Also bear in mind that back in December, as noted in this blog, President Trump issued an order directing the SEC and other agencies to see if ISS and Glass Lewis had violated rules or antitrust law related to their treatment of environmental and social issues. The order also directed the Federal Trade Commission and the Labor Department to consider steps such as new regulations to address his concerns.

Here are seven things noted in the DOJ’s withdrawal press release:

1.  DOJ Withdraws 1987 ISS Antitrust Letter – The Justice Department’s Antitrust Division is withdrawing a 1987 Business Review Letter that had indicated it did not then intend to challenge the establishment and operation of ISS under the antitrust laws because circumstances have changed.

2.  Proxy Advisor Market Is Highly Concentrated – The DOJ emphasized that ISS and Glass Lewis together control more than 90% of the proxy advisor market. Because their clients hold significant stakes in major U.S. public companies, DOJ says the two proxy advisors exert substantial influence over corporate governance policies and voting outcomes.

3.  ISS’s Business Has Changed Dramatically – When theDOJ issued the letter in 1987, proxy advisor services were in their infancy. The letter was premised on ISS providing advice only about voting rights and corporate governance – not advising or consulting for companies.

4.  The 1987 Letter Was Never a Permanent Safe Harbor – TheDOJ stresses that a Business Review Letter merely states the Antitrust Division’s enforcement intentions at the time it is issued – so it doesn’t prevent the Division from bringing a future antitrust action when circumstances or its assessment of the public interest change.

5. Corporate Governance Activity Can Have Antitrust Implications – The DOJ notes that beneficial-owner corporate governance advocacy generally can fall within antitrust protections applicable to passive investment – but those protections don’t extend to using common ownership of competing companies to encourage industry-wide output reductions or other anticompetitive conduct.

6.  Proxy Advice Itself Is Not the Target – The DOJ expressly says the proxy advisor business is not inherently problematic – nor does the lawful exercise of voting rights based on a proxy advisor’s recommendation, standing alone, create competition concerns.

7.  Market Concentration Is a Separate DOJ Concern -Beyond ISS’s changed business model, the DOJ says the extraordinary concentration of the proxy advisor industry itself raises “significant competition concerns.” The withdrawal therefore appears directed both at ISS’s expanded activities and the structure of the proxy advisor market.

The post A Harbinger of DOJ Antitrust Actions Against ISS and Glass Lewis? appeared first on The Governance Beat.

Here are seven things to know about the proposal:

1. End of Broker Discretion – Under the proposal, brokers would no longer be permitted to cast discretionary votes on uninstructed shares. Instead, every uninstructed share would be voted according to a mathematical formula based on the voting instructions actually received from other beneficial owners.

2.  Elimination of the Routine vs. Non-Routine Distinction – The proposal would abolish the long-standing distinction between routine and non-routine matters, replacing it with a single, consistent voting methodology for every proposal submitted to shareholders.

3.  Proportional Allocation of Votes – For each proposal, brokers would allocate uninstructed shares in proportion to the voting instructions received (e.g., if instructed shares vote 60% for and 40% against, uninstructed shares would be voted using the same ratio). Some brokers already vote uninstructed shares proportionally for NYSE/Nasdaq companies – so this concept is not entirely novel.

4. Voting Driven by Participating Shareholders – The Texas Stock Exchange says the proposal is designed to ensure that voting outcomes more accurately reflect the preferences of shareholders who actually submit voting instructions, rather than broker discretion.

5.  Consistent Treatment Across All Proposals – By applying the same proportional allocation method to every shareholder vote, the proposal arguably would eliminate the proposal-by-proposal inconsistencies created by the current framework.

6.  No Change to Shareholder Rights – The proposal emphasizes that beneficial owners would retain all existing voting rights. Shareholders who submit voting instructions would continue to have their votes counted exactly as directed.

7.  Potential Benefits for Companies – The Texas Stock Exchange believes the new approach could improve the ability to reach quorum for shareholder meetings, while also reducing proxy solicitation costs since uninstructed shares would still be counted under the proportional voting formula.

The post Texas Stock Exchange Proposes Bold Proposal to Overhaul Broker Voting appeared first on The Governance Beat.

1. “I’m one of the skeptics on our team. Not because I dislike technology, but because securities law has a uniquely unforgiving error profile. A misplaced disclosure isn’t like a typo in a marketing brochure. Sometimes the cost of being wrong isn’t measured in minutes. It’s measured in SEC comment letters, shareholder lawsuits or uncomfortable Audit Committee meetings. Efficiency matters. Accuracy matters more.”

2. “If someone told me five years ago I’d be asking a computer to critique my proxy, I would have laughed. Now I’m mostly annoyed when it points out something I should have considered or missed.”

3. “I don’t think AI is replacing lawyers. I do think it’s replacing blank pages. Sometimes I don’t know which end is up anymore. Too much change.”

4. “We’re not adopting AI because it’s fashionable. We’re adopting it because every other function already has. Finance is using it. HR is using it. Internal Audit is using it. Investor Relations is using it. At some point, Legal becomes the bottleneck if we insist on pretending it’s still 2022.”

5. “I spend less time searching for precedent disclosure and more time deciding whether the precedent actually fits. That’s a better use of my brain.”

6. “Our AI policy changes about as often as proxy advisor policies. Which is to say…more often than I’d prefer.”

7. “I’m old enough to remember when lawyers said we’d never trust electronic signatures. Then we’d never trust EDGAR. Then we’d never trust cloud storage. I’ve learned to be careful about predicting what lawyers will never do.”

8. “We joke that AI has become our newest member of the disclosure committee. Thankfully, it doesn’t get a vote. Well, I guess at least not yet. LOL.”

9. “Some people ask whether AI is changing legal work. That’s yesterday’s question. The real question is whether people will continue accepting legal departments that don’t use AI. Expectations are changing quickly. If everyone else can produce thoughtful first drafts faster, eventually your business partners stop rewarding the old pace.”

10. “I still catch hallucinations often enough that healthy skepticism remains mandatory. Think of AI as an incredibly fast intern who occasionally invents their own thing.”

11. “I expected AI to save time drafting. I didn’t expect it to save time thinking. Sometimes just having something intelligent – even imperfect – to react to gets me to a better answer faster.”

12. “Our Board asks about AI almost every quarter now. Ironically, those conversations have probably accelerated our own adoption more than any vendor presentation has done. Directors ask whether Legal is using AI responsibly. Not whether we’re using it. So now the conversation has shifted from experimentation to execution.”

The post Another Dozen Things In-House Practitioners Are Saying About Using AI appeared first on The Governance Beat.

My favorite interp was always the last FAQ in the 1996 release. That FAQ #7 states: “An investment company produces both an electronic version (such as a CD-ROM) and a paper version of its prospectus. Each version contains all information required by, and otherwise complies with, the applicable form and all other applicable provisions of the federal securities laws.  The electronic version contains a movie that does not appear in the paper version.  Each version of the prospectus indicates that there may be other versions of the prospectus and, if the issuer determines to make such other versions available, provides information on how to obtain such other versions.

The paper version does not include a summary or transcript of the movie in the electronic version.  Both versions of the prospectus are filed with the Commission as part of the company’s registration statement, or separately pursuant to Rule 497.

The use of either version of the prospectus to satisfy delivery requirements would be permissible. The issuer (or other party to whom the law assigns the responsibility) remains responsible for ensuring that each version satisfies applicable statutory requirements.”

Note that FAQ #7 mentions investment companies but the SEC’s guidance equally applies to public companies. And Corp Fin – at least back then – would consider the principles of this guidance to apply to disclosure documents beyond a prospectus. Meaning that companies could file and deliver different versions of a proxy statement if it so choose to do so – so long as each version fulfilled the legal requirements set forth in Schedule 14A, etc.

Why would a company decide to do this? To tailor disclosure to a type of investor would be one example. One version for retail investors; another version for more sophisticated investors. Or one version for long-term holders and another version for investors who flitted in and out of a company’s stock.

To my knowledge, no company has ever created two versions of the same document. Well, not exactly. As a Corp Fin staffer, I did work on the Form S-1 for Ameritrade’s IPO and there was a CD-ROM attached to the prospectus – so that perhaps some investors received a prospectus with the CD-ROM attached and some did not. But this did not fall within the confines of FAQ #7 because the company did include a transcript of the CD-ROM as an appendix to the prospectus (see the pics below) so that all investors received the same information. This happened in 1997.

Why hasn’t a company done this? Because disclosure documents are compliance documents first and foremost – and marketing documents second. Drafting two SEC compliant documents to meet a single disclosure obligation theoretically would create more work – and more potential liability – in a way that doesn’t outweigh the benefits available.

Still, I always thought there might be unique circumstances where it made sense to do so – but either those circumstances don’t exist or people haven’t been aware of the possibility to create two versions of a document as the SEC’s Internet guidance really isn’t something that many people focus on these days. Understandably so.

Whether FAQ #7 survives the adoption of Regulation E-Delivery is unknown. Note that the SEC’s original guidance in 1996 was not a rulemaking but an interpretation. Arguably meaning that companies always had the option to create two versions of a disclosure document unrelated to whether an “electronic” version was involved (so long as each version was compliant with the regs).

If you want to get into the weeds on the various “first time this type of thing happened” when the Internet initially became widely available to the masses, I drafted the Corp Fin section of this 1997 Report to Congress about technological advances and their impact on the securities laws…

The post Can Companies Deliver Two Different Versions of a Proxy to Shareholders? appeared first on The Governance Beat.

1. The Noise Before the Storm: What Actually Happened with Shareholder Proposals

2. E&S Proposals: Dead or Just Different?

3. The New No-Action Environment

4. Reincorporation: DExit, Texas, and the New Domicile Debate

5. Executive Compensation and Director Elections: High Support, Targeted Opposition

6. The Proxy Advisory Model Under Pressure

7. Investor Policies in Flux

8. Off-Season Engagement: What Changed After the Revised SEC Staff CDI Guidance

9. Proxy Season in the Age of AI

10. Practical Planning for 2027

The post Video Archive: “Proxy Season Recap – 10 Hot Topics” appeared first on The Governance Beat.

“Federal securities laws impose delivery obligations on companies in connection with director and executive incentive equity compensation programs – from Form S-8 prospectuses to equity award agreements and even tender offer materials. Now, those rules may change in a significant way. The SEC recently proposed Regulation E-Delivery, a sweeping new rule that would dramatically expand the ability of issuers and others to satisfy information delivery requirements electronically.

That proposed regulation is the subject of a July 21st Cooley alert, and we encourage you to read that alert to understand the potential sweeping significance of the proposed rule.  The purpose of this alert is to highlight some of the relief around electronic delivery that already applies in the employer-employee context pending final approval of the proposed Regulation E-Delivery rule in whatever form that might take.

How we got here    

Many required regulatory disclosures and reports under the federal securities laws have long been delivered in paper format. As internet and email access began to expand in the 1990s, the SEC began issuing interpretive guidance that permitted electronic delivery in some circumstances, provided generally that the person with a right to receive the applicable disclosures and reports affirmatively consented to e-delivery. In a 2000 Interpretive Release, the SEC resisted calls to expand e-delivery opportunities first provided in 1995/1996 releases. For example, in 2000, the SEC expressly concluded that the time had not yet come for an “access-equals-delivery” model, where investors would be assumed to have access to the internet, thereby allowing delivery to be accomplished solely by an issuer posting a document on the issuer’s or a third party’s website.

At the same time, the SEC in those 1995/1996 releases recognized that special relief is appropriate in the employer-employee context. At the heart of that relief is how to demonstrate evidence of delivery, one of the three elements of satisfactory electronic delivery in the current framework (along with notice and access). The 1995 release (Securities Act Release No. 7233 (Oct. 6, 1995)) provided that one method for satisfying the evidence-of-delivery element is to obtain an informed consent from an investor to receive information through a particular electronic medium. The 1996 release (Securities Act Release No. 7288 (May 9, 1996)) then provided that an issuer could presume consent to electronic delivery by employee-security holders who use the electronic mail system “in the ordinary course of performing their duties and ordinarily are expected to log-on to electronic mail routinely to receive mail and communications.”

What this looks like in practice: Equity incentive plans and Form S-8

One critical example of where this relief is in play are the following e-delivery rules presently applicable to employers awarding grants under equity incentive plans in reliance on an S-8 registration statement based on the guidance from the 1995/1996 releases:

• Presumed consent; access. As noted above, an employer generally may presume consent to e-delivery by employees who are regular email users or, for those who are not regular email users, are able to receive e-delivery via other means, such as through administrative assistants or co-workers. However, the email must prominently state that a paper copy is available upon request, and the employer must in fact make paper copies available to any employee who asks.
• Former employees. Because of an expectation that former employees and service providers no longer have routine workplace access, former employees and service providers must provide informed consent to e-delivery.
• Form of delivery. The applicable materials can be attached to the e-delivery vehicle (for instance as attachments to an email) or, where documents are not directly attached , the e-delivery must provide employees and service providers with the information necessary to easily locate and retrieve them (g., directions for accessing them through the company’s local area network or a third-party provider’s equity program portal). The access medium must “not be so burdensome that intended recipients cannot effectively access the information provided,” and recipients must have the opportunity to retain the documents or have ongoing access equivalent to personal retention.

The employer-employee relief is not limited to S-8 circumstances, however, and it can prove very useful in other employee compensation circumstances as well, such as issuer tender offers.”

The post Proposed Reg E-Delivery: Impact on Employer Obligations for Equity Comp appeared first on The Governance Beat.

1. “AI has become part of my daily routine faster than I expected. Six months ago I was using it once or twice a week. Today I’d guess I have it open almost as often as Outlook. That doesn’t mean I trust everything it says. It means I’ve learned it’s an outstanding starting point and a terrible substitute for legal judgment.”

2. “I probably use AI twenty times a day. I also probably tell it ‘that’s not right’ twenty times a day.”

3. “When I first became aware of AI for the masses, I thought it was a toy. Then I used it to summarize a 250-page SEC proposing release in about three minutes. I still read the releases, but at least now I know where to focus.”

4. “We’re a smallish legal department. If AI can save each of us an hour a day, that’s like hiring another lawyer without convincing Finance to approve another headcount request.”

5. “The funny thing is, I don’t think AI made me a better securities lawyer. It made me spend more time actually being a securities lawyer instead of formatting tables, rewriting the same paragraph seventeen different ways or searching through old proxy statements.”

6. “I remain unconvinced that the hype matches the reality. Every demo makes it look magical. Then you ask a nuanced securities law question and discover the confidence level is much higher than the accuracy level.”

7. “Outside counsel started sending work back faster. Our CFO started asking why Legal couldn’t move at the same speed. Whether that expectation is fair is almost beside the point. AI has changed what our internal clients think ‘fast’ looks like.”

8. “I use AI constantly for brainstorming. I use it almost never for the final language.”

9. “The SEC has never accepted ‘my associate drafted it’ as an excuse. I doubt they’ll be more sympathetic to ‘my AI drafted it.'”

10. “We’re seeing pressure from every direction. Our CEO wants to know how Legal is using AI. The Board wants updates on AI governance. Our employees assume we have AI tools. Our outside counsel is using AI. Frankly, the only people asking whether we should adopt AI are the lawyers who haven’t tried it yet.”

11. “AI reminds me of that first-year associate who graduated at the top of the class. Brilliant. Fast. Tireless. Also fully capable of saying something completely ridiculous with absolute confidence.”

12. “The biggest surprise wasn’t drafting. It was editing. AI is remarkably good at helping me identify what isn’t clear, what sounds repetitive and what probably made sense only because I’d been staring at it for six hours.”

The post A Dozen Things Those In-House Are Saying About Using AI appeared first on The Governance Beat.

“On July 3rd, the European Commission adopted a delegated act setting out revised European Sustainability Reporting Standards (ESRS) and a delegated act setting out voluntary reporting standards for smaller companies. The revised ESRS will replace the previous version of the ESRS (Previous ESRS).

The ESRS are the mandatory reporting standards for European Union (EU) companies subject to the EU Corporate Sustainability Reporting Directive (CSRD). These updates will affect many US companies that fall within the CSRD’s scope through their EU subsidiaries and are required to file CSRD reports starting from fiscal year 2027. The standards are now effectively final – they still require formal adoption by the EU but they can no longer be amended. We anticipate formal adoption to happen in the coming months.

The overarching goal of the revision was to simplify and streamline the Previous ESRS, complementing the changes to the scope of the CSRD introduced by the Omnibus I package (read our alert). The European Commission states that the mandatory data points have been reduced by over 60%, and as a result, estimates reporting costs will decrease by approximately 30% per company.”

The post European Commission Adopts Revised EU CSRD Reporting Standards appeared first on The Governance Beat.

A few things to note about the 18 FAQs:

1.  Regular Market Hours Remain the Price Benchmark –The traditional 9:30 a.m. to 4:00 p.m. ET trading session, including the Opening and Closing Crosses, will continue to establish the primary market prices used for transparency and price discovery.

2. Launch Target is December 6, 2026 –The expanded trading schedule is expected to begin Sunday, December 6, 2026, provided the SEC approves the necessary rule changes and the Securities Information Processor (SIP) is ready.

3.  Trading Will Run Almost Continuously During the Week –Trading would begin at 9:00 p.m. ET Sunday and continue until 8:00 p.m. ET Friday, with a daily one-hour pause from 8:00 p.m. to 9:00 p.m. ET for system processing and transition to the next trading day.

4. Current Trading Sessions Stay Largely Unchanged – Nasdaq’s existing trading hours from 4:00 a.m. to 8:00 p.m. ET will continue to operate as they do today, with no material changes what exists today in terms of functionality.

5.  Other Nasdaq Exchanges Will Keep Existing Hours – The changes only apply to the Nasdaq Stock Market. Nasdaq Texas (NTX), PSX and Nasdaq options exchanges will continue operating on their current schedules.

6.  Trade Dates Will Depend on Time of Execution – Trades executed between 9:00 p.m. and midnight will receive the next calendar day’s trade date, while trades that take place from midnight to 8:00 p.m. will carry the current day’s trade date. Settlement procedures otherwise remain unchanged.

7.  Trading Will Continue Around Many U.S. Holidays – If a U.S. market holiday falls on a Monday through a Thursday, overnight trading will still begin at 9:00 p.m. ET the evening of that holiday, providing additional access despite the daytime market closure.

8.  Static Price Bands Will Protect Against Extreme Price Moves – Subject to SEC approval, exchanges will reject orders that exceed static price bands calculated by the listing market and distributed through the SIP to reduce the risk of erroneous trades.

9.  Price Bands Will Be Based on Closing Prices – The overnight trading bands will be calculated using the greater or lesser of the adjusted Official Closing Price and the last round-lot sale before 7:45 p.m. ET, generally allowing trading within ±20% of those reference prices (subject to minimum dollar thresholds).

10.  Major Corporate Actions Will Trigger Overnight Trading Halts – Certain significant events – such as stock splits, large dividends, mergers, de-SPAC transactions, spin-offs, symbol or CUSIP changes and security type changes – will generally remain halted until 8:00 a.m. ET on the effective date. Nasdaq will identify these with the Trade Halt Code “M1.” Also see these 13 FAQs on corporate actions for more gloss (for example, the one-hour pause between 8:00 PM and 9:00 PM may be insufficient for the processing of some of these corporate actions).

The post 24-Hour Trading: Nasdaq’s FAQs and SEC’s Roundtable appeared first on The Governance Beat.

1. The Noise Before the Storm: What Actually Happened with Shareholder Proposals

2. E&S Proposals: Dead or Just Different?

3. The New No-Action Environment

4. Reincorporation: DExit, Texas, and the New Domicile Debate

5. Executive Compensation and Director Elections: High Support, Targeted Opposition

6. The Proxy Advisory Model Under Pressure

7. Investor Policies in Flux

8. Off-Season Engagement: What Changed After the Revised SEC Staff CDI Guidance

9. Proxy Season in the Age of AI

10. Practical Planning for 2027

The post Tomorrow’s Webcast: “Proxy Season Recap – 10 Hot Topics” appeared first on The Governance Beat.