Securities lawyers share their perspectives

The SEC’s evolving agenda reflects a clear pivot toward modernization. From rationalizing disclosure requirements to clarifying crypto regulation, the Commission is signaling its belief that simplicity and clarity will drive investor confidence. Yet, heightened scrutiny on AI usage, cybersecurity and operational resiliency underscores the need to embed robust governance and risk controls into a company’s DNA.

Timothy Brown

KPMG Partner, KPMG SEC Regulatory Matters Topic Team Leader

Similar to the messages from SEC Chairman Atkins on Day 1, panelists agreed that the Administration has brought a new focus to the SEC’s activities. They addressed several specific areas from the SEC’s evolving agenda along with other emerging topics.

Shareholder proposals

The panelists addressed the SEC’s agenda item on modernizing shareholder proposal rules. The Commission is considering amendments to Exchange Act Rule 14a-8, which governs the inclusion of shareholder proposals in proxy statements. The stated goal is to reduce compliance burdens for registrants and reflect developments since the Rule’s last update.

Because Corp Fin will no longer provide substantive responses to most no-action requests for excluding shareholder proposals in proxy statements, companies might see increased legal and reputation risk as decisions to exclude proposals now rest entirely with them.

Exempt offerings

The session highlighted items on the RegFlex agenda aiming to facilitate capital formation by amending the exempt offerings rules.

Panelists also focused on what’s known as the ‘Latham Letter’, which clarified requirements for exempt offerings under Rule 506(c) – making it easier for issuers to use general solicitation by outlining reasonable steps to verify accredited investors. It introduced a three-prong approach, including minimum investment thresholds and investor representations, reducing uncertainty and friction in private placements. Further updates, such as redefining ‘accredited investor’, are expected in the near future.

Executive compensation

The session covered reforms that are expected to give investors better information about executive pay practices and how those practices align with company performance. Executive compensation disclosure rules have become increasingly complex, prompting discussions about streamlining requirements or providing clearer guidance – especially around perks and nuanced items like pay ratio and pay versus performance.

While the SEC may consider bold changes, including reducing disclosure tables or easing burdens for smaller reporting companies, congressional mandates and investor demand for transparency will limit how far deregulation can go. Ultimately, any reforms will need to balance regulatory relief with investors’ expectations for clear, useful information in proxy statements.

Even simplified rules are new rules, and they demand close collaboration among company management, legal counsel, and external auditors or accounting advisors. For instance, drafting executive compensation disclosures could become more challenging when there are fewer prescriptive requirements and guidelines to follow. Similarly, deciding whether to adopt semi-annual reporting (if allowed) would involve significant strategic and operational considerations.

Dana Cretu

KPMG Partner, Department of Professional Practice

Other agenda items

Although the latest RegFlex agenda is shorter than usual, there is no shortage of topics to discuss from that agenda. Additionally, this agenda will require a substantial level of effort from the SEC staff to be enacted. To this end, other topics the panel discussed include:

clarifying the regulatory framework for crypto assets to provide greater certainty to the market;
easing and facilitating capital formation, such as enhancing the accommodations for Emerging Growth Companies (EGCs) and simplifying the filer status checkboxes; and
modernizing the shelf registration process.

Quarterly reporting revisited: The session touched on recent SEC discussions about giving public companies the option to report semi-annually instead of quarterly. The panelists pointed to the fact that other major capital markets, as well as foreign private issuers in the US, already have less frequent reporting requirements even though the majority continue to report more frequently. They believed that the likely outcome would be optionality rather than full elimination of quarterly reporting due to investor expectations.

Potential new definition of foreign private issuer (FPI): The panelists also noted that the SEC is soliciting public comment on the definition of FPI, with FPI eligibility being a topic in the ‘pre-rule’ stage. They discussed the potential implications of a new rule, from tightening eligibility criteria to reducing regulatory accommodations for FPIs in an effort to level the playing field between domestic issuers and FPIs.

Panelists listed several topics for companies to consider when crafting disclosures for this year’s annual financial statements.

Carefully consider the use of aspirational statements (e.g. disclosures about human capital, the use of AI, cybersecurity practices) in SEC filings and evaluate whether adequate procedures and controls exist related to reviewing and updating such disclosures for accuracy.
Update risk factors for risks that have gone from hypothetical to being materialized, given changes in the business environment (e.g. geopolitical issues, tariffs, government shutdown). Additionally, consider reducing risk factor disclosures – including for risks that are no longer present and for boilerplate language.
Continue to review and refresh disclosures for recently issued SEC rules, such as cybersecurity and the clawback rule.

Footnote:

2025 AICPA Conference on Current SEC and PCAOB Developments

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Relevant Results

New Administration = New focus

Shareholder proposals

Exempt offerings

Executive compensation

Other agenda items

Other SEC initiatives

Year-end disclosure reminders

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