During the ABA Business Law Section’s “Dialogue with the Director” last Friday, Corp Fin Director Jim Moloney mentioned that the Staff is “completely rethinking how registered offerings work.” Of course, Jim’s remarks were subject to the standard SEC speaker disclaimers, but they matched up pretty well with the speech I shared yesterday from SEC Chair Paul Atkins, where he said he’s instructed the Commission Staff to evaluate the ideas of:
– Adopting a regulatory IPO “on-ramp” that supplements the concept that Congress designed in the JOBS Act, and
– Providing nearly all public companies with an easier path to “shelf registration,” which allows them to access the public markets quickly and when market conditions are ideal.
Hat tip to Meredith for taking a deep dive into what this could look like – *could* being a key term since nothing has been proposed, let alone adopted. She found this 2015 interview with former SEC Commissioner Steven Wallman where he discusses the “company registration model” – and how the JOBS Act got us only part of the way to what could be a much simpler system. Here’s an excerpt:
On priorities, as an example, I thought it was very important to work on capital formation issues. And so I ended up chairing the Commission’s first ever Advisory Committee on Capital Formation. I’m proud and pleased that some of its core recommendations and much of the direction it suggested for evolution of the securities laws has been implemented since the last decade-and-a-half. Some of the recommendations, like full S-3 shelf registration for global issuers has developed over time to mimic what we had proposed in terms of a “company registration” concept.
The current law is still more complex and tortured in some respects than what’s needed if we simply implemented company registration, but in result it still arrives at almost the same place – just through a more maze-like process. We had proposed a concept of registering companies, not securities, — a Copernican shift from the current model — that would eliminate some of the transaction-based complexity of the current structure and make it much more streamlined and simplified. But the current
law, within at least an order of magnitude, has directionally moved to the same place we had suggested.
Some of the regulations that have now been implemented as part of the JOBS Act were among other concepts that we had reviewed and promoted. So I feel quite proud about all that, that we’ve moved in the direction that that the Advisory Committee suggested, albeit under different names, with other kinds of nomenclature and semantics, and over a timeframe that is overly long compared to what could have been done had we just moved forward in a timely manner then. But sometimes big ideas and novel approaches take time to acclimate and actually move through the process, especially when you have
regulatory systems that almost by definition are primarily backwards looking and influenced heavily by incumbents as the ones with a current stake in the process. It takes a bold staff and thoughtful regulatory body leadership to be what some would — perhaps even attempting to be disparaging in these circumstances — call “adventurous.” But I have always thought the Commission up to it.
In the interview, Steven also discusses his efforts to modernize SEC rules to reflect new technologies – proving that the more things change, the more they stay the same! Check out these resources for more about the ideas that were floated on the company registration model back around “the turn of the century” (i.e., the late 90s and early 2000s):
Wachtell Lipton recently published an updated version of its longstanding “Audit Committee Guide.” The 2026 edition weighs in at 203 pages. Here’s an important caveat:
The exhibits to this Guide include sample charters, policies and procedures. All of these exhibits are to some extent useful in assisting the audit committee in performing its functions and in monitoring compliance. However, it would be a mistake to simply copy published models. The creation of charters and written policies and procedures is an art that requires experience and careful thought. In order to be “state of the art” in its governance practices, it is not necessary that a company have everything another company has. When taken too far, a tendency to expand the scope of charters, procedures and policies can be counterproductive.
For example, if an audit committee charter or procedure requires review or other action to be taken and the audit committee has not made that review or taken that action, the failure may be considered evidence of lack of due care. Each company should tailor its own audit committee materials, limiting audit committee charters and written procedures to what is truly necessary and what is feasible to accomplish in actual practice. These materials should be carefully reviewed each year to prune unnecessary items and to add only those items that will in fact help directors in discharging their duties.
Among other updates, this year’s guide discusses the decline in SEC and PCAOB enforcement activity and the heightened expectations for AI oversight. Here’s an excerpt on that:
Given this emerging technology that comes with both new risks and heightened attention from many different stakeholders, it is important for boards and relevant committees to engage in active oversight of artificial intelligence risk management and to stay apprised of updates in the rapidly-evolving space. In addition to maintaining oversight over AI use internally (if tasked with such oversight), audit committees should consider how third parties, including external auditors, use and govern AI in their practices.
In remarks yesterday at the Economic Club of Washington, SEC Chair Paul Atkins once again emphasized his goal to modernize the federal securities laws – or more specifically, to “ACT”:
The answer to that is what I am calling our “A-C-T” strategy, which rests on three distinct, but interlocking pillars to: advance our regulatory frameworks into the modern era – A, clarify our jurisdictional lines – C, and transform the SEC rulebook by returning it to first principles – T.
Every initiative toward which the SEC is working—every rule that we propose, every interpretation that we release, and every institutional reform that we undertake—largely falls into at least one of those three categories.
Chair Atkins goes on to explain his view that disclosure reform falls under the “transform” prong (and helps “Make IPOs Great Again”). Here’s an excerpt:
More than a corporate milestone, I believe that every IPO is also an invitation for workers and savers to participate in the prosperity of the next generation of American enterprise. When fewer companies extend that invitation, fewer Americans receive it.
So, as I have indicated on several occasions, we are working to reverse the precipitous decline in public companies. A central objective for this goal is to rationalize disclosure requirements by delivering the minimum dose of regulation, again with materiality as our north star. Further, as a disclosure agency and not a merit regulator, the SEC should not use its rules to indirectly regulate matters—or put its thumb on the scale for issues—that should be left to the States, including corporate governance.
Looking ahead, I am eager for the Commission to propose rules that execute my Make IPOs Great Again agenda. For proposals in the near term, I have instructed the Commission staff to evaluate the following ideas: (1) adopting a regulatory IPO “on-ramp” that supplements the concept that Congress designed in the JOBS Act; (2) expanding the existing accommodations that are currently available only for emerging and smaller companies to more businesses; (3) providing nearly all public companies with an easier path to “shelf registration,” which allows them to access the public markets quickly and when market conditions are ideal; and (4) giving companies the optionality for a quarterly or semiannual regulatory filing cadence.
If you want to hear more from Chair Atkins, don’t miss the podcast he launched last week! The series is aimed at giving an “inside look” at the SEC’s work and will feature guests from inside and outside the agency.
Last week, I had the opportunity to moderate an event on shareholder activism for the Minnesota chapter of the National Association of Corporate Directors. The spectrum of perspectives on our panel made for a great conversation – a chief financial officer and independent director, an investor relations officer, outside counsel who has worked on both the activist and defense side, and a special situations communications / IR consultant who spent many years on “the other side” at a prominent activist.
Here are a few “do’s” & “don’ts” that I gleaned – also see this memo co-authored by Christine O’Brien of Edelman Smithfield, who was part of our NACD panel.
PREPAREDNESS:
DON’T over-rely on stock surveillance tools. Surveillance is a useful input, but it may not detect activists building positions through derivatives that fall below reporting thresholds. The stronger defense is maintaining ongoing dialogue with key stockholders – with IR and governance teams actively listening, identifying concerns, and escalating potential vulnerabilities to management and the board.
DO be prepared – before the call comes. By the time an activist contacts you, they have likely already accumulated a position and spoken with your stockholders. If you are only now identifying your advisors, assigning roles, and developing a response strategy, you are already behind. At a minimum, engage a proxy solicitor on retainer (so they’re on your team before an activist gets to them), and prepare a templated press release you can quickly tailor and issue. The press release should affirm that the company values input from all stockholders – signaling responsiveness while preserving time to assess your options carefully.
RESPONSIVENESS:
DON’T neglect internal and external stakeholders. Your response to an activist must address more than investor communications. Employees, business partners, customers, and other stakeholders are watching – and uncertainty can be damaging. Communicate early, set clear expectations about what the company can and cannot disclose, and ensure all communications are reviewed for consistency. Every employee should know to direct media inquiries to a single designated spokesperson.
DO listen first – then communicate deliberately. If you have the opportunity, consider adopting defensive governance structures proactively, before any threat emerges (often called a “clear day” adoption). But once an activist is at the table, defensiveness is often counterproductive. Listen openly, take their concerns seriously, and work with advisors to craft a response that is measured, consistent with your public messaging, and protective of the company’s long-term position.
DO approach settlements strategically. Settlement is currently the most common resolution to activist campaigns, due to the cost, distraction, and reputational risk of a contested proxy fight. But settling is not inherently the right outcome, and companies shouldn’t jump to accept an activist’s initial terms. Key settlement provisions – including board seat composition, standstill periods, committee assignments, and information rights – are all negotiable. Engage skilled advisors early to understand your leverage and protect the company’s interests throughout the process.
Here’s an update from Alan Dye’s Section16.net blog earlier this week: The staff of the Division of Corporation Finance has issued another no-action letter to Tower Semiconductor Ltd. (TSEM) that effectively extends to May 29 the date by which officers and directors of a foreign private issuer must file Section 16(a) reports under the Holding Foreign Insiders Accountable Act (HFIAA) if the FPI is headquartered or organized in a jurisdiction in the geographical region directly affected by the military conflict in Iran and can represent that its ability to comply with the HFIAA’s March 18 deadline has been materially affected by the direct effects of the conflict.
Here are the updated facts that led the staff to extend relief to TSEM:
…TSEM’s headquarters, management, parent company and largest fabrication facility (Fab 2) are all located less than 20 miles away from the Israel-Lebanon border, which continues to suffer rocket fires, missile strikes and air raid sirens from Lebanon. In addition, the wartime restrictions in Israel, especially in the northern part of Israel where TSEM’s headquarters, management and Fab 2 are located, remain ongoing, and TSEM employees, directors, vendors and other stakeholders located in Israel continue to be subject to shelter-in-place orders from time to time. Several parts of Israel continue to experience intermittent loss of power, internet and telecommunications services, as Israel continues to endure severe disruptions to communications and infrastructure.
As a result, these war conditions have continued to meaningfully impair TSEM’s ability to collect, verify and assist its directors and officers in reporting the security ownership information required under Section 16(a). In addition, these restrictions impact access to company records and legal and compliance services, including notary services, that are necessary to complete the reports.
For example, certain TSEM directors and officers had to reschedule notary appointments for Form ID preparations multiple times, with some of those appointments still pending as of the date of this letter, due to rocket strikes and other collateral consequences of military operations in the region.re-run S16.net blog
As regular readers of this blog will know, we’ve reached the point in the season where the major asset managers have updated their voting policies.
Weil recently published this voting guide to show where things stand with the “Big 3” – BlackRock, State Street Investment Management and Vanguard – with a special focus on environmental, social, and governance topics. It focuses on the policies that apply to the index funds managed by these institutions (i.e., not the active funds, which are a smaller portion of the holdings and may be voted differently).
The guide has two handy charts that are good as a quick reference tool. One shows year-over-year changes by topic, the other summarizes the current policies of each of the Big 3 on each of these topics:
– Board Diversity
– Director Time Commitments / Overboarding
– Independent Board Leadership
– Board Oversight of ESG Risks & Opportunities
– Use of ESG Disclosure Frameworks
– Climate Risk-Related Disclosure
– Human Capital Management / Workforce Diversity, Equity & Inclusion
– Human Rights
– Political Contributions, Lobbying & Trade Association Memberships
– ESG Metrics in Compensation
As we head into the home stretch of “proxy season” for many companies, remember that we’re posting lots of helpful resources for members in our “Proxy Season” Practice Area.
This past Friday, the SEC posted notice of filing & immediate effectiveness of a proposed NYSE rule change to enable trading of securities on the exchange in tokenized form during the pendency of the DTC tokenization pilot program. The pilot program received no-action relief back in December – and the SEC approved a corresponding Nasdaq proposal last month.
Here’s an excerpt from the NYSE notice:
The proposed rule change would establish that Exchange member organizations that are eligible to participate in the DTC Pilot Program (“DTC Eligible Participants”) may trade tokenized versions of those equity securities and exchange traded products on the Exchange that are eligible for tokenization as part of the DTC Pilot Program (“DTC Eligible Securities”), pursuant to the terms of the No-Action Letter. Pursuant to the proposed changes, DTC Eligible Securities would be able to trade on the Exchange within the current national market system, using DTC to clear and settle trades in token form, per order handling instructions that DTC Eligible Participants may select upon entering their orders for DTC Eligible Securities on the Exchange.
The Exchange’s rules do not currently permit the trading of tokenized securities on the Exchange and, unless the Exchange adopts the proposed rules, the Exchange would lack a clear framework for DTC Eligible Participants to designate, at order entry, that a DTC Eligible Security be cleared and settled in tokenized form pursuant to the DTC Pilot Program.
The Exchange accordingly proposes to amend its rules to enable the trading of DTC Eligible Securities in tokenized form on the Exchange during the pendency of the DTC Pilot Program, subject to the same conditions and restrictions as the Nasdaq rule change approved by the Commission. The Exchange believes that the existing regulatory structure mandated by Congress applies to tokenized securities, regardless of whether such securities have certain unique properties like the ability to be settled on a blockchain, much like it did when the Commission allowed securities to be decimalized and electronified and when exchange traded funds and other novel securities were initially approved. The Exchange believes that no significant exemptions or parallel market structure constructs are needed for tokenized securities to trade alongside other securities, and that the markets can accommodate tokenization while continuing to provide the benefits and protections of the national market system.
Under the NYSE rules as amended by this proposal, the term “tokenized” refers to digital representations of paper securities that utilize digital ledger or blockchain technology, as opposed to “traditional” securities, which are also digital representations of paper securities, but do not utilize blockchain technology. As long as DTC Eligible Securities are fungible with, have the same CUSIP number and trading symbol as, and afford their holders the same rights and privileges as traditional securities of an equivalent class, the Exchange will trade DTC Eligible Securities in tokenized form together with traditional securities on the same order book and according to the same
execution priority rules.
For more on this topic, listen to this recent podcast that Meredith recorded with Scott Kimpel at Hunton, check out this Cooley blog that I penned with my colleague Reid Hooper, and visit our “Crypto” Practice Area.
For a recent episode of the “Mentorship Matters with Dave & Liz” podcast, Dave and I spoke with “community involvement” powerhouse Kathy Jaffari, who is a Partner at Cozen O’Connor, where she serves as Chair of the Corporate Governance Practice and Co-Chair of the Capital Markets & Securities Practice, and Chair of the ESG Practice. Kathy is also involved with the Philadelphia Bar Association and the American Bar Association, among many other pro bono and community activities. Check out this 30-minute podcast to hear:
1. Kathy’s path to leadership in local and national Bar Associations, non-profits, and other community organizations.
2. Tips for lawyers at any stage of their career who are looking to get involved in their communities.
3. Unique professional development opportunities that Bar Associations provide, and the contributions that the Philadelphia Bar Association and American Bar Association have made to the greater legal community in recent years.
4. Potential mentorship gaps for junior corporate and securities lawyers – and how senior lawyers can fill them.
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.
During the ABA Business Law Section’s “Dialogue with the Director” last Friday, Corp Fin Director Jim Moloney gave an update on the semi-annual reporting proposal that the SEC is expected to issue. As you might recall, mandatory quarterly reporting has been on the hit list since it somehow attracted the attention of the President last fall. Around the same time, the Long-Term Stock Exchange announced a rulemaking petition on the topic.
The prospect of moving to semi-annual reporting seems to have a lot of buzz, even though most securities lawyers might scratch their heads over whether eliminating Form 10-Q filing requirements would change much in practice. So, here are six things to know if your clients ask what this proposal could mean for them:
1. Like all proposals, it will be subject to notice & comment and actual adoption isn’t guaranteed. Accounting firms are adamantly opposed, so you can expect to see some criticism.
2. The proposal will likely permit – not require – companies to move to semi-annual reporting.
3. There are plenty of reasons why established public companies, which already have well-honed quarterly reporting processes, may continue to release results on a quarterly basis – to open trading windows, raise capital, facilitate an active trading market, etc. But while the earnings release would remain, the formality of a “Form 10-Q” could disappear (depending on what the proposal and a final rule, if any, say). It isn’t unheard of to release numbers “off cycle” – i.e., not driven by a ’34 Act reporting obligation. For example, a company might release “flash numbers” if conducting an offering before issuing its regularly scheduled quarterly disclosures.
4. Newer and smaller public companies would be the most likely to benefit from the rule change, as it would give them more time to ease into quarterly reporting procedures. Think life sciences and small regional banks. It could help “Make IPOs Great Again” in this way.
5. For companies that take advantage of the semi-annual reporting regime, they would need to give notice before moving to a quarterly reporting cadence. Companies would likely move to a quarterly cadence eventually, for the reasons noted above.
6. US regulators aren’t alone in rethinking quarterly reports: Canada also recently launched a pilot project that would exempt certain issuers from filing first- and third-quarter disclosures. However, as Meredith blogged, companies that want to maintain the option of raising capital may not be able to participate in it.
The skuttlebutt is that this proposal is near the top of the pile in terms of near-term release dates, out of an exciting 22 “blockbuster” proposals that Jim flagged as being in the queue at Corp Fin. But the SEC has to carefully comply with all of the procedural steps before any rulemaking goes out the door.
In talking with our members about the status of much-anticipated SEC proposals, we hear a common sentiment: “A little less conversation, a little more action please.” Of course, rulemaking is an inherently lengthy and complex process – which in many ways is a good thing – and I don’t want to sound ungrateful for the positive things we’ve seen in terms of helpful guidance and practical applications of the rules as they currently stand. (And to be fully accurate, we do appreciate the conversation – we just also want to see the rules – but this isn’t nearly as catchy as the Elvis quote.)
When it comes to getting modernized rules on the books though, the unfortunate truth is that the SEC no longer has exclusive control over the timing of its proposals. Due to the February 2025 executive order limiting the power of independent agencies, everything has to pass through the White House’s Office of Information and Regulatory Affairs (OIRA). This Global Policy Watch blog from last August gave a 6-month update on how the new review process was working:
Also unclear at the time of the Trump order’s issuance was whether OIRA review would substantially delay independent agency rulemakings. Indeed, fear of undue delay was one main objection urged against the extension of OIRA review to independent agencies. But the experience of the last six months suggests that OIRA review does little to delay independent agency rulemakings. OIRA review of independent agency rulemakings (excluding rulemakings by the sui generis CFPB) lasted an average of 17 days, and no review took more than 29 days. To date, then, OIRA has reviewed independent agency rulemakings in a fraction of the ninety days allotted to it for regulatory reviews under the Clinton-era order.
I’m skeptical that this additional step is operating so smoothly – but with respect to SEC proposals, I hope I’m proven wrong (or at least, that some rules might be close to seeing the light of day). This dashboard shows which rules have been sent for review. Proposals on crypto assets and semiannual reporting were sent in late March – so if the average turnaround time applies, we could see those any day! The blog explains that Commissioners aren’t voting on rules until after they’ve made it through OIRA review.
