SEC Withdraws Fourteen Proposed Rulemaking Activities

SEC News

On June 12, 2025, the SEC withdrew fourteen notices of proposed rulemaking, removing them from the SEC’s rulemaking agenda.  As you can see by reviewing the related Final Rules listed on the Rulemaking Activitysection of the SEC’s webpage, the removed rules include:

  • Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals Under Exchange Act Rule 14a-8,
  • Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies,
  • Safeguarding Advisory Client Assets, and
  • Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail To Enhance Data Security.

As always, your thoughts and comments are welcome!

SEC Publishes Concept Release Addressing the Foreign Private Issuer Definition

Form 20-F, SEC News

On June 4, 2025, the SEC issued a concept release requesting input about the foreign private issuer definition.  The “Concept Release on Foreign Private Issuer Eligibility” focuses on how the population of foreign private issuers has changed since the origin of the definition and whether these changes necessitate updates to the definition.

The concept release lists several areas for comment, including:

  • The existing FPI eligibility criteria,
  • A foreign trading volume requirement,
  • A major foreign exchange listing requirement,
  • An SEC assessment of foreign regulation applicable to the FPI,
  • New mutual recognition systems, and
  • International cooperation arrangements.

You can read more in the related Fact Sheet and Press Release.

As always, your thoughts and comments are welcome!

Register Now for SECI’s One-Hour Briefing: “Navigating a Financial Restatement in SEC Reporting”

Reporting, SECI News

On June 11, 2025, the former hosts of PLI’s InSecurities podcast, Chris Ekimoff of RSM US LLP and Kurt Wolfe of Quinn Emanuel Urquhart & Sullivan, LLP, along with George Wilson of PLI’s SEC Institute, will present a One-Hour Briefing titled “Navigating a Financial Restatement in SEC Reporting.”  Companies are frequently unprepared for, and even unaware of, the risks when a financial reporting error is discovered.  This briefing will help companies build a plan and be ready if they ever need to navigate the restatement process.

This briefing will address:

    • First steps: how to respond after discovering a financial statement error
    • The audit committee’s role in the restatement process
    • Critical steps in the investigation process
    • How to develop a strategy to communicate with the SEC
    • How to control the narrative
    • Reporting restatements in Forms 10-K/A and 10-Q/A
    • When to claw back incentive-based compensation

As always, your thoughts and comments are welcome!

Non-GAAP Measures on the SEC Investor Advisory Committee Agenda

Hot Topic, SEC News

On May 29, 2025, the SEC announced that its Investor Advisory Committee will meet on June 5, 2025 and that one of the panels the committee will host is titled “Beyond the GAAP: Market Perspectives on Non-GAAP Financial Disclosures.”  The meeting will be open to the public and webcast.

The meeting agenda provides details about the members of the panel and the focus of the discussion. According to the agenda, the issues the panel will address include:

    • What areas of current regulations on non-GAAP measures, if any, could be strengthened or clarified?
    • Would greater standardization of certain non-GAAP measures benefit investors?
    • What challenges or benefits exist in implementing industry-specific non-GAAP reporting guidelines?
    • How will AI impact the quality and transparency of non-GAAP reporting?
    • Could AI be used to detect potentially misleading non-GAAP disclosures?

As always, your thoughts and comments are welcome!

SEC Announces a Roundtable on Executive Compensation Disclosures and Chairman Atkins Emphasizes the Importance of Economic Analysis in Rulemaking

SEC News

On May 16, 2025, the SEC announced that on June 26, 2025, it will hold a roundtable discussion focused on executive compensation disclosures.  As you can read in the Press Release, the roundtable will be open to the public and streamed live.  In a related Statement about the roundtable, Chairman Paul S. Atkins noted:

“When the Commission instituted tabular executive compensation disclosure in 1992, then-Chairman Richard C. Breeden championed an easily comprehensible disclosure regime centered around a graphical presentation of total executive compensation with comparisons against compensation of executives in peer firms and against the issuer’s performance.

In the intervening years, disclosure requirements have been expanded to focus more and more on variations of components of compensation, rather than on total compensation.  While it is undisputed that these requirements, and the resulting disclosure, have become increasingly complex and lengthy, it is less clear if the increased complexity and length have provided investors with additional information that is material to their investment and voting decisions.”

Chairman Atkins’ Statement enumerates a number of questions for consideration in assessing issues including cost effectiveness and materiality for current executive compensation disclosure requirements.  The Statement also encourages input from the public.

In separate remarks that shed light on how the Commission will focus on economic analysis in the rulemaking process, at the 12th Annual Conference on Financial Market Regulation, Chairman Atkins stated:

 “In years past, the Commission has unfortunately demonstrated a tendency to prioritize regulatory expansion over meticulous economic analysis, potentially jeopardizing this delicate balance.  For example, in some of the Commission’s recent economic analysis, the adopting releases have stated, ‘Where possible, we have attempted to quantify these economic effects . . . however, we are unable to reliably quantify the potential benefits and costs of the final rule.’  Going forward, we must show our work so that the public understands what we are proposing and why.  We must show that we have considered the potential effects of our rules, including the negative ones.”

As always, your thoughts and comments are welcome.

SEC Updates Rule 10b5-1 C&DIs

SEC News

On April 25, 2025, the SEC updated its Compliance and Disclosure Interpretations (C&DIs) addressing “Manipulative and Deceptive Devices and Contrivances: Rule 10b5-1.”  The changes include two new C&DIs, updates to twenty C&DIs, and withdrawal of three C&DIs.  Issues addressed include interactions with Rule 144, transactions in trusts, transactions with stock that was collateral for loans, and several other detailed areas.

As always, your thoughts and comments are welcome.

An Example Cybersecurity Event Form 8-K

Reporting

On April 12, 2025, Davita, Inc. reported a cybersecurity attack on Form 8-K.  Interestingly, and appropriately, the company did not report the event on Item 1.05.  The instructions for Item 1.05 begin with:

Item 1.05 Material Cybersecurity Incidents.

(a) If the registrant experiences a cybersecurity incident that is determined by the registrant to be material, describe the material aspects of the nature, scope, and timing of the incident, and the material impact or reasonably likely material impact on the registrant, including its financial condition and results of operations.

As this instruction clearly states, this Form 8-K Item is for material cybersecurity incidents.  That said, many times a company will want to alert investors and others when a cybersecurity incident has occurred, but the company is still in the process of assessing the materiality of the event.  On May 21, 2024, CorpFin issued this Statement addressing how to report a cybersecurity event before a materiality assessment is complete.  In the Statement, CorpFin “encourages” companies to use a different Form 8-K Item, perhaps Item 8.01 or 7.01.

Davita’s Form 8-K was filed under Item 8.01 and includes this language:

Item 8.01. Other Events. 

On April 12, 2025, DaVita Inc. (the “Company” or “we”) became aware of a ransomware incident that has encrypted certain elements of our network. Upon discovery, we activated our response protocols and implemented containment measures, including proactively isolating impacted systems. We are actively working to assess and remediate the incident with the assistance of third-party cybersecurity professionals and have notified law enforcement of the matter.

We have implemented our contingency plans, and we continue to provide patient care. However, the incident is impacting some of our operations, and while we have implemented interim measures to allow for the restoration of certain functions, we cannot estimate the duration or extent of the disruption at this time.

Given the recency of the incident, our investigation and response are ongoing, and the full scope, nature, and potential ultimate impact on the Company are not yet known.

As a final note, remember that Form 8-K Item 8.01 is filed information and Item 7.01 is only furnished.  Careful consideration should be given as to whether a company wants this information to be furnished or filed.

As always, your thoughts and comments are welcome!

CorpFin Issues C&DIs Addressing the Form 10-K Cover Page Restatement Check Boxes

SEC Hot Topic, SEC News

Since the two clawback related check boxes were added to the Form 10-K cover page, there has been a fair amount of confusion concerning when companies should check the boxes.  The wording for the check boxes involves interpreting phrases such as “the correction of an error” and a “required recovery analysis”:

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

While the staff made some comments about the check boxes in public forums, including PLI’s The SEC Speaks conference, there was no formal instruction about how to complete these two check boxes.  On April 11, 2025, the staff addressed this situation with new Compliance and Disclosure Interpretations to provide clarity about when and how to use the check boxes.

Question 104.20 addresses the first check box concerning the correction of an error:

Question 104.20

Question: When a listed issuer reports a change to its previously issued financial statements in an annual report, how should the issuer determine whether “the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements” for purposes of determining whether the check box indicating such correction of an error should be marked on the cover of its annual report?

Answer: The listed issuer should look to the guidance under the generally accepted accounting principles applicable to its financial statements in determining whether the change represents the correction of an error. When the financial statements of the registrant included in the filing have been revised to reflect the correction of an error to previously issued financial statements, regardless of whether those restatements are required or not, the listed issuer must mark the check box.

A required restatement includes (1) an accounting restatement to correct an error in previously issued financial statements that is material to those financial statements (commonly referred to as a “Big R” restatement) and (2) an accounting restatement to correct an error that is immaterial to those financial statements but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (commonly referred to as a “little r” restatement).

The correction of an immaterial prior period error that is recorded in the current year (commonly referred to as an “out-of-period adjustment”) does not require the listed issuer to mark the check box because the previously issued financial statements are not revised. [April 11, 2025]

Question 104.21 addresses the second check box concerning a required recovery analysis:

Question 104.21

Question: In 20X4, a listed issuer reports a “Big R” restatement to the 20X3 financial statements in an amendment to its 20X3 annual report and marks the check box on the cover to indicate that the financial statements reflect the correction of an error to previously issued financial statements. After applying its recovery policy pursuant to Exchange Act Rule 10D-1(b), the listed issuer determines that no recovery of erroneously awarded compensation is required.

Is the listed issuer also required to mark the check box on the cover of the amended 20X3 annual report to indicate that the restatement “required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period” pursuant to Exchange Act Rule 10D-1(b) and explain in that amended report why application of the recovery policy resulted in no recovery?

Answer: Yes, the listed issuer must mark the check box indicating that the restatement required the recovery analysis. This would include circumstances when:

      • no incentive-based compensation was received by any executive officers at all during the relevant time frame, or
      • incentive-based compensation was received by an issuer’s executive officers during the relevant time frame, but that incentive-based compensation was not based on a financial reporting measure impacted by the restatement.

Further, the listed issuer should briefly explain why application of its recovery policy resulted in no recovery. [April 11, 2025]

The remaining C&DIs address issues including whether the boxes should be checked in years after the restatement and the restatement of interim periods.  One other C&DI addresses a SPAC issue related to co-registrant reporting.

As always, your thoughts and comments are welcome!