Open questions

The SEC has solicited comments on a range of issues that may shape the final rule. Key areas of uncertainty include:

1. Eligibility for electing semiannual reporting (i.e., a mandatory or optional requirement)
2. Filing deadline for Form 10-S
3. Permissibility of midyear changes to reporting frequency and method of such changes
4. Treatment of earnings releases for semiannual filers (i.e., whether earnings releases should be “filed” rather than “furnished”)
5. Auditing and accounting implications, including with respect to the comfort letter process
6. Implications to insider trading policies, trading windows and Rule 10b5-1 plans
7. Comparability of financial information among quarterly and semiannual reporters
8. Compliance date, including any applicable transition period

Observations and commentary

When evaluating a shift to semiannual reporting, companies should consider a number of factors, including:

• Impact on quarterly earnings disclosure. Depending on their investor profile, companies may feel compelled to continue to issue earnings releases and hold quarterly earnings calls. Additionally, because semiannual filers will be reporting financial and other material information on a less frequent basis, there may be an increase in Forms 8-K filed by semiannual filers.
  
  Companies will also need to consider the impact on their guidance practices – shifting from quarterly guidance to semiannual, annual or no guidance – when evaluating a move to semiannual reporting.
• Implications for active registration statements. Companies that have active registration statements are required to keep them current to ensure investors have all of their material information. For many companies, this is achieved through incorporation by reference of their Exchange Act reports into their registration statements.
  
  A company moving to semiannual reporting would need to be mindful of the fact that extant registration statements would be regularly updated only two times per year rather than four times per year. This consideration would be relevant not only for companies with shelf and resale registration statements but also for companies with employee equity plans registered on Form S-8.
• Capital raising needs. Given the current practices regarding auditor comfort letters and negative assurance for securities offerings, depending on the timing of an offering, an underwriter may request auditor review of more recent interim financial statements than those included in the last semiannual or annual report in order to obtain traditional negative assurance comfort.
  
  Companies with near-term capital raising needs may need to continue to report quarterly, depending on how the underwriting process adapts to a semiannual reporting structure.
• 10b5-1 plan, insider trading policy and Regulation FD considerations. Semiannual reporting could affect the cooling-off period for Rule 10b5-1 trading plans adopted by directors and Section 16 officers. Under Rule 10b5-1, trading cannot begin until after a cooling-off period expiring the later of 90 days after adoption or modification of a plan or two business days following disclosure of a company’s financial results for the relevant fiscal period in a Form 10-K or 10-Q, subject to a maximum cooling-off period of 120 days.
  
  For companies that elect semiannual reporting, trading plans adopted during the first or third quarter would more likely be subject to the full 120-day cooling-off period before trading may begin under the plan.
  
  Additionally, companies adopting a semiannual reporting framework may need to impose longer trading blackout periods under their insider trading policies. A semiannual reporting framework could result in longer gaps between the disclosure of financial and other material information. Companies may prefer to continue a quarterly reporting cadence, or to continue issuing quarterly earnings releases, to allow for more frequent open trading windows.
  
  Relatedly, a semiannual framework may result in the need for more rigorous policies and protocols around Regulation FD. If companies are in possession of material nonpublic information for longer periods of time, the risk of inadvertent disclosure of such information increases, and a company’s ability to have discussions with analysts and investors could be impacted.
• Competitive (dis)advantages. A semiannual reporting framework could create information asymmetries between companies that report semiannually and those that continue to report quarterly. Companies that elect to continue to report quarterly would disclose financial results, legal developments and other information more frequently, which may provide semiannual reporters with additional visibility into competitors’ performance and strategies they can use to inform their own decision-making.
  
  At the same time, semiannual reporting companies may be at a disadvantage in the public markets. Investors may rely on more frequent disclosures from quarterly reporting peers as indicators of industry trends, which could cause the stock prices of semiannual reporters to move in response to competitors’ results, even when those companies have not provided updated information about their own performance.

The post The SEC’s Semiannual Reporting Proposal: Open Questions & Practice Pointers appeared first on The Governance Beat.

In fact, it provides a good example of the type of vague proxy disclosure that proxy advisors and investors abhor – and that plaintiffs’ lawyers could be drawn to when considering which disclosures should be a target of a lawsuit.

But there are ways that AI can help the drafting process – here are six ways:

1. Create a first draft of a summary for the forepart of the proxy or a CD&A summary if one is used (or even more of the proxy once you get comfortable with AI).
   
2. Pull together performance metrics and think of different ways to potentially lay them out.
   
3. Analyze the proxies filed by peer companies including those in the same industry.
   
4. Analyze whether you may need to modify who you identify as your peer group companies.
   
5. Analyze the proxies filed by companies with similar situations and note whether there are particular disclosures that are best suited to describe the fact pattern you have.
   
6. It can help to cross-check numbers across your various compensation tables.

Remember the warning – you must always double-check what AI produces and not blindly rely on its results…and you should always use a “closed system” AI tool when working with confidential information (including anything related to a draft of the proxy)…

The post How You Can Use AI to Help Your Proxy Drafting Process: Six Things appeared first on The Governance Beat.

Here’s a refresher of the journey of the climate disclosure rules since the SEC adopted them in March 2024:

1. States and Private Parties Challenge the Rules: After the SEC adopted the rules, a number of law suits were filed by both states and private parties. All of the litigation was consolidated in the Eighth Circuit (Iowa v. SEC, No. 24-1522 (8th Cir.)) – and the SEC stayed effectiveness of the rules pending completion of the litigation.
2. SEC Withdraws Defense of Climate Rules: In March 2025, the SEC announced it would stop defending its climate disclosure rules in the Eighth Circuit litigation including formally notifying the court that it would no longer advance prior arguments.
3. No Immediate Reconsideration Planned: In July 2025, the SEC stated it didn’t intend to review or reconsider the rules – but asked the Eighth Circuit to lift the stay and proceed with evaluating the agency’s authority to adopt the rules.
   
   The SEC emphasized that any future reconsideration would require Commission action, and that a court ruling would help clarify the scope of the SEC’s jurisdiction and authority before taking further steps.
4. Eighth Circuit Rejects SEC Request: Opposing parties argued the case should be paused until the SEC decided whether to repeal or defend the rules. In September 2025, the Eighth Circuit denied the SEC’s request to proceed and instead kept the case in abeyance, stating the SEC must first decide whether to rescind, modify, or defend the rules through rulemaking.
   
   The Eighth Circuit made clear it is the agency’s responsibility to determine the fate of the rules, noting that maintaining the stay would not materially harm petitioners.
5. Shift Toward Rescission: The current review by OIRA suggests the SEC is moving toward formal rulemaking to rescind the climate disclosure rules, rather than defending them in court.

The post The SEC Will Likely Rescind Its Climate Disclosure Rules Soon appeared first on The Governance Beat.

Here’s the press release, fact sheet – and 279-page proposing release. And here’s SEC Chair Paul Atkin’s statement – as well as Commissioner Peirce’s statement and Commissioner Uyeda’s statement. There’s a 60-day comment period.

Here’s a summary of the SEC’s proposal:

1.  Optional Semiannual Reporting Structure: Companies electing the new approach would file one semiannual report (Form 10-S) and one annual report (Form 10-K) per year, while companies that don’t elect it would continue quarterly reporting.

2.  Election Mechanism: Companies would opt into semiannual reporting by checking a box on certain filings, including Form 10-K or registration statements (e.g., Forms S-1, S-3, S-4, S-11, or Form 10).

3.  New Form 10-S Requirements: The proposed Form 10-S would require substantially the same disclosures as Form 10-Q – but for a six-month period, with financial statements prepared under GAAP and reviewed (not audited) by an auditor.

4.  Filing Deadlines: Semiannual reports on Form 10-S would be due 40 or 45 days after the end of a semiannual period, consistent with current Form 10-Q deadlines based on filer status.

5.  Regulation S-X Amendments: The proposal would revise financial statement rules to accommodate semiannual reporting, including updating “staleness” requirements and streamlining age-of-financial-statement rules.

6. Transition and Technical Amendments: The SEC would update rules governing transition reports (Rules 13a-10 and 15d-10) and make conforming technical amendments across existing rules and forms referencing quarterly reporting.

The Cooley Alert with practical guidance about this proposal is coming soon…

The post The SEC Proposes Optional Semiannual Reporting: Form 10-S! appeared first on The Governance Beat.

The $64,000 question for you should be: “how do I get quoted in the media?” The answer is that you need to become a source. And the best way to do that is develop a business relationship. Like any relationship, you have to place yourself in the journalist’s shoes. Be empathetic.

From the journalist’s perspective, they need to find good story ideas to take to their editors. Something juicy that’s going to sell newspapers. Sharing compelling story ideas is the fastest way to win a reporter’s heart. Doing that by email is your best bet. Most journalists work very hard. They’re on deadline. They have limited time to shoot the breeze.

There’s nothing wrong with sending an email to a journalist even though you’ve never met them. An unsolicited approach. Their email addresses can often be found online. They love to get story ideas – and feedback – from their readers.  They are accessible.

If you happen to meet a journalist at a conference, go ahead and introduce yourself. Show them that you’re “normal.” The bonus is that I find they tend to be interesting people. They’re knowledgeable. Curious. And they may help you in ways you hadn’t considered if you develop a real relationship. They know a lot of people. They know a lot about how the real world works.

Don’t Expect to Be Quoted

If you pay attention to media articles, there are fewer quotes from sources than you might think. It’s actually pretty hard to be quoted by name. But it does happen.

When I work with a journalist, I go in with the attitude of “I’m going to help this nice person but I’m not expecting anything out of it.” That way, I’m not disappointed.

In fact, the journalist might ask you for a quote – and fully intends for it to be in the piece – but their editor might cut it. The journalist doesn’t have the final word on what gets included in the final product. That happens quite a bit. Be resilient and don’t take it personally.

How to Increase Your Odds of Being Quoted

Here’s where a lot of lawyers get stuck. They’re used to being cautious. Not willing to share opinions. Not being colorful. Those all are traits for a quote that isn’t going to see the light of day.

The quote you offer can’t read like a law firm memo. It has to have a little pizzazz. I always preach to “write like you talk.” That goes double for quotes. It should sound a little off-the-cuff.

The people you see get quoted often are ones that journalists think are “quippy.” (shout out to Francine McKenna for coining this term!)  They’re always ready with a quote if a reporter calls because they keep up the action in their arena – and they know how to make dry material come to life with a provocative or memorable take. It helps if they are willing to face the consequences of a strong opinion. A journalist might be willing to accept your boring quote. But their editor is likely to toss it if it’s boring.

Remember that quotes typically are short. Less is more. They might only be a handful of words long. A dozen at the most. Look at a paper to get an idea of what is being accepted by that publication.

Offer to Send a Quote by Email

This doesn’t always work for the journalist, but I often have a phone conversation to answer any questions that they might have. As part of that conversation, I offer to email over a quote for them to consider if they need it.

Since I’m experienced in the art of “what’s a good quote,” this arrangement works out for both of us much of the time. Doing this benefits me because I can control the risk of being misquoted – and it also allows me to ensure my unusual name is spelled properly. It benefits the reporter because they can cut and paste from my email.

Getting Your Name and Affiliation Right

A journalist isn’t going to show you a draft of what they’ve written up. If you’re dealing with them over the phone, you’re not even going to know what they’re going to grab from your conversation as a quote. That’s just the way it works.

I recommend that you make some effort to ensure that the reporter gets your name spelled correctly. Same with the spelling of who you work for. Particularly if either of those are hard to spell. Offer to send the reporter an email with the proper spelling and preferred affiliation. It really takes the air out of your balloon to be quoted with your name spelled incorrectly.

Note that some publications won’t use your affiliation the way you want them to, regardless of what you tell them. For example, in my old job, I wanted them to say I was “Editor of TheCorporateCounsel.net.” But often they would either say I was a former SEC lawyer – or leave out my affiliation altogether. There’s nothing you can do about that other than try for what you want.

The post How to Be Quoted by the Media appeared first on The Governance Beat.

1. Retail holders are training AI agents to buy and sell assets on their behalf (per this Bloomberg article)
2. Crypto-powered exchanges are also facilitating the use of AI agents to trade on behalf of retail holders (per this Bloomberg article)
3. Transfer agents are developing ways to support the issuance of tokenized equity so that companies can offer alternative ways for shareholders to invest (see this Computershare press release)
4. The first company has issued tokenized equity through a blockchain with assistance from Broadridge (see this Broadridge press release)
5. Vanguard has a plan to offer voting choice available for all of its US equity index funds by the end of 2027, including allowing enrollment through the use of voice assistants like Alexa (see this Vanguard press release)

The post Lots of New Technology Options for Retail Investors appeared first on The Governance Beat.

I’ll cover ways that AI can be helpful during the drafting process soon enough – but I thought I’d start with a realistic example to illustrate the stark gap between what AI likely would draft compared to what a competent disclosure lawyer would. We should remain vigilant and not overly rely on AI and the case study below should help drive that point home. Here’s what AI wrote as a sample paragraph for the CD&A:

“In fiscal 2025, the Compensation Committee approved an increase in CEO compensation reflecting strong company performance. Revenue and Adjusted EBITDA grew by 12% and 15%, respectively, and total shareholder return exceeded the median of the peer group. The Committee also updated the long-term incentive program to include additional performance metrics aligned with shareholder value creation. These actions demonstrate the Company’s commitment to pay-for-performance alignment.”

At first glance, you may be taken aback because it does sound like our brand of legalese. But when you take a second look, you can see how generic it is. It reads like you would think someone who is poking fun would write it. As you can tell, AI is good at producing statistically “normal” disclosure and mimicking common phrasing.

But what it winds up with is strictly boilerplate. It doesn’t know your company’s facts. And it doesn’t apply judgment about materiality or investor and proxy advisor perception. In fact, it provides a good example of the type of vague proxy disclosure that proxy advisors and investors abhor – and that plaintiffs’ lawyers could be drawn to when considering which disclosures should be the target of a lawsuit.

In comparison, this is how a human disclosure drafter would likely write up that CD&A paragraph:

“In fiscal 2025, the Compensation Committee increased the CEO’s total compensation by 18%, reflecting performance that exceeded pre-established targets across key financial metrics. Revenue increased 12% and Adjusted EBITDA grew 15%, both above target levels set at the beginning of the year.

Total shareholder return ranked at the 65th percentile relative to the Company’s peer group, reinforcing alignment between realized pay outcomes and shareholder experience.

In determining compensation, the Committee also considered the CEO’s role in advancing the Company’s strategic priorities, including the expansion of higher-margin product lines and operational efficiency initiatives.

The Committee approved the addition of a relative TSR modifier to the long-term incentive program beginning in fiscal 2025 to further strengthen the alignment between executive compensation and shareholder returns.”

What changed? A number of important things:

1. There is specificity over generality, such as tweaking the phrase “strong performance” to “exceeded pre-established targets.”
   
2. There is a clear pay-for-performance linkage, with the human drafter’s disclosure providing an explicit connection between metrics, targets, outcomes and the resulting pay.
   
3. There is transparency about the compensation committee’s use of judgment by covering strategic considerations and qualitative factors.
   
4. There is a calibration in tone to remove fluffy or defensive language to make it more measured with factual phrasing.
   
5. A change to LTI design is highlighted, likely to illustrate that the board was responsive to concerns expressed during shareholder engagement or a low say-on-pay vote received the prior year.

The post Should Companies Be Using AI to Draft Their Proxy? An Example to Scare You appeared first on The Governance Beat.

However, in recent years, these filings have primarily been used by smaller shareholders voluntarily to publicize their views on various proposals as EDGAR doesn’t restrict their use of these filings. Corp Fin’s new CFI is designed to prohibit these voluntary submissions on EDGAR – as some had argued that these filings may be misleading when the filer doesn’t hold $5 million of securities.

These smaller shareholders continue to conduct exempt solicitations without making the voluntary submissions on EDGAR. And now the Interfaith Center on Corporate Responsibility has created this web page that lists these exempt solicitations in chronological order by annual shareholders meeting date.

At last count, there were over 120 of these solicitations listed so you may want to check and see if your company’s meeting is being targeted.

By the way, ICCR is also maintaining a list of companies it feels are excluding shareholder proposals by “behaving opportunistically”…and CII is hosting a “SEC Rule 14a-8 Correspondence” web page maintained exclusively for its members…

The post ICCR Fills the EDGAR Gap By Providing a List of Voluntary Exempt Solicitations appeared first on The Governance Beat.

Judge Leo Sorokin issued this 30-page order in granting the injunction, in which he found (among other things):

1. The ordinary business exclusion basis was dispositive; the two other grounds for exclusion – ((i)(1), improper under state law and (i)(3), violation of proxy rules for materially false and misleading statements) – were inapplicable to the case.
   
2. Because the proposal centers on a “sufficiently significant social policy issue” (i.e. deforestation), it falls outside the ordinary business exclusion. The judge invoked statements from the SEC staff in Staff Legal Bulletin 14H where the SEC staff expressly noted that the two-part test adopted by the Third Circuit in Trinity Wall Street v. Wal-Mart Stores in 2015 for applying the (i)(7) ordinary business exclusion differs from the SEC’s statements on the ordinary business exclusion and SEC staff practice – and found that there’s no requirement that a shareholder proposal be completely “divorced” from day-to-day operations to avoid exclusion under Rule 14a-8(i)(7). 
   
   And that if a proposal focuses on a sufficiently significant social policy issue, it can’t be excluded – even if it touches upon ordinary business matters – and the “nitty gritty of [a company’s] core business”.
   
   In this case, the proposal highlights systemic economic and environmental risks tied to deforestation, which elevated it beyond routine ordinary business concerns. And linking the issue to the company’s private-label supply chain – an ordinary business area – doesn’t change the proposal’s core focus on deforestation risk.
   
3. The court also ruled the proposal did not micromanage the company  because there wasn’t sufficient “intricate detail” about the company’s daily business decisions implicated and the proposal left to the company’s discretion how to assess the alleged deforestation risks.
   
4. The open-ended and less prescriptive nature of the proposal distinguished it from the no-action letter precedent cited by the company.
   
5. Staff Legal Bulletin 14M encourages a company-specific approach in evaluating the relative significance of policy issues since a policy issue that is significant to one company may not be significant to another – here, the court provided that the proposal at issue positioned the significant policy concern of deforestation in relation to company-specific issues.

The post Federal Court Enjoins Company From Excluding Shareholder Proposal  appeared first on The Governance Beat.

1. Proxy advisors often qualify as investment advice fiduciaries under ERISA.

2. State laws requiring disclosure of non-financial factors in proxy advice are not preempted by ERISA.

Proxy advisors act as ERISA fiduciaries when they either exercise control over proxy voting for plan assets or provide fee-based advice to ERISA plans on how to vote those proxies, triggering ERISA’s fiduciary obligations. Under a longstanding five-part test, proxy advisors that provide ongoing, fee-based recommendations tailored to ERISA plans generally meet the fiduciary standard. As fiduciaries, proxy advisors must comply with ERISA’s duty of loyalty and duty of prudence.

State laws requiring proxy advisors to disclose when recommendations aren’t based on maximizing financial returns are generally not preempted by ERISA, because ERISA fiduciaries should always act to maximize risk-adjusted returns – meaning such disclosures should rarely apply to ERISA plans.

ISS and Glass Lewis may need to adjust their practices or face enforcement risk or litigation. And although focused on proxy advisors, the DOL guidance may extend to other entities like asset managers and sovereign wealth funds.

And investors themselves may have to reevaluate their own voting practices including the extent of their reliance on ISS or Glass Lewis recommendations…

The post DOL Issues Guidance Indicating That Proxy Advisors Have ERISA Fiduciary Obligations appeared first on The Governance Beat.