According to a recent Barker-Gilmore research report, the way that corporate boards and general counsels work together could use some improvement. The report says that Boards and General Counsel are aligned on outcomes, but operating models for corporate governance haven’t kept pace with the GC’s expanded role.
The report argues that the way to address this issue and strengthen governance & decision-making is by modernizing the norms for how the GC interacts with and accesses members of the board to better reflect the way in which the GC’s role has evolved. The report’s conclusion offers some specific suggestions on how to change existing norms to improve the alignment between boards and GCs:
The research points to a clear opportunity to modernize governance interaction models to reflect the expanded scope of the General Counsel role. Effective models consistently include:
– Explicit expectations that GC input shapes strategy before board materials are finalized
– Normalized, recurring interaction with Committee Chairs and Lead Directors
– Clear CEO–GC alignment on when and how the GC may engage directors directly
– Visible GC ownership within enterprise risk management, M&A documentation, and strategic disclosures
– Use of the Corporate Secretary role to shape agenda flow, executive exposure, and risk framing
Barker Gilmore says that these modernized norms do not dilute CEO authority, but strengthen decision-making “by ensuring risk, governance, and legal judgment are integrated early and visibly.”
This BCLP blog offers some advice on topics that should be addressed with the board during cybersecurity briefings. These include discussions of the threat landscape & the company’s risk profile, the potential impact of AI, an overview of the legal and regulatory landscape, an overview of the company’s cybersecurity program, a description of maintenance/improvement activities, and topics for board approval. The blog also offers the following thoughts on private discussions with the CISO & director education efforts:
As part of periodic board briefings, it may be beneficial for the board or committee charged with overseeing cybersecurity to have private sessions with the CISO to discuss topics of material importance away from other management. Interaction between the board and CISO may build trust between the parties, which is critical in the event of a material cyber incident.
In addition to board briefings, a company may also encourage its directors to take continuing education classes on cybersecurity topics, as well as participate in the company’s tabletop exercises to get a better understanding of how significant cybersecurity incidents may be addressed.
Last month, the Corp Fin Staff issued a no-action letter to the Bank of England that addressed the U.S. federal securities implications of a proposed approach for addressing bank failures. This Reuters article notes:
The Bank of England updated its guidance on handling bank failures on Monday, introducing an alternative bail-in mechanism that changes how bondholders are compensated during a rescue, after securing assurances from U.S. regulators.
The BoE said it had received a no-action letter from U.S. regulators, assuring it that U.S. authorities would not pursue enforcement action over use of the new mechanism.
The new guidance was supported by lessons learned from the failures of Credit Suisse and Silicon Valley Bank, the BoE said.
Under the new approach, bondholders whose debt is wiped out or converted as part of a bank rescue will first receive temporary placeholder rights rather than shares in the rescued bank.
These rights, known as PROPPs, are a provisional entitlement that will later be converted into actual shares in the recapitalised bank once regulators have worked out exactly how much each creditor is owed.
“The key addition is the introduction of an alternate approach to bail-in where affected creditors receive non-transferable contingent beneficial interests,” the BoE said in a statement.
In the scenario described in the Incoming Letter, as part of the Bail-In [a process used by a resolution authority to recapitalize a failing financial institution without using taxpayer funds], all ordinary shares of the failed Firm would be transferred to either the BoE or a third-party depositary bank, in each case with no consideration payable and without the consent of the holders of such ordinary shares. This process was distinct from Credit Suisse’s resolution, during which its Additional Tier 1 capital securities were written down despite the common stock remaining outstanding and even being entitled to receive proceeds from the sale of that bank. The voting rights pertaining to the ordinary shares of the failed Firm will be exercisable by either the “resolution administrator” of the failed Firm appointed pursuant to the “Bail-In Resolution Instrument,” or alternatively by the BoE. The BoE would then determine a structure for how the failed Firm’s liabilities that are subject to the Bail-In, including the Bail-In Securities, would be written-down. The BoE has established a structure whereby the holders of Bail-In Securities that have been or will be written-down would be granted contingent beneficial interests, created by virtue of the Bail-In Resolution Instrument, which would entitle such holders to the delivery of ordinary shares of the Firm after the resolution, or alternatively, if applicable, the receipt of the net cash proceeds derived from the sale of the ordinary shares. These interests are referred to as Potential Rights to Onward Property or Proceeds (“PROPPs”). Once the Bail-In process has been concluded and each class of PROPPs has been valued, some PROPPs may be converted into equity securities of the post-resolution Firm. The BoE’s question was whether the exchange or conversion process was exempt from registration under Section 3(a)(9) of the Securities Act.
Section 3(a)(9) Exemption
Section 3(a)(9) exempts from registration “any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly by or indirectly for soliciting such exchange.” The BoE was of the opinion that the exchange of ordinary shares in a failing Firm with the holders of Bail-In Securities would satisfy the requirements of Section 3(a)(9) in a case where the exchange is effectuated through the PROPPs mechanism. TheStaff concluded that it would not recommend enforcement action if a Firm, as part of the Bail-In process, (1) exchanges its Bail-In Securities for non-transferable PROPPs; and (2) subsequently exchanges those PROPPs for ordinary shares in the resolved Firm without registration under the Securities Act, in reliance on an opinion of counsel that the exemption provided in Section 3(a)(9) is available.
In its no-action letter, the Staff stated:
Based on the facts presented, the Division will not recommend enforcement action to the Commission if a Firm (1) exchanges its Bail-In Securities for non-transferable PROPPs and; (2) subsequently exchanges those PROPPs for ordinary shares in the resolved Firm without registration under the Securities Act, in reliance on your opinion of counsel that the exemption provided in Securities Act Section 3(a)(9) is available.
In a statement released on the same day that the no-action letter was published, SEC Chairman Paul Atkins directed the Staff to prepare a rulemaking for consideration by the Commission that would provide an exemption from registration under Section 5 of the Securities Act for bank bail-in frameworks beyond the Bank of England situation, stating:
I am pleased that the Division has issued the letter in response to the Bank of England’s request. However, there is a wide range of bank bail-in frameworks used globally. To account for these various frameworks and to provide for a more certain and authoritative solution, I have instructed the Division to prepare a rulemaking recommendation to the Commission regarding a potential exemption from the Securities Act’s registration requirements, for securities offered and sold in connection with a regulatory bail-in.
Until the Commission takes up any such rulemaking, I encourage other foreign regulators and regulated firms to contact the Division to discuss their particular bail-in processes or frameworks.
And with that directive there is yet one more rulemaking piled on Corp Fin’s already overflowing plate!
Zach Barlow recently noted on the PracticalESG blog that 23 State Attorneys General sent a letter to Fitch, Moody’s, and S&P Global addressing downgrades of the credit ratings for fossil fuel companies. In the letter, the AGs claim that that the ratings agencies have unjustly and unlawfully used ESG criteria in their credit rating decisions. For example, the letter states:
Based on the same flawed “energy transition” and “increasing regulations” ESG predictions, S&P claimed that fossil-fuel-producing states’ economies were only improving “for now,” and projected that those states would face a more “prolonged economic recovery,” lagging behind other states. The Ratings Agencies continue to use ESG factors to weigh down ratings for fossil-fuel-producing states and municipalities, even after the Ratings Agencies’ ESG-driven predictions have proven to be incorrect. These methodological departures and conflicts of interest harm state economies, tax revenues, and investments.
Zach notes in the blog:
The AGs allege that ratings agencies adopted undisclosed UN PRI pledges. They argue that this, in conjunction with the agencies’ ESG consulting arms, created conflicts of interest in violation of SEC rules. They are requesting that the ratings firms withdraw from ESG commitments. Along with the letter, the AGs provide a list of 27 interrogatories that ask about how firms consider ESG factors in their credit ratings. The AGs warn that if their demands are not met, they will bring state legal action or refer the credit agencies to federal regulators.
If you do not have access to the complete range of benefits and resources on PracticalESG.com, be sure to sign up now and take advantage of our no-risk “100-Day Promise” – during the first 100 days as an activated member, you may cancel for any reason and receive a full refund.
Meredith recently noted on the Proxy Season Blog that, following the enactment of the Texas law last year that imposes regulations on proxy advisory firms, other states have enacted their own “copycat” laws, and those laws are now being challenged with lawsuits. The blog notes that Glass Lewis recently announced that it has commenced litigation against Indiana, while ISS filed a lawsuit against Kansas challenging its copycat law. These laws are scheduled to take effect July 1, 2026. Bloomberg Law reports:
The state laws also ignore a crucial fact, ISS said in its complaints against Kansas and Indiana: Many issues that come up at annual meetings don’t lend themselves to financial analyses, such as whether to reelect a board member who has missed too many meetings.
Glass Lewis cited a similar concern in its litigation: “There is no obvious way to assign a dollar figure to a vote for one director over another, a vote to ratify or reject a particular auditor, or a vote for or against a nonbinding shareholder proposal,” according to its Indiana complaint.
The two firms said they aren’t only concerned about a compliance hassle—though Glass Lewis said the burden would likely be overwhelming. They’re concerned about what compliance actually means.
Terms of the state laws are too vague, ISS and Glass Lewis both said.
Note that only members of the TheCorporateCounsel.net can access the Proxy Season Blog. If you are not a member, email info@ccrcorp.com to sign up today or call us at 800.737.1271.
The SEC’s optional semiannual reporting proposal for public companies was released on Tuesday, and with the benefit of some time, we can now reflect on some of the finer details of the proposal.
Rationale
In the proposing release, the Commission recounts the history of interim period reporting under the U.S. federal securities laws, noting that the SEC had initially moved from an early quarterly reporting regime to a semiannual reporting approach in 1953, and then revisited that decision in 1970 by adopting Form 10-Q and the quarterly reporting system that is in place today. In terms of the potential benefits of optional semiannual reporting, the SEC notes in the proposing release:
Companies that elect semiannual interim reporting may see a reduction in compliance costs of time and money, as they would incur these interim reporting costs only one time in connection with each fiscal year instead of three times in connection with each fiscal year pursuant to quarterly reporting. These companies could then choose to dedicate any compliance cost and resource savings to their business growth. Other potential benefits of semiannual reporting include: less distraction from running the day-to-day business; reallocation of attention from interim reporting to company strategy; additional time spent on new product development; and ability to engage in transactions that might not be possible when management is focused on preparing interim reports. To the extent that companies could not previously do so due to quarterly reporting, companies electing semiannual reporting may employ business strategies that may help ensure these companies’ long-term viability. In particular, emerging growth companies and smaller reporting companies may value having the flexibility to select the interim reporting requirement that is most appropriate for them and their investors. Additionally, reducing the compliance costs associated with quarterly reporting may contribute to more private companies deciding to enter the public markets and more companies deciding to remain public. Further, the flexibility provided in the proposal may appeal to companies in certain industries where investors may focus more on certain business, product, or regulatory developments than interim financial results.
Applicability
The SEC’s proposal would permit semiannual reports for all Exchange Act reporting companies that file Form 10-Q today, regardless of filer status, revenues, market capitalization, or other criteria. The Commission solicits comment as to whether the option for semiannual reporting should be available only for Exchange Act reporting companies that satisfy certain criteria.
Earnings Release Practices
The Commission makes the point in the proposing release that this proposal does not contemplate any general changes to the current regulatory requirements governing earnings releases or earnings guidance practices. The SEC notes that “federal securities laws do not impose general duties upon Exchange Act reporting companies to announce or publish earnings, conduct earnings calls, or issue earnings guidance.” The proposing release notes that, while the proposed rule changes are focused on the specific issue of the frequency of interim reporting, the Commission would welcome comments on the impact of the proposal on voluntary earnings release practices.
Other Rule and Standard Changes
The Commission notes that, if the proposal is adopted, changes may be necessary to existing stock exchange rules and accounting and auditing standards, and the proposing release notes that the Commission staff would coordinate any such changes with accounting and auditing standard-setters, securities exchanges, and other market participants. The proposing release seeks comment on what exchange rules and accounting and auditing standards may be impacted by the adoption of optional semiannual reporting. Similarly, the proposing release recognizes that regulations of other Federal agencies reference quarterly SEC reports, and therefore such agencies may need to change their regulations in the event that the SEC moves forward with the shift to optional semiannual reporting.
More Cover Page Check Boxes!
The proposing release contemplates adding a check box to the cover page of certain forms that would allow an issuer to elect to provide semiannual reports if the box is checked. If the box is not checked, the issuer will be subject to the “default” reporting regime of filing one Form 10-K and three Form 10-Qs for each fiscal year. The check box would be added to Form 10-K, as well as registration statements on Forms S-1, S-3, S-4, and S-11 and Form 10. The proposing release notes:
Companies that have yet to file Exchange Act reports, such as private companies conducting initial public offerings, would make initial elections to use semiannual reporting by checking the box on the cover page of the registration statement filed. This election would determine what financial statements are required in the registration statement and indicate the company’s planned interim reporting frequency to investors and other market participants. Similar to current requirements for the first quarterly report for companies that have newly become Exchange Act reporting companies, the first semiannual report on Form 10-S would be due the later of 45 days after the effective date of the registration statement or the date that Form 10-S would otherwise have been due had the company been an Exchange Act reporting company.
Correcting a Check Box Mistake
Recognizing the possibility that a company may mistakenly leave the check box unmarked or incorrectly mark the check box, the SEC proposes to amend Rule 13a-13(b) and Rule 15d-13(b) to permit companies to amend their Form 10-K to correct any such inadvertent mistakes. The proposing release notes that the corrective amendments would be required to be filed as soon as practicable after discovery of the mistake, but no later than the due date by which the company’s first Form 10-Q report would be required to be filed for the fiscal year in which the initial Form 10-K with the erroneous election was filed.
Changing Your Mind
The proposed optional semiannual reporting approach would permit a change in interim reporting frequency (either from quarterly to semiannually or vice versa) to be indicated on a Form 10-K by checking the box on the cover page to file semiannually or leaving the box unchecked to file quarterly. The proposal contemplates that the determination to report semiannually or quarterly would thus be made on an annual basis and may not be changed until the next Form 10-K annual report is filed. Companies would be required to file interim reports based on the chosen frequency, beginning with the report for the first interim period of the fiscal year in which the Form 10-K with the election was filed. The proposing release includes a number of examples explaining how this would work if the proposed amendments were adopted.
Amendments to Regulation S-X
The Commission is proposing amendments to various rules in Regulation S-X that would incorporate semiannual reporting and simplify the rules with respect to the age of financial statements. Specifically, the proposed amendments would:
– Simplify Rule 3-01 and Rule 8-08 by reorganizing each and consolidating the requirements of Rule 3-12 regarding the age of financial statements in a registration or proxy statement into the balance sheet requirements of Rule 3-01;
– Revise the age of financial statements requirements to incorporate semiannual reporting through the introduction of a revised model for determining the age of interim financial statements; and
– Revise other rules in Regulation S-X to incorporate semiannual reporting.
The Commission’s proposed consolidation of Rules 3-01 and 3-12 would streamline Regulation S-X, which the proposing release says would make the age of financial statement requirements easier to apply. The SEC is proposing to adopt new Rule 3-01(a), which would provide that the date of the most recent balance sheet included in a registration statement or proxy statement must be updated to comply with that section’s requirements as if the effective date of the registration statement, or proposed mailing date in the case of a proxy statement, were the filing date.
Transition Reports and Technical Amendments
The Commission proposes amendments to Exchange Act Rules 13a-10 and 15d-10, which set forth the Commission’s requirements with respect to transition reports upon a change in fiscal year, to incorporate the proposed semiannual reporting option. The Commission is also proposing a wide range of technical amendments to conform existing rules and forms to incorporate the proposed optional semiannual reporting frequency.
Comments
The proposing release includes numerous specific questions about a wide range of topics concerning the move to optional semiannual reporting, as well as more general requests for comment. Comments will be due within 60 days from publication of the proposing release in the Federal Register.
The CAQ’s SEC Regulations Committee meets periodically with the SEC Staff to discuss emerging financial reporting issues relating to SEC rules and regulations. The CAQ recently published the highlights from the joint meeting of the SEC Regulations Committee and the Staff that took place on March 12, 2026. The topics addressed include:
– Smaller Reporting Company status following a change in fiscal year end;
– Smaller Reporting Company status determination when annual revenues previously exceeded $100 million;
– Corporation Finance Interpretations 130.05 and filer status determination upon consummation of a de-SPAC transaction; and
– Filing interim financial information for private operating company when a reverse merger between two operating companies occurs after fiscal quarter end, but before Form 10-Q is due.
As always, these highlights offer useful insights into the Staff’s approach on a wide range of financial reporting issues.
I spent part of this week in Orlando, Florida for a firm event, and that experience reminded me that we are just a little over five months away from our 2026 Proxy Disclosure & 23rd Annual Executive Compensation Conferences, which will be held on October 12th and 13th in Orlando. As you have no doubt observed from reading this blog over the past two weeks, the rulemaking floodgates have opened at the SEC and we are likely to see quite a few proposals coming from the Commission in the weeks and months ahead. Our October Conferences present a great opportunity to hear from our outstanding speakers on all of the changes contemplated by the SEC, as well as how those changes will impact you and your company.
You can now check out the full agendas for the October Conferences, as well as our list of speakers. At the 2026 Proxy Disclosure Conference, I will be interviewing Christina Thomas, Deputy Director of the Division of Corporation Finance, and you will have an opportunity to hear from our “SEC All-Stars” (including yours truly) at both Conferences. You can register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. I encourage you to sign up today so you can take advantage of the early bird rate!
While you are in Orlando, I encourage you to take advantage of all that the area has to offer. On Sunday, I got the opportunity to take the Disney’s Keys to the Kingdom Tour, which is a guided walking tour of the Magic Kingdom, including backstage areas such as the famed underground “Utilidor” tunnels that allow people and supplies to travel beneath the park unseen!
The excitement was palpable yesterday upon the release of the SEC’s semiannual reporting proposal, much like when Navin R. Johnson proclaimed “The new phone book is here! The new phone book is here!” in The Jerk some 47 years ago.
If you are wondering why we did not receive a heads-up that these proposed amendments were to be considered at an upcoming open meeting of the Commission, that is because there was no open meeting scheduled and thus no Sunshine Act notice was issued. Here is a blog from Broc from over a dozen years ago explaining the Commission’s ability to propose and adopt rules by seriatim, without the need to hold an open meeting. With the Commission now comprised of a Chairman and two Commissioners that are all from the same political party (and therefore they would be expected to unanimously approve rulemaking actions), it is likely that we will not see too many rulemaking actions considered at full-blown open meetings. As Liz explained and Meredith expanded upon in recent blogs, we are still able to get some insight into imminent rulemakings by monitoring the dashboard of the White House’s Office of Information and Regulatory Affairs (OIRA), where SEC rulemaking initiatives under review by that office are listed until the review is completed. The difference with this approach is largely that we do not have any way of predicting how long the OIRA process will take, whereas with a Sunshine Act notice you generally knew that the Commission would consider the rulemaking action within a week’s time.
As this entry from the Goodwin Public Company Advisory Blog notes, the SEC’s proposed amendments contemplating an optional approach to semiannual reporting:
The SEC proposed amendments (summarized in this Fact Sheet) that would allow public companies to elect to file semiannual reports on new Form 10-S, rather than filing quarterly reports on Form 10-Q. The SEC also proposed amendments to the financial statement reporting requirements of Regulation S-X and other rules and forms to facilitate the semiannual reporting option.
The proposal would amend Exchange Act Rules 13a-13 and 15d-13 to provide reporting companies with the option to shift from quarterly to semiannual reporting. Specifically, companies could elect to file two reports per year on a new Form 10-S and a Form 10-K, rather than filing a Form 10-K and three Form 10-Qs. Those companies that do not make this election would continue to file periodic reports on a quarterly cycle as is the case today. The election would be made by checking a box on specified filings, including the Form 10-K or certain registration statements, and is intended to provide companies with greater flexibility to choose the reporting cadence that best aligns with their business and investor needs.
Proposed Form 10-S would require the same narrative disclosures and financial information as Form 10-Q, but covering a fiscal six-month period rather than a fiscal quarter. The financial statements for a semiannual period would be prepared in accordance with U.S. GAAP and reviewed by an independent auditor, but would not need to be audited. The Form 10-S would be due 40 or 45 days after the end of the reporting period, depending on a company’s filer status.
The SEC’s proposal also includes conforming changes to Regulation S-X to align financial statement requirements with an optional semiannual reporting framework. In particular, the SEC would revise “age of financial statements” requirements to ensure that financials included in registration statements are not considered stale under rules originally designed for quarterly reporting. The amendments would also simplify and consolidate these timing requirements into a single rule, reflecting a move toward a more streamlined and flexible financial reporting regime.
Public companies have an obligation under the federal securities laws to provide information that is material to investors. Yet, the rigidity of the SEC’s rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors. Today’s proposed amendments, if ultimately adopted, would provide companies with increased regulatory flexibility in this regard.
In determining a company’s reporting cadence, a company might consider factors such as the costs and management time of preparing quarterly reports versus semiannual reports, expectations of its investors, potential effects on its cost of capital, the stage of its business development, the nature of its business model, other avenues of disclosure including earnings calls and current reports on Form 8-K, and prospects of increased research coverage, all without undermining fundamental investor protections. Ultimately, this flexibility might reduce some of the burdens of being a public company and potentially influence a company’s decision to become or remain public. The proposal seeks public input on the optional semiannual reporting framework, and I look forward to the public feedback.
Chairman Atkins went on to indicate that this semiannual reporting proposal “is just the first step of the larger, comprehensive effort to review and reshape the current SEC rules governing public companies with respect to their ongoing reporting obligations and their ability to raise capital in the public markets.”
As if the excitement from the semiannual reporting proposal was not enough, the White House’s Office of Information and Regulatory Affairs (OIRA) updated its dashboard to reflect the fact that the SEC had submitted a rulemaking titled “Rescission of Climate-Related Disclosure Rules” on Monday. Perhaps due to the fact that we never had to comply with the climate-related disclosure requirements as a result of stay imposed due to the pendency of litigation, it is easy to forget that those requirements remain in the SEC’s rules, and that the SEC must go through a rulemaking process to amend the rules to eliminate the requirements.
To briefly review the bidding, back in March of last year, the SEC announced that it had voted to discontinue its defense of the climate disclosure rules that were adopted in March 2024 and were challenged in litigation pending in the Eighth Circuit. The SEC’s announcement noted that a letter had been sent to the court stating that the agency was withdrawing its defense of the rules and that its counsel was no longer authorized to advance the arguments in the brief that the SEC had filed. Several months later, the SEC provided a status update to the Eighth Circuit in which the agency indicated that it does not intend to review or reconsider the climate disclosure rules. The SEC also requested that the court lift the stay on the litigation and continue considering the parties’ arguments regarding the scope of the agency’s power to adopt the climate disclosure requirements. In the status update, the SEC stated: “[i]f the Court were to uphold the Rules in whole or in part, any reconsideration of them would be subject to Commission deliberation and vote of its members, and the Commission cannot prejudge that action. Moreover, a decision from this Court would inform the scope and need for such action, including providing insights as to the Commission’s jurisdiction and authority.”
In their response to the SEC’s status report, the intervenors argued that the case should be held in abeyance until the SEC decides on a course of action with respect to repealing or proceeding with the rules. Last September, the Eighth Circuit issued an order rejecting the SEC’s request. The order stated, the “petitions for review [of the validity of the climate disclosure rules (the Final Rules)] will be held in abeyance to promote judicial economy until such time as the Securities and Exchange Commission reconsiders the challenged Final Rules by notice-and-comment rulemaking or renews its defense of the Final Rules. The Final Rules have been stayed, and an abeyance will not cause material prejudice to the petitioners. It is the agency’s responsibility to determine whether its Final Rules will be rescinded, repealed, modified, or defended in litigation.”
While the standoff with the Eighth Circuit persisted for some time, it now appears that the Commission contemplates moving forward with the necessary rulemaking to rescind the climate disclosure rules. We can certainly expect this to continue to be a controversial topic as the administrative process now plays out back at the SEC.
