As John noted last week, new SEC Chairman Paul Atkins was sworn in last Monday and we have been anxiously awaiting to hear from him about his agenda for the agency. His first remarks came at Friday’s latest Crypto Task Force Roundtable, where each of the Commissioners offered opening remarks. The speech by Chairman Atkins was short and to the point:
Welcome to the third roundtable of the SEC’s Crypto Task Force.
I am in my fourth day back at the Commission and thank my fellow Commissioners and the SEC staff for their warm welcome. I am eager to tackle long festering issues, such as regulatory treatment of digital assets and distributed ledger technologies.
In addition, my warmest personal thanks go to Commissioner Peirce for her principled and tireless advocacy for common-sense crypto policy within the United States. It is no wonder that she has earned the title of “CryptoMom.” Commissioner Peirce is the right person to lead the effort to come up with a rational regulatory framework for crypto asset markets. Thank you to the panelists for volunteering their time and expertise.
This is important work as entrepreneurs across the United States are harnessing blockchain technology to modernize aspects of our financial system. I expect huge benefits from this market innovation for efficiency, cost reduction, transparency, and risk mitigation. Market participants engaging with this technology deserve clear regulatory rules of the road. Innovation has been stifled for the last several years due to market and regulatory uncertainty that unfortunately the SEC has fostered.
I look forward to engaging with market participants and working with colleagues in President Trump’s Administration and Congress to establish a rational, fit-for-purpose regulatory framework for crypto assets.
Today’s roundtable is focused on the challenges SEC registrants face when attempting to safely custody crypto assets for their customers in compliance with the federal securities laws. For example, are changes needed to the custody rules under the Exchange Act, Advisers Act, or Investment Company Act to accommodate crypto assets and blockchain technology? Is the “special purpose broker-dealer” regime workable for market participants, or is a new crypto asset broker-dealer framework needed? The market itself seems to indicate that the current framework badly needs attention. You all can help give us direction.
Thank you all for dedicating your Friday afternoon to helping us address these important issues. I look forward to a productive discussion.
As Chairman Atkins makes more public appearances (particularly the external ones) over the coming days and weeks, we will be able to get more insight into his developing agenda.
Question: A company sponsors a 401(k) plan that permits both employer and employee contributions to be invested through a self-directed “brokerage window.” How are purchases and sales of issuer securities through the 401(k) plan pursuant to such a self-directed “brokerage window” treated for purposes of Rule 10b5-1(c)(1)?
Answer: Because the counterparty to the self-directed “brokerage window” transaction will be an open market participant, the instruction for any self-directed “brokerage window” transaction will need to satisfy all conditions of Rule 10b5-1(c)(1), including those applicable to purchases and sales of the issuer’s securities on the open market. [Apr. 25, 2025]
Question 120.33
Question: Rule 10b5-1(c)(1)(ii)(D) provides that an individual claiming the Rule 10b5-1(c) affirmative defense to insider trading may not have multiple Rule 10b5-1 plans that provide for purchases or sales of issuer securities on the open market. Rule 10b5-1(c)(1)(ii)(D)(3) provides an exception for an eligible sell-to-cover transaction. An eligible sell-to-cover transaction is a contract, instruction, or plan that authorizes an agent to sell only such securities as are necessary to satisfy tax withholding obligations arising exclusively from the vesting of a compensatory award, such as restricted stock or stock appreciation rights, where the insider does not otherwise exercise control over the timing of such sales. Does “necessary to satisfy tax withholding obligations” refer to the minimum tax withholding obligation imposed under the applicable tax rules, or to tax withholding payments calculated to satisfy the employee or director’s expected effective tax obligation with respect to the vesting transaction?
Answer: For purposes of Rule 10b5-1(c)(1)(ii)(D)(3), “necessary to satisfy tax withholding obligations” refers to tax withholding payments that are calculated in good faith to satisfy the employee or director’s expected effective tax obligation solely with respect to the vesting transaction, consistent with applicable tax law and accounting rules. [Apr. 25, 2025]
The three withdrawn CDIs are as follows:
Question 120.02
Question: A person who has adopted a written trading plan or given trading instructions to satisfy Rule 10b5-1(c) plans to sell the securities in reliance on Rule 144. Can the person modify the Form 144 to state that the representation regarding the seller’s knowledge of material information regarding the issuer is as of the date the Rule 10b5-1 plan was adopted or instructions given, rather than the date the person signs the Form 144?
Answer: The form already includes the representation, so modification is unnecessary. [Apr. 24, 2009]
Question 120.19
Question: Does canceling one or more plan transactions affect the availability of the Rule 10b5-1(c) defense for future plan transactions?
Answer: The cancellation of one or more plan transactions would be a modification of an alteration or deviation from the plan, which would terminate that plan. See Rule 10b5- 1(c)(1)(iv). The Rule 10b5-1(c) defense would be available for transactions following the alteration such termination only if the transactions were pursuant to a new contract, instruction or plan that satisfies the requirements of Rule 10b5-1(c). See Securities Act Release No. 7881 (Aug. 15, 2000), at fn. 111 and Question 120.16. Moreover, if a person established a new contract, instruction or plan after terminating a prior plan, then all the surrounding facts and circumstances, including the period of time between the cancellation of the old plan and the creation of the new plan, would be relevant to a determination whether the person had established the contract, instruction or plan “in good faith and not as part of a plan or scheme to evade” the prohibitions of Rule 10b5- 1(c). [Mar. 25, 2009]
220.01 After the written trading plan described in Q&A 120.11 has been in effect for several months, the broker that has been executing plan sales goes out of business at a time when the person is aware of material nonpublic information. The person wishes to continue sales under the plan pursuant to its original terms. The person may transfer plan transactions to a different broker without being deemed to have cancelled the original plan and adopted a new plan if the transfer to the new broker is timed so that there is no cancellation of any transaction scheduled in the original plan, and the new broker effects sales in accordance with the original plan’s terms in compliance with Rule 10b5-1(c). [Mar. 25, 2009]
The majority of the revisions to the other Rule 10b5-1 CDIs involved tweaks to rule references and the addition of language regarding compliance with applicable conditions, while more substantive changes were made to: Questions 120.12, 120.15 and 120.16 with respect to limit orders; Question 120.18 with respect to terminations of Rule 10b5-1 plans; Question 120.21 with respect to employee contributions to a company stock fund in a 401(k); and Questions 120.22 and 120.23 with respect to 401(k) fund switching transactions.
The agenda for this meeting is focused entirely on Regulation A. The meeting will kick off with reports from the Staff on Regulation A, including information on where and how capital is being raised in reliance on Regulation A. The Committee will then consider the challenges that companies face when utilizing Regulation A and will discuss potential regulatory changes that could help facilitate capital formation.
Regulation A is receiving a great deal of attention in the new Administration and in Congress so the Committee’s recommendations will likely represent important contributions to the dialogue about the usefulness of this exempt offering alternative.
Stanford’s Rock Center for Corporate Governance recently issued a report about how the adoption of AI tools will influence how boards of directors do their jobs and what is expected of them. The report says that AI will have a transformative effect on corporate boardrooms:
First, artificial intelligence offers to increase the volume, type, and quality of information available to management and boards. By making this information readily available, it reduces the information asymmetry between management and directors. Board members are much less likely to be “in the dark” about the operating and governance realities of their companies as technology makes it easier for them to search and synthesize public and private information made available to them through AI board tools.
Second, AI increases the burden on both parties to review, synthesize, and analyze information prior to board meetings. Managers and directors can expect to spend substantially more time on meeting preparation, because the quantity of available knowledge is substantially greater. Elementary information that was previously reviewed during meetings will be expected to be analyzed and digested prior to the meeting.
Third, artificial intelligence will allow for the supplementation—and in some cases, replacement—of information provided by third-party advisors and consultants. Furthermore, AI will increase the breadth of analysis available to the board, coupling the retrospective review of mostly historical data (prevalent today) with more powerful tools for predictive and trend analysis. These tools will allow boards to be more proactive and less reactive.
The report cautions that as a result of the dramatic improvements in the information provided to directors through AI, “expectations for a director’s diligence in reviewing and preparing this information will be exponentially higher, and the quality of questions, challenges, and insights will also be expected to be correspondingly higher.”
We’ll always cover SEC compliance and board governance issues associated with AI developments here, but if you’re looking for guidance on risk management and compliance issues associated with AI and other emerging technologies, be sure to check out and subscribe to our free AI Counsel Blog.
Earlier this month, Liz blogged about President Trump’s memo calling for agencies to repeal facially unlawful regulations without notice and comment, where that can be done consistent with the “good cause” exception in the Administrative Procedure Act. This Pillsbury memo says that if agencies follow the President’s direction, we’re likely to see quite a thicket of litigation:
If agencies implement the memo’s direction and repeal regulations without public input, litigation is virtually assured. Advocacy groups have already announced plans to challenge the approach. Critics argue that the administration may be overreaching—particularly by attempting to apply decisions like Loper Bright retroactively, citing the Supreme Court’s express statement that its holding is prospective.
Litigation may not proceed uniformly, given the lack of consensus among federal courts on how to evaluate good-cause claims:
– The D.C. and Second Circuits apply de novo review, independently determining whether the statutory criteria are satisfied.
– The Fifth, Eighth and Eleventh Circuits apply arbitrary and capricious review, deferring to agency reasoning if it appears reasonable and supported by the record.
– The First, Third, Fourth, Sixth, Seventh, Ninth and Tenth Circuits have not adopted a clear or consistent standard, often applying mixed or fact-specific approaches.
The memo says that the disparate standards of review increases the risk of inconsistent outcomes in these lawsuits, but it also observes that if challenges to the same regulatory repeal are filed in multiple circuits, the Judicial Panel on Multidistrict Litigation may consolidate them and potentially assign them to the D.C. Circuit where de novo review would apply.
If you’re finding it as hard to keep track of all the legal and business issues created by the ongoing tariff saga as I am, you may find this Cooley blog very helpful. It offers up a “Tariff & Trade War Playbook” listing 25 things that in-house counsel should do to help their companies navigate the current environment. While it’s targeted at in-house lawyers, there’s a lot here for outside counsel to consider as well. This excerpt has some tips on stakeholder engagement:
– Develop talking points to support consistent messaging to key stakeholders on the company’s actions and responses, including employees, customers, suppliers and regulators.
– Consider whether tariff impacts should be discussed, along with other material business and financial matters, in the CEO letter included in the annual report accompanying the company’s proxy statement.
– Consider treatment of potential questions from the floor at the company’s annual shareholders meeting (and prepare Q&A ahead of time).
– Ensure communications with stakeholders, including at the annual shareholders meeting, are Regulation FD-compliant.
Other areas covered by the blog include board and management crisis governance, risk management and compliance, business strategy and operations, compensation, and public company disclosure and trading implications.
When new SEC Chairman Paul Atkins showed up for his first day of work, he had a letter on his desk from half a dozen Democratic senators asking about whether the SEC would investigate “actions by President Trump, donors, and other potential insiders that may constitute market manipulation, insider trading, or other violations of federal securities laws in connection with President Trump’s tariff actions and announcements.” The letter also asked for information about how recent SEC staff cuts have affected the agency’s ability to “monitor and respond to large-scale market events, such as the crash following President Trump’s tariff actions?”
Chairman Atkins is extremely unlikely to seek my advice on a response, but if he asked for my thoughts about the insider trading question, I’d probably tell him something like “Forget it Jake, it’s Chinatown.” On the other hand, I’d tell him that I think the question about the impact of the agency’s staff cuts is one that a lot of people are asking, albeit not in such an overtly politicized way.
For example, the folks at the Shadow SEC recently issued “Shadow SEC Statement No. 2,” in which they warned – in all caps no less – THE CRISIS DEEPENS AS SEC STAFF AND BUDGET CUTS ARE DIRECTED. Here’s what they had to say about the impact of SEC staff cuts on capital formation:
All registration statements must be reviewed and implicitly approved by the SEC’s staff. The difference between an experienced and able staff of reviewers and others with less experience and/or ability can be significant, and the registration process goes much more smoothly when the reviewer is the former. We do not suggest that all registration statements will simply come to a halt after large staff cuts, but the process can be greatly extended and delayed depending on the size of the cuts. This implies that public corporations will be less able to rely on the registration process and may turn to other sources of capital, including bank debt.
Similarly, because of the broad wording of the federal securities laws, and the rapid rate of innovation in financial products, counsel may often need to seek a “no action” letter from the staff. But if the staff is significantly depleted, it may not be able to respond in a reasonable period (in part, because staffers with experience in the area may have departed). One cannot assume that the staff will have the same level of expertise if its size is substantially reduced. Indeed, the sad truth is that ability and mobility go together, and those most likely to leave will be those whom private firms most want to attract.
Pontificating about the review process while apparently failing to appreciate that not all registration statements are reviewed isn’t a great credibility enhancer, and the final sentence of the last quoted paragraph strikes me as a gratuitous shot at the staff. Putting that stuff aside though, the potential impact of staff cuts on the review process and the SEC’s ability to provide guidance are fair points to raise – particularly since these are areas where current commissioners have promised improvement.
The AI boom has resulted in efforts by many companies to promote their use of AI tools in their businesses. However, overenthusiastic promotional efforts can cross the line into outright misrepresentations and have led to a rise in “AI washing” claims by private plaintiffs. A recent Hunton Andrews Kurth blog reviews two securities class action lawsuits targeting corporate directors and officers and raising allegations of AI washing and discusses the importance of comprehensive D&O coverage to protect corporate fiduciaries against these claims. The memo recommends the following actions to maximize the level of protection under D&O policies:
Policy Review: Ensuring that AI-related losses are covered and not excluded under exclusions like cyber or technology exclusions.
Regulatory Coverage: Confirming that policies provide coverage not only for shareholder claims but also regulator claims and government investigations.
Coordinating Coverages: Evaluating liability coverages, especially D&O and cyber insurance, holistically to avoid or eliminate gaps in coverage.
AI-Specific Policies: Considering the purchase of AI-focused endorsements or standalone policies for additional protection.
Executive Protection: Verifying adequate coverage and limits, including “Side A” only or difference-in-condition coverage, to protect individual officers and directors, particularly if corporate indemnification is unavailable.
New “Chief AI Officer” Positions: Chief information security officers (CISOs) remain critical in monitoring cyber-related risks but are not the only emerging positions to fit into existing insurance programs. Although not a traditional C-suite position, more and more companies are creating “chief AI officer” positions to manage the multi-faceted and evolving use of AI technologies. Ensuring that these positions are included within the scope of D&O and management liability coverage is essential to affording protection against AI-related claims.
We’ve blogged a lot lately about the disclosure, governance, and commercial implications of President Trump’s tariff-related decisions. We’ve also accumulated quite a few law firm memos and other resources addressing a wide range of issues arising from this dramatic change in the United States’ approach to global trade. We expect that there will be many more shoes to drop and plenty of additional resources to add to our collection, so we’ve decided to consolidate our tariff-related resources into a new “Trump Administration Tariffs” Practice Area. We hope you’ll find it helpful.
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Most corporate lawyers know that the False Claims Act is a formidable weapon for asserting claims against contractors who allegedly overcharge the federal government, but what many may not appreciate is that it also applies to efforts to evade customs duties and tariffs. This Nixon Peabody memo discusses this aspect of the FCA and other federal statutes that companies need to pay close attention to in light of the Trump administration’s dramatic changes to U.S. tariff policy. This excerpt addresses the application of the FCA to duties and tariffs:
The FCA both imposes liability for knowingly submitting false claims for payment to the government and knowingly avoiding obligations to pay money to the government (known as “reverse false claims”). In recent decades, DOJ and qui tam relators have leveraged the FCA primarily to pursue recoveries for noncompliance with federal healthcare program requirements. That enforcement trend, however, should not obscure the fact that the FCA is a multipurpose enforcement mechanism that is regularly employed by both DOJ and whistleblowers to target conduct across every economic sector. This includes defense, government procurement, and customs noncompliance, which triggers the FCA’s “reverse false claims” provision.
US importers must declare, among other things, their goods’ country of origin and value, whether the goods are covered by antidumping duties (i.e., tariffs on imported goods priced below their fair market value in the exporting country) or countervailing duties (i.e., tariffs that offset the effects of foreign government subsidies on exports), and the amount of duties owed. CBP relies on these representations to determine the correct amount of any duties.
Thus, importers bear an affirmative duty to use “reasonable care” to ensure that such information is accurate. Importers who fall short and knowingly provide false information to CBP risk FCA liability. Critically, because the FCA’s knowledge standard embraces not just actual knowledge but also deliberate ignorance or reckless disregard, taking affirmative measures to ensure reporting accuracy when goods cross US borders is essential to minimizing potential FCA exposure.
The memo notes that there have recently been significant financial settlements involving FCA actions based on avoidance of customs duties. Like the more familiar provisions of the FCA, these “reverse false claims” actions may be brought through qui tam lawsuits filed by third party plaintiffs as well as by the federal government.
