As John noted back in March, the SEC voted to discontinue it defense of the climate disclosure rules in litigation pending in the U.S. Court of Appeals for the Eighth Circuit. Liz indicated back in April that state intervenors filed a motion to hold the case in abeyance, and on April 24, 2025, the Eighth Circuit granted the intervenors’ motion to hold the litigation in abeyance. In the order granting the motion, the Eighth Circuit directed the SEC to file a status report within 90 days advising whether the SEC intends to review or reconsider the rule. The court stated that if the SEC determines “to take no action, then the status report should address whether the Commission will adhere to the rules if the petitions for review are denied and, if not, why the Commission will not review or reconsider the rules at this time.”
The SEC filed its status report yesterday, and Commissioner Crenshaw was not happy with what it said. In a statement, Commissioner Crenshaw noted: “The Commission has effectively ignored the Court’s order and thrown the ball back at the Court. The Court should decline to play these games.” She further stated:
The Court “directed” the Commission to advise whether it “intends to review or reconsider the [R]ules at issue in this case.” And, if the Commission has determined to take no action, the Court ordered the Commission to explain whether it “will adhere to the [R]ules if the petitions for review are denied and, if not, why it will not review or reconsider the [R]ules at this time.”
The Court’s directive was straightforward; our answer is not.
The Commission’s Status Report, filed today, states plainly enough that it has no intention of revisiting the Rules at this time. That, however, is where our responsiveness ends. The Status Report goes on to argue that we cannot expound on what the Commission’s future plans might be in the event the rulemaking petitions are denied, because we would be “prejudging” those policy decisions. And, the Status Report explains, any future rulemaking should benefit from a court ruling on our statutory authority.
We also weigh in on a number of questions that the Court did not ask of us – for example, we opine that there are “no obstacle[s]” to reaching the merits of the case and that a “live controversy” remains.
This purported response is wholly unresponsive.
It remains to be seen what the Eighth Circuit will do in response to the SEC’s status update, but needless to say, it appears that no resolution is in sight for the future of the climate disclosure rules.
Our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” are less than three months away, and you have until tomorrow to take advantage of our “Early Bird” rate, which is a 20% discount on the single in-person attendee fee. You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
With all that is going on these days, you do not want to miss our October Conferences, which are taking place on October 21 and 22 at The Virgin Hotels in Las Vegas (and via webcast). This year, we mark the very special occasion of CCRCorp’s 50th Anniversary with a Welcome Party + CCRcorp’s 50th Anniversary Celebration, which will take place from 4:00 pm to 7:00 pm PT on October 20. After we celebrate, we will cover the wide range of topics highlighted in our agenda and hear from a fantastic group of speakers. I look forward to seeing you at the Conferences!
The question of what to do about “finders” has haunted securities regulators and practitioners for many years, much to the frustration of everyone who has sought to find a solution. For this purpose, “finders” refers to those persons who assist companies with capital-raising activities in private markets without being registered as a broker-dealer. When I was the Chair of the American Bar Association Business Law Section’s Federal Regulation of Securities Committee, I had the good fortune to work with an extraordinarily talented and dedicated Subcommittee that was entirely focused on this one topic, and over the years they have volunteered considerable amounts of time toward addressing this issue and proposing practical solutions. We then saw a glimpse of a path forward five years ago when the SEC took initial action on the issue, but as of today the Commission has not move forward with any regulatory solution.
At the SEC’s Small Business Capital Formation Advisory Committee meeting that took place yesterday at the SEC, the topic of finders was addressed, and the Chairman and Commissioners weighed in with their opening remarks. In his opening statement, Chairman Atkins noted:
We know small businesses seeking to raise less than $5 million in capital can struggle to attract funding from VC firms and institutions. Larger investors are often inclined to step in at later stages of growth, leaving fledgling businesses and their founders with limited avenues to capital. So, after exhausting their own network of family members and friends, businesses in the earliest stage of growth sometimes engage a finder to identify angel investors who target smaller, higher-risk investment opportunities. These finders may provide valuable introductions and facilitate access to much-needed capital. But the regulatory approach to this limited activity, when done outside of a registered broker-dealer, is quite opaque.
Commission staff have issued no-action letters over the years addressing very narrow circumstances under which persons have sought to act as finders without registering as a broker-dealer. Gray areas remain. And a lack of regulatory certainty can deter conscientious participants from helping small businesses to secure financing at a formative stage.
So understandably, many have called on the Commission to provide greater clarity over the years. In 2017, the Treasury Department recommended that the SEC work with the Financial Industry Regulatory Authority (FINRA) and the states to formulate a new regulatory structure. The SEC proposed an exemptive order with a request for comment in October 2020 but has since taken no further action. And the legal gray area that lingers can deprive small businesses of essential resources at a time when thirty-three percent of them launch with less than $5,000 in funding—and nearly forty percent fail due to lack of capital.
Commissioner Peirce raised some questions for consideration in her comments:
Though the 2020 Proposal was never adopted, as you consider the staff’s overview of the 2020 Proposal and discuss issues surrounding finders more generally, please consider the following questions:
1. Is the 2020 Proposal a good starting point for exemptive relief, or would a different approach be more effective? Have market practices changed since 2020 in a way that would warrant changes to the 2020 Proposal?
2. Would the 2020 Proposal, or any action related to providing clarity for finders, benefit from a full rulemaking process, as some commenters suggested in 2020?
3. Is the Committee still supportive of a blanket exemption for finders for offerings under a certain size?
4. Should any exemption for finders cover activities related to secondary offerings?
5. In 2020 commenters were divided on whether an exemption should be provided only to natural persons. Does this committee favor one approach over the other?
Let’s be clear: any activity, whether in the form of an exemption or a dramatically scaled down regulatory structure, remains subject to the antifraud provisions of the securities laws. But a person who merely provides a name and contact information to a company seeking capital in exchange for modest transaction-based compensation does not need to be regulated in the same manner as the largest Wall Street brokerage firms. Finders should be subject to an appropriately tailored set of guardrails that reflect their limited involvement in smaller scale private capital market activities. The 2020 Proposal included a number of exemptive conditions; perhaps there are others that should be considered.
The objective is to minimize burdens on legitimate intermediaries while decreasing the likelihood that illegitimate actors will engage in bad acts. As then-Commissioner Stephen J. Friedman observed forty-five years ago, “all regulation-deregulation decisions involve a trade-off between the abuse-prevention of a prophylactic rule and that rule’s interference with the activities of non-abusers.” In this instance, any framework should open doors to finders who serve as legitimate conduits for investment information flows without imposing disproportionately draconian broker-dealer regulatory standards. I look forward to reviewing the Committee’s recommendations.
Finally, Commissioner Crenshaw offered a different perspective on the Commission’s 2020 proposed exemptive order, stating:
First, we checked important investor protections at the door. The 2020 proposal did not attempt to marry the finder registration exemption with effective guardrails. If the Commission is to engage in policymaking that relaxes registration requirements on finders, then it must consider more than just the potential for issuer access to capital; due consideration must be given to the investor experience.
The 2020 proposal would have allowed finders to: contact potential investors; distribute offering materials; pitch those materials in meetings with issuers and investors; and effectively praise the benefits of that issuer (without expressly “advising” on the investment) – all in exchange for compensation premised on whether they make the sale. This is traditional broker activity.
If the Commission allows finders to engage in traditional broker activity without registration – or even with diminished regulatory responsibilities – we must build in guardrails. The 2020 proposal eschewed broker requirements under Regulation Best Interest (even though the Commission had just made clear in 2019 that Regulation Best Interest applies to accredited investors); it also sidelined books and records, basic sales practice, and examination requirements, among other things. The proposal did not even require finders to notify the Commission of their intent to utilize the exemption. Finders were essentially carved out of our registration regime without any mechanism for us to review whether they were complying with the requirements of the safe harbor, or to evaluate the success of the program.
The need for guardrails is important as the Commission considers expanding access to the opaque private markets, whose securities are less liquid, bear higher transaction costs, and whose valuation practices are less consistent (to name a few potential issues).
But, perhaps more importantly, the need for protections is even greater in this finders’ space which – again and again – has proven itself susceptible to microcap fraud, pump-and-dumps, front-end-fee scams, and other manipulative activity. Indeed, experts have noted that the enforcement actions and litigations exposing finder-related fraud likely represent only “the tip of the iceberg.”
We will be watching to see what recommendation the Small Business Capital Formation Advisory Committee comes up with on the topic of finders and whether the Commission elects to go forward with any efforts to address the regulatory grey areas in this realm.
I was shocked to recently learn when reading the PracticalESG.com Blog that The Conference Board has reported that the number of US public companies issuing sustainability reports fell 52% year over year (January 1–June 30) based on Russell 3000 companies. Editor Lawrence Heim notes in the blog:
Reasons for this include regulatory uncertainty, US governmental policy changes and a fundamental reassessment of sustainability reporting to begin with. Last month, I posed the question
“How often is reporting itself assessed for materiality [to external audiences]? Might be worth considering. I’ve written before about Robert Eccles and Tim Youmans 2015 ‘Statement of Significant Audiences and Materiality’ to specifically clarify the primary intended audiences for ESG reporting and context for materiality determinations – it can also be used to evaluate the importance of voluntary disclosures to begin with.”
Looks like there may be some momentum behind stopping (you physics folks – go ahead and explain that…)
On a related note: As we continue our research project on how companies present financial data on sustainability benefits, I have noticed exactly what The Conference Board found. The number of companies that have not updated reports since 2023 has been surprising.
This trend really took me by surprise, because the clients that I work with have been updating their sustainability reports as usual. If you do not have a subscription to PracticalESG.com, I encourage you to email info@ccrcorp.com to sign up today, or sign up online.
For those of you who have followed this blog for a long time or who sat through one of the many “Which is Better?” segments that I did with Marty Dunn back in the day, you will know that my favorite rock band is Black Sabbath. Given that background, I was very sad to learn that Black Sabbath frontman Ozzy Osbourne passed away yesterday at the age of 76. Ozzy was truly one-of-a-kind, being both the “godfather of heavy metal” and a reality TV pioneer. Black Sabbath, with Ozzy delivering his unique vocals, ushered in a whole new genre of rock and roll that defined an era and set the stage for the continued evolution of rock music to this day.
The thing that I always found most inspiring about Ozzy is how he was able to reinvent himself to meet the moment, despite the many struggles that he faced in his life. He was fired from Black Sabbath in the late 1970s, but was able (with the help of his wife Sharon) to launch a solo career that was arguably even more successful than his Black Sabbath era and once again defined heavy metal for a new generation of fans. In the early 2000s, he became a beloved reality TV star, pioneering a format that we are all very familiar with today. Finally, he bid farewell to his fans in style in his hometown of Birmingham just earlier this month. I think that everyone would agree, that was quite a ride.
Yesterday, the SEC announced that it has designated George R. Botic to serve as Acting Chair of the Public Company Accounting Oversight Board, effective July 23, 2025. As Meredith noted last week, PCAOB Chair Erica Williams will depart on July 22.
The SEC’s announcement notes that George Botic is a CPA and became a PCAOB Board Member on October 25, 2023. Prior to joining the Board, he served as the Director of the PCAOB’s Division of Registration and Inspections and in various other roles at the PCAOB. Earlier in his career, Mr. Botic was a Senior Manager with PricewaterhouseCoopers.
Since its inception, the PCAOB has been the proverbial political football of the securities laws. Created in the aftermath of the Enron debacle when Congress decided that self-regulation was no longer advisable for the public accounting industry, the PCAOB has spent the last 23 years standing up a formidable regulator of the audit profession, adopting standards, conducting inspections and enforcing the standards that it has created. The Board has survived a devastating scandal involving the appointment of its first Chairman, a challenge to the constitutionality of its authorizing statute and numerous changes in leadership when the political winds in Washington shifted over the course of the past two decades. For more on the history of the PCAOB, check out this gallery in the SEC Historical Society’s virtual museum and archive.
This year, the PCAOB’s challenges have been more existential. Targeted for elimination by Project 2025, the PCAOB found itself at risk of being eliminated, with the SEC to take over its responsibilities. As I mentioned last month, the legislative effort to eliminate the PCAOB ran aground due to a ruling by the Senate parliamentarian, who deemed the Republican PCAOB elimination proposal to be subject to the “Byrd Rule,” which would have subjected the proposal to an unachievable 60-vote requirement.
Having dodged that Congressional bullet, the PCAOB is not out of the woods just yet. In a WSJ article last week, outgoing PCAOB Chair Erica Williams noted: “My biggest concern is that people pull back from the PCAOB’s mission and not provide the staff with the resources that they need to continue to deliver for investors.” She indicated that is a particular concern now given that fraud risk is heightened when the economy tightens. The article further notes:
Her departure could mark the start of a series of changes at the PCAOB, potentially with regard to its budget. Atkins, while an SEC commissioner in the 2000s, criticized the PCAOB’s budget, saying salaries paid to board members were disproportionately high.
The PCAOB, whose budget is nearly $400 million this year, is funded by fees paid by public companies and broker-dealers. The SEC requested to add $100 million to its fiscal 2026 budget if it were to be required to take on the PCAOB’s work, Atkins said at a House hearing in May, adding he would likely seek additional funds.
Williams focused on the need for PCAOB resources as part of her opposition to lawmakers’ previously proposed plan for the PCAOB’s elimination. She said in May that it would take years for the SEC to reassemble skilled inspections staff under lawmakers’ previously proposed plan for the PCAOB’s elimination. The PCAOB’s inspection division is its largest unit by far, at nearly 500 employees and about 45% of the budget.
As Meredith recently noted on The Advisors’ Blog on CompensationStandards.com, we recently posted the transcript for our recent CompensationStandards.com webcast, “Proxy Season Post-Mortem: The Latest Compensation Disclosures,” during which Mark Borges, Ron Mueller and I discussed the “lessons learned” from the 2025 proxy season that companies can start carrying forward into next proxy season. The webcast covered the following topics:
– 2025 Shareholder Engagement Challenges
– 2025 Proxy Statements
– DEI and Other E&S Developments
– 2025 Proxy Statements
– Executive Compensation Disclosures
– Shareholder Proposals
– Thoughts on the (then-upcoming) SEC Roundtable
Members of the CompensationStandards.com can access the transcript of this program. If you are not a member, email info@ccrcorp.com to sign up today and get access to the full transcript – or sign up online.
On Friday, President Trump signed the GENIUS Act into law, capping off the first major legislative effort to regulate crypto assets, in this case payment stablecoins. A White House Fact Sheet notes that “[t]he GENIUS Act prioritizes consumer protection, strengthens the U.S. dollar’s reserve currency status, and bolsters our national security.” The Fact Sheet also states that “[t]he GENIUS Act will make America the undisputed leader in digital assets, bringing massive investment and innovation to our country.”
SEC Chairman Paul Atkins issued a statement marking the signing of the legislation, noting:
The GENIUS Act provides necessary guidance for a crucial element of the emerging crypto asset ecosystem. Clear payment stablecoin regulation allows companies and individuals to transact in ways that boost efficiency and lower costs. Payment stablecoins will play a significant role in the securities industry moving forward, which is why I have asked SEC staff to consider whether guidance, rulemaking, or other steps may be helpful to accommodate SEC registrants utilizing payment stablecoins, including for settlement and margining. I invite market participants to engage with the SEC staff on what is needed for our securities markets to take advantage of the GENIUS Act’s full potential.
Commissioner Hester Pearce also issued a statement, noting:
The signing of the GENIUS Act into law marks an important milestone in the effort to bring regulatory clarity to crypto—a necessary prerequisite for innovation in our markets to flourish and for the American public to benefit from that innovation. The new law confirms that payment stablecoins are not securities. People have voted with their dollars—privately issued stablecoins already enjoy broad use as a payments mechanism. The GENIUS Act, by putting a regulatory framework around them, aims to protect current and future users and the financial system. The GENIUS Act charges state and federal banking regulators with overseeing payment stablecoin issuers. This clear direction from Congress also should serve as a catalyst for the SEC to provide guidance on how SEC registrants can use—and accommodate their customers’ use of—payment stablecoins. I invite investors and market participants regulated by the SEC to engage with the Crypto Task Force on what the Commission needs to do, in light of the GENIUS Act, to ensure that SEC registrants interacting with payment stablecoins can serve their customers effectively, efficiently, and safely.
As this WilmerHale alert indicates, the GENIUS Act will take effect either 18 months after its passage or 120 days after final regulations are issued, whichever comes first, while the regulations implementing the GENIUS Act must be issued within one year of enactment.
The GENIUS Act is a landmark piece of legislation because it represents the first legislative attempt to implement comprehensive regulation for an aspect of the cryptocurrency market. The regulatory framework contemplated by the legislation focuses specifically on payment stablecoins, which are digital assets the value of which is always equal to one dollar. Stablecoins can be used to facilitate payments that consumers use credit cards and payment apps to accomplish today.
The Act is described as a consumer protection bill that establishes Federal safeguards to protect stablecoin holders and enhance consumer confidence in the payment stablecoin market. To achieve these ends, the Act establishes a clear Federal regulatory framework for the issuance of “payment stablecoins,” while preserving a pathway for certain State-regulated entities to issue payment stablecoins. The Act also provides restrictions on “digital asset services providers” (e.g., cryptocurrency exchanges) with respect to the offer and sale of certain payment stablecoins. Given its broad scope, both within the United States and extraterritorially, the GENIUS Act is expected to have significant impacts on the global cryptocurrency markets, market participants, and the broader financial system.
For purposes of this legislation, a “payment stablecoin” is defined as any digital asset that: (i) is, or is designed to be, used as a means of payment or settlement, and (ii) the issuer of which: (A) is obligated to convert, redeem, or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value; and (B) represents that such issuer will maintain, or create the reasonable expectation that it will maintain, a stable value tied to a fixed amount of monetary value. This definition of “payment stablecoin” does not include a digital asset that is (i) a national currency; (ii) a deposit; or (iii) a security. Notably, the GENIUS Act clarifies that payment stablecoins are not commodities regulated by the CFTC or securities regulated by the SEC, and payment stablecoin issuers are prohibited from paying any interest on payment stablecoins.
While the GENIUS Act does not regulate non-payment stablecoins, it directs the Secretary of the Treasury to conduct a study of non-payment stablecoins and submit the report to the Senate Banking Committee and the House Financial Services Committee within one year of enactment.
The GENIUS Act contemplates a regulatory framework that involves the U.S. Treasury, primary Federal payment stablecoin regulators, and State payment stablecoin regulators. A considerable amount of the regulatory authority and responsibility with respect to payment stablecoins is vested in the Secretary of the Treasury.
With respect to the implementation timetable, Gibson Dunn’s alert notes:
Nonetheless, the industry should anticipate a lengthy rulemaking process before final regulations are fully phased in (and some rulemakings, like capital and liquidity requirements, may include transition periods before full effectiveness). It is critical for all market participants to consider the implications of the Act and potential rulemakings on their business models because there will be meaningful opportunities for market participants to participate in advocacy efforts and the rulemaking process with both Federal and State regulators and other Federal and State policymakers in shaping the substance of the final rules designed to implement the dual Federal-State stablecoin issuance framework in the United States.
Given all of this, despite the initial excitement arising from the enactment of the legislation, it may ultimately be a few years before we see a full regulated payment stablecoin infrastructure up and running.
