooling off period could be materially shortened, reducing one of the key benefits that the MWCB mechanism was designed to provide in the first place. Rather than shorten the cooling off period and risk this benefit, the Exchange believes the market would be better served by a change to the length of the associated trading halt that mirrors coordinated market practice. As is the case today, the Exchange would reopen for pre-market trading at 4:00 a.m. ET or later on the following trading day.
– Second, the new Night Session may be subject to different liquidity and participation considerations than the current pre-market session. Notably, while retail investors have expressed interest in overnight trading, the Exchange expects that institutional investors will take more time to transition to a round-the-clock model. However, such institutional participation may be of heightened importance following a Level 3 halt as these investors are likely to have views on the underlying market events that led to the Level 3 Market Decline in the first place. The Exchange is concerned that opening during hours that such participants do not normally trade may impact the quality of price discovery at a time of significant market volatility. Waiting until 4:00 a.m. ET or later to resume trading would facilitate broader participation and therefore price discovery.
– Finally, the Commission recently approved an amendment to the Plan to Address Extraordinary Market Volatility that would establish new price protections from 9:00 p.m. ET to 4:00 a.m. ET. While these price bands would help to assure a fair and orderly market during normal market conditions, it is possible that they would instead prevent normal price discovery following a Level 3 Market Decline. Rather than allowing trading to resume with such price bands in effect, which would represent a change from the current reopening following a Level 3 Market Decline, the Exchange believes that waiting until 4:00 a.m. ET to resume trading would ensure that price discovery can occur during pre-market trading, as it does today, which may further inform prices going into the opening auction and regular market hours trading following a Level 3 halt.
Given those factors, Nasdaq is amending its rule to state that trading in all NMS stocks should not resume until 4:00 a.m. ET or later following a Level 3 halt. Nasdaq expects other SROs to effect amendments that say that trading will resume on or after 4:00 a.m. ET or the applicable morning resumption time depending on the normal reopening time of each SRO. As noted above, this update is in addition to the 20% Limit Up-Limit Down protections that will apply to individual equities. Members can visit our “Trading Window Procedures” Practice Area for additional resources.
Disney marked its anniversary by looking back at what has endured since 1971 — while also pointing out just how much has changed along the way. That feels on point for this year’s Conferences too. Some proxy season issues are perennial favorites, but so many changes are underway that there will plenty of new things to talk about too. The Conferences will help you understand the practical impact of these developments on companies, disclosures and boards – and how all the moving pieces fit together.
On October 12th, our agenda will focus on proxy disclosures – starting with an interview with Corp Fin Deputy Director Christina Thomas. Among other topics, we’ll discuss the fate of shareholder proposals, the current shareholder activism environment, common securities lawyer mishaps (and how to avoid and resolve them), tokenization, proposed SEC filer status changes, shareholder engagement and voting, and advising boards during times of uncertainty.
On October 13th, the 23rd Annual Executive Compensation Conference turns to executive pay, with the SEC All-Stars, potential changes to the SEC’s compensation disclosure rules, insights from leading compensation consultants, perks and executive security, and the latest from ISS and Glass Lewis.
For those attending in person, the fun actually starts a little early: we’ll have a welcome reception Sunday, October 11th from 4:30–6:00 p.m. in the Orange Foyer, and PDEC attendees are also invited to the NASPP opening celebration immediately after Monday’s programming.
As always, the two days are bundled together, and you can join us in person at the Hilton Orlando or virtually. And in addition to live and on-demand access to all of the CCRcorp sessions, Conference attendees get exclusive access to our Course Materials – which include unique & practical bullet points and examples from our experienced speakers on each topic we’ll be covering. Our speakers go the extra mile to provide usable takeaways. The Course Materials and on-demand replays are invaluable resources to refer back to as proxy season approaches!
For those seeking CLE credit, here’s a list of states in which credit is available – and CLE FAQs about live, virtual and on-demand credit.
Act Now: The Conferences begin next Monday, October 12th. With 14 sessions over 2 days, you’ll walk away with action items to help support director elections and say-on-pay, see around corners for changes to rules and market mechanics that affect companies, and avoid costly mistakes. You can still register. Sign up online, email info@ccrcorp.com or call our team at 800-737-1271 today.
Lastly, if you have registered, remember that your unique access link and attendance instructions will be emailed to you from no-reply@events.ringcentral.com. Here’s more detail on what to watch for.
Hope to see many of you in Orlando – please come say hi at any time!
Spencer Stuart is out with its 2026 Board Index – here’s an excerpt:
While boardroom continuity is valuable, many U.S. boards are still taking a too-cautious approach to refreshment. New S&P 500 director appointments in 2026 are at the lowest level since 2016, and director turnover declined year over year to 0.7 new directors per board.
The number of appointments also lagged the number of director departures in 2025, suggesting that not all directors were replaced. Appointments of both first-time and next-generation (next-gen) directors (those aged 50 and younger) have also declined as boards favored experienced directors.
With all the fast-moving risks and opportunities presented by AI, I was – in some ways – surprised to see this stat. The Board Index also says that 64% of incoming directors were either CEOs or financial professionals and 54% are retired. Industry-wise, though, people with tech/telecommunications backgrounds were in high demand: Constituting 17% of new-director appointments, along with industrials/manufacturing backgrounds.
Here are a few other stats:
– 80% of S&P 500 boards now include a director skills matrix in the proxy – though quality may vary
– 99% of boards have some sort of annual performance evaluation – with 33% using a third-party
– 63% of boards have a mandatory retirement policy – reflecting a steady decline from 73% in 2016
– 100% of boards have at least one woman director, and 98% have at least one underrepresented minority director
– The average number of board meetings has decreased to 7.5, compared to 8.4 in 2016 – the average number of committee meetings is also slightly lower than ten years ago
This LinkedIn post from Adam Epstein caught my eye. The point of the post is to emphasize the importance of an experienced board chair – but it also shows how well-organized board dinners can improve overall board effectiveness. In the anecdote he gives, the (seasoned, new-to-the-company) independent chair added structure to board dinners after observing that the company’s earnings calls were not as polished as they could be and that the other directors may not have been listening to them. Adam explains what happened next:
The chair conferred with the CEO, corporate secretary (CFO), and the chair of the nominating/governance committee and made a recommendation.
Each independent board member – 6 total – will be assigned one of the company’s publicly-traded competitors. At each board dinner they should be prepared to: (1) succinctly discuss what they learned from listening to the competitor’s most recent earnings call; and (2) compare what they heard to what was said on the company’s most recent earnings call.
The results after just a couple of quarters were palpable.
– The board dinners became so focused that the subsequent board meetings were not only more nuanced, but the engagement level was transformed. Creating structure for the board dinners was unpopular at first, but the board members had no choice but to rise to the challenge lest their short dinner presentations telegraph unpreparedness.
– Upon greater reflection on the strategic challenges facing the company, the complete board realized that their board composition was no longer apt. One of the most tenured board members decided not to stand for re-election (with some measured cajoling) and they are now beginning a search for a new board member that has the experience the board requires.
– Several of the board members conferred about the professionalism delta between competitor earnings calls and the company, and two changes are now afoot: (1) the company is going to hire an experienced internal investor relations professional; and (2) the CEO is interviewing several prospective speaking coaches.
As Adam notes, “corporate governance ain’t rocket science”… and it’s impossible to overstate the importance of having an experienced chair.
To the extent your board is considering matters that will later require a stockholder vote, ensure that the minutes are sufficiently detailed to support the later drafting of a proxy statement. In the not-so-distant past, material discrepancies between the two was the “open sesame” for stockholders to demand the inspection of informal board materials in Section 220 litigation.
While the heightened standards of the revised Section 220 blocked that result here, best practices would still be to be mindful that the minutes adequately cover material matters that will likely need to be disclosed to the stockholders in a proxy statement.
Think of your entire package of board materials, the agenda, any board books, and the minutes of the meeting as materials that might someday be evidence in litigation where the board may need to convince a fact finder that it acted loyally and with due care on certain matters before it.
The Court of Chancery notes things like how long it appears (from the minutes) that certain matters were discussed and in what level of detail. Make sure your minutes reflect the relative importance of the matters under discussion. For instance, the minutes should not have a very robust discussion of something somewhat mundane (like whether to serve one brand of soda or another in the cafeteria) but a relatively miserly discussion of the merger transaction being considered.
If you’re looking for more guidance on preparing minutes, check out the resources in our “Board Minutes” Practice Area, including a variety of checklists on minutes-related topics.
Over on DealLawyers.com, I recently blogged about the Delaware Chancery Court’s decision inATG Capital Opportunities Fund LP v. Lane, (Del. Ch.; 8/26), which involved an activist’s successful challenge to an effort its slate of nominees under the terms of the company’s advance notice bylaw. This Sidley memo focuses on an interesting aspect of the case – in addition to the board minutes, the company apparently had an AI transcription of its board meeting, and both were introduced into evidence. As this excerpt from the memo explains, they didn’t match, and that didn’t help the board’s argument:
The court had two written records of what happened in the boardroom: the official minutes and AI-generated transcripts of the same meetings. The minutes described the board’s decisions in the way minutes typically do, recording the action taken and the stated reasons for it. The AI transcripts purported to capture the discussion itself. At one meeting, for example, the minutes recorded that a defensive measure was adopted to protect stockholders; the AI-generated transcript recorded the chairman describing it as “necessary in order for the board to remain in its position.”
Notwithstanding common warnings about inaccuracies in AI-generated material, nothing in the opinion suggests that the admissibility or reliability of the transcripts was contested; they were joint trial exhibits, cited alongside testimony without qualification. After reviewing the record, the court ruled for the investor on its challenge to the board’s rejection of the nomination notice.
In the court’s view, the board’s concerns were matters for stockholders to weigh in the election rather than grounds to exclude the nominees from the ballot. Although the AI transcripts did not decide the case, they informed the court’s account of the board’s deliberations, and the court cited them in the portion of the opinion assessing the board’s motivations.
The memo identifies several practical takeaways for companies from the decision, including the need to decide deliberately when and how AI transcription can be used, and to treat board and other sensitive meetings with particular caution. In addition, the memo says that companies should articulate a risk-based policy for AI transcription, decide whether AI transcripts should be kept as corporate records, and train directors and officers to speak knowing a transcript may exist, and to draft minutes with that in mind as well.
Last month, I blogged about Corp Fin’s new CFIs addressing 13G eligibility. This Weil memo summarizes the key takeaways from those CFIs for public companies and 13G institutions:
– Company-initiated engagement is on firmer footing. Because issuer initiation is now an explicit mitigating factor, public companies seeking substantive dialogue with large passive stockholders should consider extending the invitation themselves and documenting that they did so.
– Do not expect a return to 2024. Institutional investors’ engagement protocols were rebuilt around the 2025 guidance. Companies should anticipate that many institutional holders will remain measured in engagement heading into the 2027 proxy season.
– Limited comfort in proxy contests. CFI 103.14 confirms that 13G filers can hear out and share views with both sides of a proxy contest. Companies in contested or potentially contested situations should assume their passive holders are talking to the other side, and calibrate their own solicitation and engagement strategy accordingly.
– Structure the conversation. Agendas and framing still matter. Well-prepared companies will make it easier for their shareholders to stay in the 13G lane.
– Safer ground for 13G investors, within limits. For institutional investors, issuer-initiated meetings, explaining the rationale for a past or upcoming vote, and seeking clarification of a company’s disclosures are now expressly safer ground. Pressuring management, including conditioning voting support on the adoption of specific measures, remains disqualifying, and 13G eligibility continues to turn on all of the facts and circumstances. Investors should consider documenting who initiated each engagement.
If you’re interested in other perspectives on the new CFIs, check out the other memos we’ve posted in our “Schedule 13G” Practice Area.
At an open meeting yesterday, the SEC announced that it was considering potential designations of additional credentials that would qualify an individual as an accredited investor. That may seem like an unusual way to expand accredited investor status, but remember that Rule 501(a)(10) of Reg D allows the Commission to designate “one or more professional certifications or designations or credentials from an accredited educational institution” as qualifying an individual for accredited investor status.
Here are the credentials that the SEC proposes to designate as conveying accredited investor status along with links to the individual notices the agency issued with respect to each potential designation:
(1) Passing an accredited investor examination to be developed by FINRA;
(2) Holding a license as a U.S. certified public accountant;
(3) Holding a charter as a Chartered Financial Analyst;
(4) Holding a certification as a Certified Financial Planner in the United States;
(5) Holding a license as a FINRA Investment Banking Representative license (Series 79) or a FINRA Research Analyst license (Series 86 and Series 87).
Rule 501(a)(10) requires the SEC to designate qualifying credentials only after notice and an opportunity for public comment, and to post the credentials recognized as satisfying the criteria for accredited investor status on its website. The comment period for the proposed designation of these credentials will end 60 days after publication of the relevant notices in the federal register.
Commissioner Hester Peirce’s last day on the job is Friday, October 2nd, and her departure will leave the SEC with just two sitting commissioners. As Meredith blogged earlier this year, the way the SEC’s quorum rules work, having only two commissioners won’t affect its ability to act, but yesterday the SEC nevertheless opted to amend its quorum rule to account for the possibility that one commissioner might recuse himself from a particular matter. Here’s an excerpt from the SEC’s release adopting the amendment:
In prior years, the Commission has occasionally been in the position of having fewer than three members and believes it prudent to adapt its quorum rule to further accommodate that contingency. Moreover, the Commission has found that situations often arise in which one or more Commissioners have disqualified themselves or are otherwise disqualified from participating in a matter.
When such situations arise, it is important that the Commission be able to continue to conduct business. Accordingly, the Commission is amending the quorum rule to specify that, in a situation in which only one Commissioner is able to participate in a matter because all other Commissioners currently in office are disqualified from participating in that matter, the remaining member would constitute a quorum for that particular matter.
By now, you may well be asking how the Commission could adopt this rule without notice and opportunity for comment. The adopting release addresses that issue too:
The Commission finds, in accordance with the Administrative Procedure Act (the “APA”), that these amendments relate solely to agency management and organization and do not constitute a substantive rule. Accordingly, the APA’s provisions regarding notice of proposed rulemaking and opportunity for public comment are not applicable.
I doubt very much that appointing new SEC commissioners is high on the Trump administration’s agenda right now, but for the record, this is no way to run a railroad.
