SEC Developments: Reversals and Reassessments
SEC Reverses Course on Gensler-Era Rule Proposals
On June 12, 2025, the Securities and Exchange Commission (SEC) made a significant announcement by withdrawing fourteen proposed rules initiated during the tenure of former SEC Chair Gary Gensler. Among the notable withdrawals was the controversial proposed amendment to the Shareholder Proposal Rule, Rule 14a-8. This proposed amendment sought to alter the substantive bases for excluding shareholder proposals from proxy statements, making it more challenging for issuers to dismiss these proposals.
The Bottom Line
The news comes as a relief to many issuers concerned about the potential tightening of rules surrounding shareholder proposals. The withdrawn amendments would have revamped the substantial implementation, duplication, and resubmission bases for exclusion, effectively raising the bar for issuers wanting to exclude certain proposals from proxy statements.
The Details
The SEC’s decision to retract the 2022 rule proposal aligns with an overarching trend under the current administration’s regulatory approach, emphasizing a need for less restrictive governance. The proposed changes had detailed procedures for excluding proposals that were deemed “substantially implemented” or duplicative of previous proposals, which would have stymied shareholder engagement.
In particular, the substantial implementation exclusion, which allows issuers to dismiss a shareholder proposal by demonstrating that they have already substantially implemented the proposal, would have been narrowed to apply only when “essential elements” of the proposal were executed. Similarly, any proposal deemed to “substantially duplicate” another would need stringent criteria to be excluded.
While final rules were projected for adoption in October 2025 following a public comment period that closed in September 2022, the SEC’s recent reversal illustrates a pivot toward facilitating greater shareholder engagement in the corporate governance process.
Concept Release Invites Input on Foreign Private Issuer Definition
In another crucial development, the SEC published a concept release on June 4, 2025, contemplating potential amendments to the definition of “foreign private issuer” (FPI). This move reflects a growing concern over evolving market dynamics and regulatory challenges tied to FPIs.
The Bottom Line
The SEC is soliciting feedback on whether to amend the FPI definition given discernible shifts in the landscape over the past two decades. These shifts have rendered many FPIs less transparent, raising questions about the appropriateness of existing accommodations under U.S. federal securities laws.
The Details
The concept release poses several questions aimed at reevaluating the established criteria used to classify FPIs. The SEC is considering whether to revise the current ownership thresholds, possibly requiring a more stringent standard for assets held outside the U.S. and suggesting an evaluation of trading venues.
Concerns surrounding weaknesses in home-country disclosure requirements have prompted this evaluation, as many FPIs have become much more reliant on U.S. markets than ever before. As of 2023, a staggering 55% of FPIs reported that 99% or more of their equity security trading occurred solely in U.S. markets, upending traditional regulatory assumptions regarding cross-border trading dynamics and oversight.
Key Developments Prompting Reconsideration
Data presented in the concept release illustrates significant shifts in FPI jurisdictions over the last two decades, with an increasing number now incorporated in places like the Cayman Islands and mainland China, which often feature lenient home country regulatory standards. Such trends have intensified scrutiny over the level of disclosure available to U.S. investors and raised alarms about regulatory arbitrage.
SEC Staff Updates Rule 10b5-1 Guidance
In April 2025, the SEC staff issued updates to its Compliance and Disclosure Interpretations (C&DI) regarding Rule 10b5-1, which offers an affirmative defense against insider trading claims. Notable revisions were made to adapt the interpretations to the amendments rolled out in 2022.
The Bottom Line
Two new interpretations clarified the eligibility for utilizing the affirmative defense, particularly when trades occur through a 401(k) plan with self-directed options. The guidance emphasizes that to qualify, trading instructions must meet all of Rule 10b5-1’s conditions, underscoring the importance of compliance in managing insider trading risks.
Corporate Law Developments in Texas
Texas has recently enacted significant changes to its corporate laws, making strides to strengthen its legal framework in the race for corporate law competitiveness, taking direct aim at Delaware’s historical dominance in this realm.
The Bottom Line
Key updates include provisions allowing Texas corporations to streamline the approval process of fundamental business transactions without separate class votes and establishing more protective mechanisms for directors and officers against certain liabilities.
The Details
Among the highlights is a transformation in how Texas corporations can manage shareholder proposals. Beginning September 1, 2025, corporations can impose stricter conditions on who can submit proposals, requiring shareholders to meet specific ownership thresholds and demonstrating a continuous holding period. These changes may serve to ease challenges faced by corporate governance in an increasingly complex regulatory landscape.
Developments in Nevada’s Corporate Law
In tandem with Texas, Nevada is also refining its corporate regulatory environment to allure more corporations, further intensifying the rivalry with Delaware.
The Bottom Line
Key amendments now permit Nevada corporations to pave the way for waiving jury trials in internal matters and redefine the fiduciary duties of controlling stockholders. The newfound clarity on controlling stockholder transactions reflects an effort to balance corporate governance while maintaining appealing operational flexibility.
The Details
The legislation outlines that only controlling stockholders have a fiduciary duty to refrain from improperly influencing directors or officers. Additionally, transactions involving controlling stockholders may now receive pre-approval through disinterested directors, further easing the approval process and promoting transactional agility.
Stock Exchange Developments
The NYSE has adjusted its policies to attract more global companies, particularly those based outside North America, aiming to improve their stockholder distribution requirements.
The Bottom Line
The new rule, effective May 2, 2025, allows these companies to consider stockholders globally, significantly enhancing the NYSE’s competitiveness in a marketplace where cross-border investment is becoming increasingly vital.
The Details
Previously, companies outside North America could only count U.S. holders toward meeting the stockholder distribution standards. This shift aligns the NYSE more closely with other exchanges, particularly Nasdaq, thereby potentially increasing liquidity for non-U.S. stockholders and making the NYSE a more favorable venue for international enterprises.
Other Developments: Regulation of Proxy Advisory Services
Texas has initiated groundbreaking legislation concerning proxy advisory services, mandating disclosures when such services do not prioritize financial interests.
The Bottom Line
Effective September 1, 2025, the law requires proxy advisors to inform clients when advice is based on non-financial factors, thereby aiming to bring transparency to voting recommendations that could diverge from shareholder interests.
The Details
The regulations not only mandate clear disclosures to affected companies but also outline substantial penalties for proxies failing to adhere to these standards. This move represents Texas’s broader efforts to rein in the influence of non-financial considerations in corporate governance, fostering a more streamlined regulatory atmosphere favorable to business.
These developments signal notable shifts in the regulatory landscape, creating a dynamic environment for corporate governance, investment strategies, and advisory services. With Texas and Nevada intensifying their status as competitive corporate law hubs, and the SEC re-evaluating its frameworks, stakeholders must remain vigilant to navigate these evolving legal waters effectively.