Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The Division of Corporation Finance (the Division) of the Securities and Exchange Commission (SEC) announced its complete exit from the shareholder proposal review process and formally signaled its intention to rescind Exchange Act Rule 14a-8.

On August 14, 2026, the Division issued an Updated Statement regarding the Division’s role in the Rule 14a-8 process, announcing that, effective immediately and “unless and until the Division announces otherwise,” it will no longer respond to any Rule 14a-8 no-action requests from companies seeking Division guidance on excluding shareholder proposals. The Updated Statement represents a continuation and expansion of the Division’s “no objection” approach piloted during the 2025-2026 proxy season.

On Friday, August 28, 2026, the Division submitted a rule proposal to the White House’s Office of Information and Regulatory Affairs for interagency review. Based on recent remarks from SEC leadership and the working title of the proposal, “Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals…”, the proposal is widely expected to seek a full rescission of Rule 14a-8.

Rule 14a-8 remains in effect as written until the SEC issues a final regulation. The typical SEC rulemaking timeline suggests much of the upcoming proxy season may proceed unaffected, though it is possible a final release is issued during the upcoming proxy season. For the upcoming proxy season, companies considering excluding shareholder proposals should proceed as they did last proxy season: assess shareholder proposals based on the merits, consider the market and, most importantly, monitor Rule 14a-8 rulemaking developments and related guidance.

Background: Historical Practice & “No Objection” Proof of Concept

Historically, the Rule 14a-8 process gave companies a way to seek the Division’s view before excluding a shareholder proposal. A company would submit a no-action request explaining its basis for exclusion, and the Division would typically respond by either declining to recommend enforcement action or declining to concur.

The Division announced in November 2025 that, for only the 2025-2026 proxy season (October 1, 2025 through September 30, 2026), it would not respond to no-action requests or express any view on a company’s intended reliance on any basis for exclusion under Rule 14a-8, other than requests submitted under Rule 14a-8(i)(1), subject to a narrow “no objection” exception that did not include a substantive review. The Division cited resource and timing constraints following the lengthy government shutdown, the volume of registration statements and other filings requiring prompt attention and the extensive body of SEC guidance already available.

The Division continued to respond to Rule 14a-8(i)(1) requests, which seek exclusion of proposals on the basis that they are not a “proper subject” for shareholder action under state law, reasoning that insufficient guidance existed on the treatment of precatory (i.e., non-binding, advisory) proposals to warrant the same hands-off approach.

For non-Rule 14a-8(i)(1) no-action requests, the Division allowed companies wishing for some sort of response to provide an unqualified representation that they had a reasonable basis to exclude the proposal. In response, the Division would issue a “no objection” letter stating that, based solely on that representation (i.e., not based on the merits of the exclusionary basis), it will not object if the company omits the proposal from its proxy materials.

SEC Chairman Paul S. Atkins described the “no objection” policy for the 2025-2026 proxy season as “both a turning point and a proof of concept” and likened the change to taking off the training wheels from the shareholder proposal. 

Updated Statement: “No Response” Policy

The Updated Statement makes clear that the Division will no longer respond to Rule 14a-8 no-action requests of any sort, effective immediately, abandoning both historical practice and the modified “no objection” policy in effect last season. Unlike the “no objection” policy, the new “no response” policy is not tied to a proxy season or any defined period, but continues indefinitely unless and until the Division announces otherwise. The Updated Statement indicates that the SEC’s Division of Investment Management, which is responsible for reviewing Rule 14a-8 no-action requests relating to investment companies, “will take a substantially similar approach.”

The Division framed the change as a reallocation of resources toward the review of Securities Act and Exchange Act filings, including statutorily required reviews, and again pointed to the extensive body of existing guidance. It also observed that, though the Division has long engaged in the informal practice of expressing its enforcement position in response to Rule 14a-8 no-action requests, the Staff has recognized since 1976 that the Division is not required to respond or take any other responsive action.

The new “no response” policy is similar to the “no objection” policy in effect last proxy season, but substantively differs in two respects:

  • “No response” policy encompasses all Rule 14a-8 exclusionary bases, including Rule 14a-8(i)(1) no-action requests. The Division’s new policy encompasses no-action requests for exclusion of proposals on any procedural or substantive basis under Rule 14a-8. Accordingly, the Division will no longer respond to no-action requests to exclude a proposal under Rule 14a-8(i)(1) (proposal is not a “proper subject” for shareholder action under state law). The Division noted that it received no Rule 14a-8(i)(1) no-action requests at all during the 2025-2026 proxy season.
  • “No objection” letters discontinued. The Division will no longer respond to any Rule 14a-8 notice, whether or not the company requests a response.

With respect to the no-action request submission process, the Division’s shareholder proposal email address has been shut down. Companies and proponents should submit all notices and correspondence via the online Shareholder Proposal Form.

The practical implications of the policy change are slight. Under the “no objection” policy available last proxy season, companies were already reaching their own legal conclusions without substantive Division review—the Division’s “no objection” letter acknowledgment rested purely on the company’s own “unqualified representation” and did not reflect any evaluation of the adequacy of that representation or of the basis for exclusion. The shift from “no objection” to “no response” therefore does not meaningfully alter the risk profile of excluding a proposal, and companies seeking to exclude a shareholder proposal should proceed as they did last proxy season. 

Proposed Rescission of Rule 14a-8

The submission of the proposed rule to rescind Rule 14a-8 represents a first official step towards fundamental changes to the shareholder proposal framework. The SEC’s 2026 regulatory agenda includes “Shareholder Proposal Modernization,” under which the SEC has long foreshadowed  changes to Rule 14a-8, widely anticipated in the form of a rescission or significant amendments. Chairman Atkins has stated that “the SEC is holistically evaluating the rule itself,” with its focus being the fundamental question of “what is the federal government’s appropriate role in regulating shareholder proposals,” signaling that the shareholder proposal process may be more appropriately governed by state law. 

The rule proposal submitted for interagency review on August 28, 2026, is titled “Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals…,” confirming that direction. Interagency review precedes publication, so the submission signals that a proposal is near but does not fix its timing or its final contents. Rule 14a-8 remains in effect until the SEC issues a final regulation rescinding or amending it, and the typical SEC rulemaking timeline suggests much of the upcoming proxy season may proceed unaffected, though it is possible a final release issues during the season.

Rule 14a-8 Applies as Written

Until the SEC issues a final version of the proposed rule rescinding or amending Rule 14a-8, the rule remains in effect as written. The Division’s gradual pullback from its historical role occurred in stages, first suspending most no-action responses during the last proxy season and now withdrawing from the process entirely and indefinitely, while the rule itself remained untouched. Staff guidance could remove the Division from the process, but only rulemaking can change what Rule 14a-8 requires.

Neither the “no response” policy nor the proposed rule amends Rule 14a-8 or alters any substantive or procedural grounds on which a proposal may be excluded. Rather, the policy shift is an exercise of Staff discretion over resource allocation.

Under Rule 14a-8(j), a company that intends to omit a shareholder proposal must still notify the SEC and the proponent no later than 80 calendar days before it files its definitive proxy materials. The exclusion notice must explain why the company believes it may exclude the proposal, referring to the most recent applicable authority, together with a supporting opinion of counsel where the basis rests on state or foreign law. However, because the Division has stopped issuing “no objection” letters, the notice will not need to include an “unqualified representation” that the company has a “reasonable basis” to exclude the proposal, which was necessary to receive a “no objection” letter from the Division under the policy in effect last proxy season.

Practical Implications

  • Consider the exclusionary basis against the risk of challenge. Exclusions resting on eligibility or procedural defects generally present less litigation risk than those resting on a substantive basis. Of the six shareholder proposal exclusions litigated during the 2025-2026 proxy season, one proposal was excluded on procedural grounds and five under Rule 14a-8(i)(7).
  • Anticipate market reaction. Rule 14a-8(j) exclusion notices are public, and proponents may draw attention to a company blocking a proposal from shareholder vote. Companies should consider how proponents, institutional investors and proxy advisory firms may respond (including whether voting guidelines of institutional investors and proxy advisors change in response to the Division’s complete and indefinite withdrawal).
  • Expect proponents to pursue alternative engagement and activism channels. Proponents may challenge exclusions in court or pursue floor proposals under the company’s advance notice bylaws. Engagement or a negotiated withdrawal may remain the more efficient approach.
  • Confirm exclusion mechanics and closely monitor developments. Companies still must submit their Rule 14a-8(j) notice at least 80 days before filing definitive proxy materials. Boards and committees should be briefed early, and developments should be tracked at the federal, state and institutional investor/proxy advisor levels.

Key Takeaways

  • The SEC has formally ended its involvement in the Rule 14a-8 no-action process. The change largely continues the approach taken during the 2025-2026 proxy season, under which companies were already responsible for assessing the merits of shareholder proposal exclusions.
  • Rule 14a-8 remains in effect for now. Companies should continue to follow the rule’s existing requirements, including the 80-day notice requirement, while monitoring developments in the SEC’s rulemaking process.
  • A potential rescission could bring more significant change. Although the immediate impact may be limited, full rescission of Rule 14a-8 could fundamentally alter the federal framework governing shareholder proposals and increase the importance of other mechanisms for addressing disputed proposals.

For more information on the Division’s updated approach to Rule 14a-8 and its implications for the 2026-2027 proxy season, please contact Jack Bowling, Scott Gootee, Andrew Arbuckle or the Stinson LLP contact with whom you regularly work.

On August 18, 2026, the Securities and Exchange Commission (SEC) proposed Regulation Crypto Assets, a new registration-exempt offering framework designed specifically for crypto assets. The proposal would create two exemptions from Securities Act registration; a conditional safe harbor under which a crypto asset would no longer be treated as a security; and preemption of state blue sky registration and qualification requirements. This is the SEC’s first purpose-built offering regime for crypto assets, and it comes as the Senate has stalled for now on broader crypto market structure legislation. Comments are due 60 days after publication in the Federal Register.

Background: From Enforcement to a “Fit-for-Purpose” Framework

Since the 2017 DAO Report, the SEC has regulated crypto assets largely by applying the Supreme Court’s SEC v. W.J. Howey Co. test through informal guidance and enforcement, asking whether a crypto asset was sold as part of an “investment contract” and thus regulated as a security. Market participants have long argued that this analysis is hard to apply consistently and that case law, disclosure and resale rules written decades before blockchain technology was invented are a poor fit for token distributions.

The SEC’s posture shifted with the creation of the Crypto Task Force in 2025 and, on March 17, 2026, the SEC and Commodity Futures Trading Commission (CFTC) issued a joint interpretive release addressing how the federal securities laws apply to certain crypto assets and transactions. That March interpretation confirmed that while some crypto assets are not securities, they may be sold subject to an investment contract that is a security and, critically, that the otherwise non-security underlying crypto asset may later “separate” from its investment contract security when purchasers can no longer reasonably expect the issuer to engage in essential managerial efforts. Regulation Crypto Assets would codify that separation concept and build an offering regime leading up to it.

The Building Block: “Covered Investment Contracts”

The proposed regime centers on the “covered investment contract” definition: an investment contract where a crypto asset is the only asset subject to the contract and that crypto asset is not itself a security; that token is separately defined as the “subject crypto asset.” Notably, the startup exemption covers “covered transactions,” a term that expressly includes airdrops and network rewards in addition to offers, sales and other distributions. Where the underlying crypto asset is a security, however (such as with tokenized stock securities), the definition, and thus the exemptions, do not apply.

All issuers relying on either exemption (both are described below) would provide principles-based narrative disclosure under proposed Rule 103, with 10 topics, including the material terms of the covered investment contract and the issuer’s representations or promises to engage in essential managerial efforts. Rule 103 would also require that the disclosure be consistent with the issuer’s public communications (e.g., its website, official social media accounts and whitepapers), rendering communications discipline a compliance issue in addition to a marketing one. Both exemptions would be non-exclusive. They are unavailable to “bad actors” disqualified under Regulation A’s Rule 262, registered investment companies and business development companies.

The Startup Exemption

Proposed Rule 200 would exempt offers, sales and other distributions of covered investment contracts up to $5 million over up to four years. The exemption is available only once to an issuer and its affiliates for the same or a substantially similar crypto asset, and the issuer may be an entity, an individual or a group.

To use the exemption, an issuer would file a notice of reliance on new Form NOR with the SEC before any covered transaction occurs, certifying its intent to fulfill the promised essential managerial efforts within four years; keep the Rule 103 disclosures freely available on a specified website; update them within 30 calendar days after each year-end if there have been material changes; and file a transition report on new Form TR no later than the end of the four-year period. The Rule 103 information itself would not be filed on EDGAR, making version control and recordkeeping important if questions later arise about what was publicly available and when.

Unlike Regulation D and Regulation Crowdfunding, the startup exemption would impose no accredited investor condition and no individual investment limit, would permit general solicitation, and would not treat the covered investment contracts as restricted securities subject to Rule 144-style holding periods. The SEC’s view is that free tradability supports the network effects that drive token value.

The Fundraising Exemption

Proposed Rules 300 through 307 would create a two-tier offering exemption modeled on Regulation A.

  • Tier 1 would permit up to $20 million of covered investment contracts in a 12-month period (including no more than $6 million by affiliated selling securityholders), with no audit requirement.
  • Tier 2 would permit up to $75 million in a 12-month period (including no more than $22.5 million by affiliated selling securityholders), with financial statements audited under U.S. GAAS or PCAOB standards.

The fundraising exemption would impose a U.S. nexus test drawn from the “foreign private issuer” definition: the issuer must be organized in the United States, a majority of its executive officers or directors must be U.S. citizens or residents, more than 50% of its assets must be located in the United States and its business must be administered principally in the United States.

Issuers would file an offering statement on new Form 1-CRYPTO, modeled on Form 1-A, with a Part II offering circular tracking the Rule 103 topics, a narrative discussion of financial condition modeled on Regulation Crowdfunding and U.S. GAAP financial statements. Regulation A-style offering conditions would carry over, including a 10% of income or net worth investment limit for non-accredited investors, “testing the waters” communications under Rule 304, and a prohibition on at-the-market offerings. Qualified issuers would then be subject to ongoing reporting on new Forms 1-KC (annual), 1-SC (semiannual) and 1-UC (current).

The Investment Contract Safe Harbor

Proposed Rule 400 would provide a non-exclusive, conditional safe harbor from the term “investment contract” in the definitions of “security” in Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act. An issuer satisfies the safe harbor if it (1) has completed or permanently ceased all essential managerial efforts it promised under the covered investment contract, and is not making and does not intend to make new such promises; and (2) files a transition report on Form TR certifying satisfaction of that condition and providing a supporting analysis. The safe harbor is available whether or not the issuer used either exemption.

Three limits deserve attention. The safe harbor rests on the issuer’s own certification and analysis rather than any SEC staff determination or bright-line decentralization metric. The SEC would not be barred from later challenging whether the conditions were actually met, in which case it may argue that the investment contract never ceased to exist. And while the safe harbor would control the SEC’s administration of the federal securities laws, the release states plainly that it “would not prevent other parties from asserting that a crypto asset is subject to an investment contract (or is otherwise a security)”—leaving private plaintiffs and state regulators outside its protection.

Preemption of State Registration and Qualification

Proposed Rule 500 would define “qualified purchaser” for purposes of Securities Act Section 18(b)(3), making covered investment contracts sold under the regime “covered securities” and thus preempting state registration and qualification requirements. Preemption would extend to secondary market transactions by persons other than an issuer, underwriter or dealer in covered investment contracts initially sold under Regulation Crypto Assets or another federal exemption—but only while the issuer remains current with the applicable disclosure, filing and periodic reporting requirements of a Regulation Crypto Assets exemption. Resale preemption can therefore lapse. States would retain their antifraud authority.

Importantly, the proposal does not address whether platforms trading covered investment contracts must register as exchanges, brokers or dealers. Free transferability and blue sky preemption alone would not create a complete federal pathway for secondary trading.

Practical Implications

  • The comment period is a leverage point. The 60-day window is the principal opportunity to shape offering limits, the disclosure topics, the safe harbor conditions, foreign issuer applicability, and the scope of preemption. Commissioner Hester Peirce, who leads the Crypto Task Force, acknowledged that the proposal “will not fit every model” and specifically invited comment on facilitating crypto assets that “serve a role akin to equity.”
  • Disclosure discipline starts now. Because Rule 103 requires consistency with whitepapers, websites and official social media, and because the description of promised “essential managerial efforts” becomes the benchmark against which the safe harbor is later measured, issuers should treat public statements about roadmaps and milestones as securities disclosure.
  • Public companies can mine Rule 103. Issuers with material crypto operations, exposure or treasury strategies may find the Rule 103 topics a useful reference for risk factors, competitive intelligence, and digital asset disclosure even if they never file the new forms.
  • The safe harbor is not a private litigation shield. Counsel should not treat a Form TR filing as an ultimate determination of non-security status. Contractual protections, a defensible, contemporaneous supporting analysis, and ongoing compliance remain essential.

Takeaways

Regulation Crypto Assets would be a significant shift from regulation-by-enforcement toward a defined pathway for crypto asset offerings. Its treatment of resales, general solicitation and state preemption is more permissive than any existing small-offering exemption, providing a regulatory advantage to such crypto offerings as compared to offerings of other securities.

But it targets smaller, unregistered offerings, leaves secondary market intermediary questions unresolved, and its centerpiece safe harbor binds only the SEC. Chairman Paul Atkins framed the package as “minimum effective dose, maximum freedom to build, and durable clarity under existing law,” while cautioning that “legislation remains indispensable to enacting ‘future-proofed’ rules of the road that are durable enough to protect the work we are undertaking today from being unwound by a future rogue regulator.”

With the Senate likely to take an initial vote on the CLARITY Act soon, issuers and market participants would be wise to treat the proposal as only the current state of play in a rapidly changing regulatory environment for crypto assets.

For more information on Regulation Crypto Assets and its implications for crypto asset offerings, disclosure practices and securities law compliance, please contact Scott Gootee, Eric Mikkelson, Andrew Arbuckle or the Stinson LLP contact with whom you regularly work.

The Securities and Exchange Commission (SEC) signaled that it will likely move forward this year with a proposal to loosen the so-called “Pay-to-Play Rule” in Rule 206(4)-5 of the Investment Advisers Act of 1940 intending to restrict investment advisers from obtaining business from public pension plans or other government entities in exchange for political contributions or fundraising support. The disclosure to the White House, made through the interagency regulatory review process, is the clearest signal to date that a formal rule proposal—and a Commission vote—could arrive before year-end.

Background: A Rule Under Pressure

Adopted in 2010 in the wake of pay-to-play scandals involving public pension investments, the Pay-to-Play Rule generally bars an investment adviser from receiving compensation for advising a government entity for two years after the adviser or a “covered associate” makes a political contribution above a de minimis amount ($350 per election for officials the contributor can vote for; $150 for others) to certain state or local candidates or officials with influence over the adviser’s selection. The Rule also restricts using third-party solicitors and coordinating or soliciting contributions on an official’s behalf.

The Rule has drawn criticism as overbroad and difficult to administer. The Rule imposes strict liability for violations, with limited ability to cure, and the “covered associate” and “look-back” provisions can sweep in contributions made before an individual joined the adviser. SEC Chair Paul Atkins has been an outspoken critic, telling a Securities Industry and Financial Markets Association audience in March that the Rule is “a trap for the unwary” and pledging that the Commission would “be addressing that as well this year.” Commissioner Hester Peirce has separately and repeatedly criticized the Rule as “an exceedingly blunt instrument” that chills protected political activity without meaningfully addressing corruption risk.

From the Regulatory Agenda to the White House

The SEC signaled its intentions formally when it added potential amendments to the Pay-to-Play Rule to its Reg Flex Agenda, released July 3, 2026. That entry described a possible proposal to amend Rule 206(4)-5 “to address identified compliance burdens,” without specifying which provisions might change. Industry participants and commentators have floated reform candidates including raising the de minimis contribution thresholds, narrowing the pool of “covered associates,” softening the look-back and look-forward provisions and revisiting the strict-liability enforcement posture.

The SEC’s submission to the White House, a part of the standard interagency review that precedes formal rulemaking, moves the initiative from the agenda stage toward an actual proposal in process. While the submission does not guarantee whether or when the Commission will publish a proposed rule, it suggests the Commission is far enough along in its internal process that a vote to issue a proposal could occur in the coming months

What Would Happen Next

If the Commission votes to issue a proposed rule, the SEC would publish the proposal for public comment, followed by a comment period (typically 30 to 90 days) before the SEC could vote to adopt a final rule. Any changes to the Pay-to-Play Rule would likely apply only prospectively from an eventual compliance date, and the current Rule, including its existing contribution thresholds and two-year compensation “timeout,” remains fully in effect until then.

Practical Implications

  • The current Pay-to-Play Rule still applies. Advisers and their covered associates should continue to comply with Rule 206(4)-5 as written, including its de minimis thresholds and look-back provisions, until any amendments are formally adopted.
  • 2026 midterms heighten the stakes. With midterm election fundraising accelerating, advisers should use this period to refresh training for covered associates and confirm pre-clearance procedures for political contributions, rather than waiting on the prospect of relief.
  • Watch for a formal proposal. A Commission vote to propose amendments (rather than to adopt them) would be the next concrete milestone. Advisers should monitor the SEC’s public agenda and any proposing release for the scope of contemplated changes, particularly to contribution thresholds and the definition of “covered associate.”
  • State and local rules are unaffected. Any SEC reform would not alter the patchwork of more than 300 local pay-to-play ordinances, which often impose separate and sometimes more restrictive requirements.

Takeaway

The SEC’s disclosure to the White House marks a significant step toward the rulemaking Chair Atkins previewed earlier this year, but it is not itself a change in the law. Investment advisers should treat the current Pay-to-Play Rule as fully operative, continue vigilant compliance through the 2026 election cycle and watch for a formal proposing release that would signal the scope and timing of any relief.

We will continue to closely monitor these developments. For more information on the SEC’s potential reform of the Pay-to-Play Rule and its impact on investment adviser compliance programs, please contact Eric Mikkelson, Andrew Arbuckle or the Stinson LLP contact with whom you regularly work.

The Securities and Exchange Commission (SEC) stayed an approval order on August 6, 2026, regarding a Nasdaq rule change that imposes a new minimum Market Value of Listed Securities (MVLS) requirement of $5 million for all companies listed on the Nasdaq Global Select Market, Nasdaq Global Market, and Nasdaq Capital Market. The commission had approved the rule change on July 22 but paused the proposal after opposition pushback. Unlike most continued listing deficiencies, a breach of the $5 million threshold triggers trading suspension and delisting proceedings with no cure or compliance period.

Background

Previously, Nasdaq’s continued listing framework required companies to, among other metrics, satisfy minimum thresholds for bid price and market value of publicly held shares; however, there was no standalone minimum requirement for total MVLS. Now, MVLS (the product of a security’s consolidated closing bid price and its total exchange-listed shares) must be at least $5 million.

Nasdaq filed the proposed rule change on January 13, 2026, and subsequently amended the proposal on June 18, 2026. The $5 million MVLS requirement is designed to protect investors from the heightened susceptibility to fraud and manipulative trading that low-value securities often face, while still preserving an avenue for companies whose decline in market value is only temporary to demonstrate that continued listing remains appropriate. The SEC approved the rule as amended, effective as of the SEC’s July 22, 2026, approval.

The New MVLS Requirement and Its Consequences

The rule change establishes the following framework:

  • Minimum Threshold: All Nasdaq-listed companies must maintain MVLS of at least $5 million on a continuous basis.
  • Automatic Deficiency: If a company’s MVLS falls below $5 million for 30 consecutive business days, Nasdaq will issue a Staff Delisting Determination and immediately suspend trading in the security.
  • No Cure Period: Unlike other deficiencies, there is no cure or compliance period to regain the $5 million MVLS level. The deficiency results in immediate delisting proceedings.
  • No Automatic Stay on Trading Suspension: A timely request for a Hearings Panel review does not stay the suspension of trading (unlike most other listing deficiencies).
  • Limited Hearings Panel Relief: The Panel may only (1) reverse the determination if made in error or (2) grant an exception of up to 180 days for the company to demonstrate compliance with Nasdaq’s initial listing requirements—which are more stringent than continued listing standards.

Key Takeaways

  • Nasdaq-listed companies will face a new, standalone market value compliance requirement. Companies with declining market values will need to closely monitor MVLS levels to identify potential issues before triggering delisting proceedings.
  • The lack of a cure period will make early action critical. Unlike other Nasdaq deficiencies, companies that fall below the $5 million MVLS threshold cannot rely on additional time to regain compliance before suspension and delisting proceedings begin.
  • Boards and management teams need to incorporate MVLS monitoring into ongoing compliance processes. Establishing regular tracking and escalation procedures can help companies evaluate potential solutions before a deficiency becomes more difficult to address.

For more information on the SEC’s stay concerning the Nasdaq’s $5 million MVLS continued listing requirement, please contact Jack Bowling, Cooper Hilton or the Stinson LLP contact with whom you regularly work.

By Scott Gootee, Eric Mikkelson & Andrew Arbuckle

On July 21, 2026, the Securities and Exchange Commission (SEC) published proposed Regulation E-Delivery, a sweeping overhaul of the framework governing how issuers, broker-dealers, investment advisers and other SEC registrants deliver required disclosures to investors. If adopted, the rule would replace the SEC’s decades-old, guidance-based approach to electronic delivery with a modern, rules-based regime that allows electronic delivery to become the default. Comments are due September 21, 2026.

Background: Why This Matters

Under the current framework, most required regulatory disclosures default to paper delivery unless the recipient affirmatively elects to receive them electronically. The “opt-in” process is generally cumbersome, including a multi-step verification process under the E-SIGN Act that has constrained electronic delivery adoption. The result is billions of pages of paper mailings each year.

Regulation E-Delivery would flip the default delivery method from paper to electronic delivery. Rather than requiring recipients to opt in to electronic delivery, the rule would permit covered entities to deliver disclosures electronically unless the recipient opts out. The proposed new regime is permissive, not mandatory. No covered entity would be required to switch to electronic delivery, but those that do would have a clear, rules-based safe harbor to rely on.

Scope and Key Definitions

The proposal is deliberately broad. If adopted, Regulation E-Delivery would apply across the federal securities laws.

“Covered entities” include any person required to deliver information under the federal securities laws: issuers, broker-dealers, investment advisers, registered investment companies, transfer agents, business development companies and parties conducting proxy solicitations or tender offers.

“Covered information” encompasses virtually any disclosure required to be delivered to a covered recipient under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940 or any other of the federal securities laws. This includes issuer prospectuses, annual and periodic reports and proxy and tender offer materials for issuers and third parties (e.g., bidders in a hostile tender offer and dissidents in a proxy contest). For investment companies and investment advisers, covered information includes fund prospectuses, fund annual and semi-annual reports, custody rule account statement notices, Form ADV Part 2 Brochures and Part 3 Form CRS. For broker-dealers, covered information includes trade confirmations, Form CRS and disclosures required under Regulation Best Interest. The proposed rule also exempts covered information from the consumer consent provisions of the E-SIGN Act, to the extent applicable.

“Covered recipients” means any current or prospective customer, client, investor, security holder or similar recipient.

A handful of narrow exclusions apply (e.g., Regulation Crowdfunding, Rule 15c2-11 and security-based swap trade acknowledgments are carved out) but the scope captures the vast majority of routine disclosure delivery obligations.

How the New Default Would Work: Three Conditions

A covered entity may rely on Regulation E-Delivery to satisfy its delivery obligations where three simple conditions are met:

  1. The covered recipient has provided an electronic address (e.g., an email address provided in connection with opening a brokerage account or purchasing securities).
  2. The covered entity has provided a prominent disclosure that it intends to send covered information to that electronic address.
  3. The covered recipient has not opted out of electronic delivery.

Two Permissible Delivery Methods

The proposed rule provides two methods for electronic delivery, depending on the nature of the information:

  1. Direct Delivery: For covered information that does not contain personal financial information (PFI), a covered entity may deliver the document directly to the recipient’s electronic address (e.g., as an email attachment or in the body of an email).
  2. Statement of Availability: For covered information that contains PFI (e.g., trade confirmations or account statements), the covered entity must instead send a notice directing the recipient to a secure location where the information can be accessed, such as a password-protected website. This method may also be used for non-PFI materials at the covered entity’s election.

In both cases, recipients retain the right to opt out at any time free of charge, request a paper copy within three business days by first-class mail and update their electronic address. Covered entities must maintain written policies to identify and remediate failed deliveries.

Impact on Proxy Materials and Prospectuses

With respect to proxy statement delivery, Regulation E-Delivery would eliminate the “Notice of Internet Availability” as a standalone delivery method, moving issuers instead to default electronic delivery through the proposed rule’s two permitted methods. It would also eliminate the longstanding prohibition on using “notice-and-access” for business combination proxy solicitations, extending electronic delivery to transactions that historically required delivery of a full paper set (e.g., mergers). The proposal also would make numerous conforming technical amendments to Regulations 14A and 14C affecting intermediaries, beneficial owner communications, shareholder lists, householding, proxy websites and related proxy processing requirements.

On the prospectus side, Regulation E-Delivery would update the ways Securities Act prospectus obligations may be satisfied–though the proposal would not change substantive Securities Act prospectus delivery obligations. The proposed rule does not displace Rule 172’s “access equals delivery” framework permitting many issuers and other offering participants to satisfy the final prospectus delivery obligation via the filing of the final prospectus. Notably, the SEC is not proposing a broader “access equals delivery” approach but is specifically requesting comment on whether it should.

Transition for Existing Paper Recipients

The proposal includes a thoughtful transition mechanism for recipients currently receiving paper. A covered entity wishing to move these recipients to default electronic delivery must provide two paper notices: (1) an initial notice at least 180 days before the transition; and (2) a follow-up notice 30 days before the transition. Both notices must alert the recipient about the pending switch to electronic delivery, identify the electronic address that will be used and explain the recipient’s right to opt out and continue receiving paper. This transition process does not apply to recipients already receiving information electronically or to covered entities that simply choose not to adopt electronic delivery.

Comment Period and Timeline

Comments are due September 21, 2026, 60 days from the publishing date of the proposal. If adopted, Regulation E-Delivery would become effective 60 days after publication of the final rule, with a two-year transition period during which the SEC’s prior electronic delivery guidance would remain in effect.

Takeaway

Regulation E-Delivery represents the most significant modernization of SEC disclosure delivery mechanics in three decades. For issuers, broker-dealers and investment advisers, it promises meaningful cost savings and operational simplification, particularly for those still managing large-scale paper mailings. The immediate action items are to review the proposal, assess how Regulation E-Delivery would impact existing delivery infrastructure and practices, and prepare for the transition process for covered recipients receiving paper communications.

For more information on the SEC’s proposed Regulation E-Delivery rule and its potential impact on electronic delivery of federal securities law communications, please contact Scott Gootee, Eric Mikkelson, Andrew Arbuckle or the Stinson LLP contact with whom you regularly work.

By Scott Gootee & Andrew Arbuckle

On June 4, 2026, the U.S. Supreme Court unanimously held that the Securities and Exchange Commission (SEC) is not required to prove investors suffered pecuniary loss before seeking disgorgement of ill-gotten gains. The decision in Sripetch v. Securities & Exchange Commission, 146 S. Ct. 1403 (2026) resolves a circuit split regarding the scope of the SEC’s disgorgement authority and preserves disgorgement as key remedy in the SEC’s enforcement toolkit

Background and Procedural History

The case is the Court’s latest chapter in a trilogy addressing the SEC’s disgorgement authority. In Liu v. SEC (2020), the Court held that 15 U.S.C. § 78u(d)(5), which permits the SEC to seek “any equitable relief that may be appropriate or necessary for the benefit of investors,” authorizes disgorgement, subject to traditional equitable principles, including that awards be limited to net profits and be “awarded for victims.” Shortly thereafter, Congress codified § 78u(d)(7), expressly adding “disgorgement” to the SEC’s statutory enforcement tools.

The SEC alleged that Ongkaruck Sripetch engaged in fraudulent penny-stock schemes involving at least 20 companies, including classic “pump-and-dump” operations. Sripetch consented to a district court order finding that he engaged in fraudulent schemes netting more than $6.6 million in illicit proceeds but objected when the SEC sought over $4.1 million in disgorgement.

Sripetch argued that, because the SEC lacked evidence that investors suffered any financial harm, there were no “victims” for whom disgorgement could be awarded under Liu. The SEC disagreed, arguing that investors who did not lose money could still be considered “victims” under Liu and separately contended that its evidence sufficiently demonstrated that investors had suffered financial harm as a result of Sripetch’s wrongdoing. The district court sided with the SEC without deciding whether proving investors suffered financial harm is required as a prerequisite.

On appeal, the Ninth Circuit held that a finding of pecuniary harm is now required before a court orders disgorgement, joining the First Circuit and deepening a split with the Second Circuit, which had required a showing of pecuniary harm. The Supreme Court granted certiorari to resolve the further deepened circuit split.

The Court’s Holding and Key Reasoning

The Court unanimously sided with the First and Ninth Circuits, holding that the SEC is not required to prove investor pecuniary harm to obtain disgorgement. Without deciding whether Congress’s addition of § 78u(d)(7) altered the nature of the SEC’s disgorgement remedy, the Court assumed that disgorgement remains an equitable remedy subject to traditional equitable constraints. The Court concluded that traditional equitable principles do not require a showing of pecuniary loss and that a “victim” under Liu is any person whose legally protected interests were invaded, not just those who suffered measurable financial harm.

The reasoning rests on a fundamental distinction between legal damages and equitable disgorgement. Damages are measured by a plaintiff’s loss, whereas disgorgement is measured by a defendant’s gain. Under traditional equitable principles, a person whose legally protected interests have been invaded may recover the wrongdoer’s profits from that invasion, even without “any loss.” The Court surveyed historical cases illustrating this principle, including disputes over unauthorized use of easements, property, and personal chattels where courts stripped defendants of profits despite the plaintiff suffering no measurable financial harm.

Justice Thomas’s Concurrence

Justice Thomas joined the majority’s holding but wrote separately to urge that, in a future case, the Court should recognize that disgorgement under § 78u(d)(7) is a legal remedy subject to the Seventh Amendment right to a jury trial. He argued that Congress’s decision to enumerate disgorgement in a separate subsection, assign it a distinct statute of limitations and separate it from “equitable relief” all suggest a legislative reclassification. He further noted that in 2024, the SEC obtained $6.1 billion in disgorgement orders while returning only $345 million to victims, a disparity he characterized as resembling a fines regime rather than equitable relief.

Practical Implications

  • The “no-loss” defense is gone. Defendants can no longer rely on the absence of investor financial harm as a complete bar to disgorgement where the alleged conduct invaded legally protected investor interests and generated unjust gains. This is particularly significant in insider trading, market manipulation, nondisclosure and registration-failure matters, situations in which investor losses are often difficult to quantify or hard to trace.
  • The focus shifts to other limitations. Defendants should now concentrate on whether the SEC can establish (1) the amount of net profits attributable to the violation; (2) a causal link between the wrongdoing and the gains sought; and (3) compliance with victim-distribution requirements.
  • Evaluate the SEC’s distribution plans. The Court cautioned that if the SEC uses disgorgement as a vehicle to collect penalties for the U.S. Treasury rather than compensate victims, that would depart from what § 78u(d)(5) permits. Defendants should scrutinize whether the SEC’s proposed use of disgorged funds crosses the line from compensation into penalty territory.
  • Jury trial demands to the forefront. Justice Thomas’s concurrence suggests that the Seventh Amendment question will reach the Court. Defendants in litigated cases should assess the risks and benefits of demanding a jury trial, particularly where the SEC seeks disgorgement without simultaneously seeking civil penalties (in which case a jury right already attaches under SEC v. Jarkesy).

Takeaway

Sripetch enhances the SEC’s ability to enforce disgorgement actions. Following Sripetch, the SEC is not required to prove that investors suffered measurable financial harm but demonstrate only that a defendant obtained gains through conduct that infringed investors’ legally protected interests. With the Seventh Amendment question now firmly teed up, SEC disgorgement litigation in the near term could look materially different.

For more information on the SEC’s disgorgement authority following the Supreme Court’s decision in Sripetch v. Securities & Exchange Commission, please contact Scott Gootee, Andrew Arbuckle or the Stinson LLP contact with whom you regularly work.

By Phil McKnight, Eric Mikkelson & Andrew Arbuckle

The DOL’s Proposed Safe Harbor and What It Means for Asset Managers, Advisers, and Plan Sponsors

On March 30, 2026, the U.S. Department of Labor (DOL) released a proposed rule titled “Fiduciary Duties in Selecting Designated Investment Alternatives” (the Proposed Rule), which would establish a process-based safe harbor for plan fiduciaries selecting investment options for 401(k) plans, including options with exposure to alternative assets such as private equity, private credit, real estate, and infrastructure. The Proposed Rule implements Executive Order 14330, which President Trump signed on August 7, 2025, directing the DOL to clarify fiduciary duties under ERISA and to prioritize actions that curb litigation risk constraining fiduciaries’ judgment in offering alternative investment opportunities. Importantly, the Proposed Rule does not currently provide an operative regulatory safe harbor. However, because it reflects the DOL’s current view regarding prudent investment selection, fiduciaries evaluating alternative investments may wish to begin incorporating the proposal’s six-factor analytical framework and enhanced documentation practices now, even before issuance of final regulations.

The Proposed Rule is broader than many expected: rather than limiting its scope to alternative assets, it provides a framework applicable to the selection of any designated investment alternative (DIA), consistent with the DOL’s historically neutral approach across asset classes. The rule arrives as part of a coordinated federal initiative. The Securities and Exchange Commission (SEC), U.S. Department of Treasury, and DOL are coordinating efforts to expand private market access for retirement savers, with the Treasury focusing on regulatory streamlining and the SEC and DOL addressing investor protection. At the same time, the SEC’s 2026 examination priorities emphasize duty of care and loyalty obligations for firms serving retail investors, signaling that expanded access will be paired with closer regulatory scrutiny.

The Six-Factor Safe Harbor

The Proposed Rule identifies six non-exclusive factors that fiduciaries would need to “objectively, thoroughly, and analytically” consider and utilize in selecting a DIA. Under the proposed framework, when a fiduciary adequately considers these factors when selecting a particular investment, courts would “presume” the fiduciary’s judgment satisfied the duty of prudence and would give it “significant deference.” The safe harbor itself will not become available unless and until final regulations are issued. Nevertheless, prudent fiduciaries may wish to begin adopting elements of the proposed framework now because it provides a detailed roadmap for how the current DOL views the duty of prudence. When a plan’s investment options consist of mutual funds, collective investment trusts (CIT), and exchange-traded funds—all of which price daily and trade on public markets—liquidity and valuation are essentially non-issues. Regulators already require these funds to manage liquidity and report accurate values. As a result, fiduciary committees reviewing traditional menus spend most of their time on performance, fees, and benchmarking. The DOL’s examples confirm this: for registered funds, fiduciaries can simply rely on existing regulatory compliance. The six-factor analysis becomes meaningfully more demanding only when alternative assets enter the picture. The six factors are:

  • Performance. Under the Proposed Rule, the fiduciary would be expected to consider the DIA’s risk-adjusted expected returns over an appropriate time horizon, net of fees. Fiduciaries would not be required to select the highest-return option and, given the long-term nature of retirement savings, it may be prudent to give greater weight to long-term historical performance over short-term performance.
  • Fees. Under the Proposed Rule, the fiduciary would need to consider a “reasonable number” of “similar” investment alternatives and determine that fees are appropriate, taking into account risk-adjusted expected returns and any other value (including benefits, features, or services) the investment brings to furthering the purposes of the plan. The Proposed Rule expressly rejects a lowest-cost requirement: the fiduciary would not violate its duties solely because it does not select the alternative with the lowest fees.
  • Liquidity. Under the Proposed Rule, the fiduciary would need to determine that the selected investment will have sufficient liquidity to meet plan and participant needs. Some illiquidity may be acceptable if prudently balanced against additional risk-adjusted returns. For example, for investments with redemption restrictions not subject to the Investment Company Act of 1940 (the 1940 Act), the Proposed Rule provides that, as a safe harbor avenue, the fiduciary may rely on manager representations that the fund has adopted a liquidity risk management program “substantially similar” to one meeting the 1940 Act liquidity risk management requirements.
  • Valuation. Under the Proposed Rule, the fiduciary would need to determine that the DIA can be timely and accurately valued. For investments that include alternative assets without a generally recognized market, the fiduciary would need to determine that the assets are valued through an independent, conflict-free process that satisfies generally recognized accounting standards.
  • Benchmarking. Under the Proposed Rule, each DIA would need to have a meaningful benchmark, which the DOL defines as “an investment, strategy, index, or other comparator that has similar mandates, strategies, objectives, and risks.” Composite and custom benchmarks are permitted. The Supreme Court’s pending decision in Anderson v. Intel (certiorari granted January 2026), which addresses whether ERISA plaintiffs must plead a “meaningful benchmark” to state a prudence claim, makes this factor especially important to watch.
  • Complexity. Under the Proposed Rule, the fiduciary would be expected to assess whether it has the skill and capacity to comprehend the investment sufficiently or whether to seek professional assistance. Fiduciaries would not be precluded from selecting complex strategies, provided they secure sufficient information to understand the risks.

The Proposed Rule includes for each of the six factors multiple examples describing how a fiduciary might consider that factor when selecting an investment, emphasizing that there is no “one-size-fits-all” approach to DIA selection.

The proposed safe harbor addresses only the duty of prudence in selecting a DIA. It does not cover ongoing monitoring obligations (though the DOL has indicated it will issue separate interpretive guidance on monitoring), prohibited transactions, diversification, or the duty of loyalty. Again, while the safe harbor protections would not become available until final regulations are issued, the six-factor framework reflects the DOL’s current expectations for prudent fiduciary decision-making.

CITs: The Emerging Vehicle of Choice

The Proposed Rule is expected to accelerate the development of alternative-asset products for 401(k) plans, many of which will be structured as CITs. A CIT is a bank-maintained pooled investment vehicle exempt from SEC registration under Section 3(c)(11) of the 1940 Act. Banks and trust companies maintain CITs under the Office of the Comptroller of the Currency or state banking authority. CITs are available only to qualified retirement plans and certain institutional investors, and they operate under a bank-trustee governance model rather than an independent board.

CITs offer several structural advantages for delivering alternative asset exposure. Without SEC registration or prospectus requirements, they operate at lower cost. They also offer flexibility that registered funds cannot easily match: multiple share classes, tailored fee schedules, and liquidity management tools such as “liquid sleeves,” redemption queues, and gates.

However, the Proposed Rule’s safe harbor examples reference 1940 Act compliance as the benchmark for liquidity and valuation, which is straightforward for registered funds. For CITs, the examples suggest that liquidity and valuation provisions must be “substantially similar” to 1940 Act standards—raising questions about who decides whether that standard is met. This tension may be addressed in the final rule.

Practical Takeaways

The Proposed Rule carries practical implications for asset and fund managers, investment advisors and broker-dealers, and plan sponsors as they gear up for what could be a significant opportunity.

For Alternative Asset and Fund Managers

For asset and fund managers, the Proposed Rule lays out the framework under which such persons can create new, more diversified investment products with asset categories not traditionally found in participant-directed 401(k) plans and introduce these alternative investment products within a zone of safety from certain fiduciary challenges under ERISA section 404. Managers may find opportunity in designing products that make it straightforward for fiduciaries to demonstrate compliance with each factor. As plan fiduciaries would likely rely heavily on written manager representations (particularly regarding valuation, liquidity, and fees), managers may want to begin preparing comprehensive, institutionally rigorous due diligence responses.

The Proposed Rule supplements but does not replace existing ERISA fiduciary standards. Practical obstacles that have historically limited access to alternative asset investments remain. Such obstacles exceed the scope of this discussion, but include, for example, the ERISA “25% Test”: if benefit plan investors hold 25% or more of any class of equity interests in an entity, that entity’s assets become “plan assets” subject to ERISA’s fiduciary and prohibited transaction rules. CITs themselves are exempt because they are established for the exclusive benefit of plan investors, but the private funds held by CITs may not be.

For Investment Advisers and Broker-Dealers

The Proposed Rule creates new demand for advisory services aligned with ERISA’s fiduciary framework. From an Investment Advisers Act of 1940 (Advisers Act) perspective, managers building 401(k) products should note that their contractual client is typically the fund, the target-date fund (TDF) manager, or another fiduciary decision-maker—not individual participants—creating a dual compliance lens: SEC and Advisers Act requirements for the pooled vehicle, and ERISA/DOL requirements for the 401(k) context. Private funds relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act cannot be offered through defined contribution plans without restructuring, as those exemptions restrict marketing and impose investor-counting requirements incompatible with participant-directed plans. Managers may wish to evaluate whether 1940 Act-registered structures (such as interval funds or non-traded business development companies) or CITs are the more appropriate vehicle for their strategy.

Broker-dealers facilitating alternative investment products with plan sponsors will want to carefully evaluate the boundary between activity governed under SEC Regulation Best Interest (Reg BI) and the assumption of ERISA fiduciary status. Reg BI requires broker-dealers to act in the best interest of retail customers, but that standard differs from ERISA’s fiduciary obligations, particularly with respect to ongoing monitoring duties and conflicts management. A broker-dealer deemed to have provided “investment advice” under ERISA Section 3(21) could find itself subject to full ERISA fiduciary status, with attendant litigation exposure. The practical distinction is significant: Reg BI triggers point-of-sale obligations, whereas ERISA fiduciary advice creates an ongoing duty relationship. Broker-dealers may wish to consider structuring engagement models to delineate clearly between non-fiduciary activity and fiduciary advice.

The SEC’s 2026 examination priorities target duty of care and duty of loyalty for firms serving retail investors, while recent Marketing Rule enforcement has focused on retail-facing advertising and conflicts management. Given that 401(k) participants are positioned similarly to retail investors, managers and broker-dealers should anticipate heightened scrutiny. Managers may want to review fund documentation and marketing materials for defined contribution-oriented alternative products for Marketing Rule compliance, including verification of performance claims, disclosure of material risks, and substantiation of any comparative statements.

For Plan Sponsors and Fiduciaries

The proposed safe harbor rewards documented process, not investment outcomes. Although the safe harbor itself will not become available unless and until final regulations are issued, prudent plan sponsors and fiduciaries may wish to begin incorporating elements of the proposed framework now—both because it provides a detailed roadmap for how the DOL views the duty of prudence and because doing so will position them to take advantage of the safe harbor when it becomes operative. Sponsors and fiduciaries may wish to begin discussions with their ERISA counsel and their plan’s ERISA Section 3(21) investment advisors or Section 3(38) investment managers to assess whether and when alternative asset exposure may be appropriate for their participants. As the regulatory landscape develops, sponsors may wish to consider several preparatory steps going forward:

  • Audit existing fiduciary review procedures against the six-factor framework, including investment policy statements, committee charters, and RFPs for new products and advisors, and assess whether and when they should be updated to reflect the proposed safe harbor criteria.
  • Develop standardized due diligence questionnaires that map to the proposed safe harbor’s requirements. Plan fiduciaries may rely on written representations from investment managers and advisors to satisfy many of the safe harbor factors, particularly for liquidity, valuation, and benchmarking—but those representations must be solicited, documented, and understood.
  • Maintain robust, contemporaneous documentation of fiduciary committee deliberations—including the six-factor analysis, due diligence findings, manager representations, and the rationale for each investment decision. In ERISA fiduciary litigation, “prudence is process,” and documenting that process is essential protection.

The most likely near-term opportunity for plan sponsors and fiduciary committees is evaluating a TDF that incorporates exposure to diversified investment alternatives (e.g., private equity, private credit, and infrastructure funds)—such as a TDF with an illustrative 5–10% private markets allocation—rather than adding a stand-alone alternative investment option. TDFs are already the dominant allocation channel in defined contribution plans, and embedding alternative exposure within a TDF allows participants to access these asset classes without navigating complex stand-alone vehicles. Several major TDF providers have announced or launched products with private capital sleeves, positioning this channel as the early mover for alternative asset adoption.

Key Takeaways

  • The DOL’s Proposed Rule would establish a process-based safe harbor for selecting 401(k) investment options, potentially reducing litigation risk for fiduciaries that follow a documented review process. Although the safe harbor is not yet operative, the proposal is expected to accelerate access to alternative investments in defined contribution plans.
  • The proposal emphasizes process over outcomes, focusing on factors such as performance, fees, liquidity, valuation, benchmarking and complexity. Fiduciaries may wish to begin incorporating the framework into investment review and documentation practices now, as it reflects the DOL’s current view of prudent decision-making.
  • CITs are expected to play a significant role in expanding access to private market investments within 401(k) plans. However, questions remain about how certain liquidity and valuation standards will apply under a final rule.
  • The proposal could create new opportunities for asset managers, advisers and broker-dealers as demand for alternative investment products grows. Firms should also prepare for increased scrutiny of fiduciary obligations, disclosures and compliance practices.

Looking Ahead

The public comment period for the Proposed Rule closed on June 1, 2026. The proposal generated substantial public interest: as of the date of this publication, the Regulations.gov docket reported 47,103 comments received and 39,296 comments publicly posted. The final rule could change materially in response to the comments the DOL receives. The Supreme Court’s forthcoming decision in Anderson v. Intel, which the Court will not hear arguments on until Fall 2026, will likely shape the pleading standard for ERISA prudence claims and the practical value of the proposed safe harbor’s benchmarking factor. The DOL has indicated it will issue separate interpretive guidance on the ongoing duty to monitor DIAs. Congressional activity, including the pending Retirement Investment Choice Act, could give Executive Order 14330 the “force and effect of law.” And in the broader market, practitioners and investment advisors expect the Proposed Rule to accelerate CIT product development and TDF partnerships with alternative asset managers, with industry analysts (including Deloitte) projecting that private capital in defined contribution plans could exceed $1 trillion by 2030.

The regulatory trajectory is clear, and the market is already moving. Those who begin laying the legal, operational, and product infrastructure in the coming months will be well positioned when the regulatory path is settled.

For more information on how these developments may affect your plan’s investment processes, product design strategy, or compliance programs, please contact Phil McKnight, Eric Mikkelson, Andrew Arbuckle, or the Stinson LLP contact with whom you regularly work.

By Eric Mikkelson & Carissa Occhipinto

On March 17, 2026, the Securities and Exchange Commission (SEC) issued an Interpretative Release related to how federal securities laws will be applied to many cryptocurrency assets and related transactions. This release clarifies the SEC’s approach in an area otherwise historically challenged with much uncertainty, especially with respect to the fundamental regulatory question of which crypto assets are considered securities and which aren’t.

The Commodity Futures Trading Commission (CFTC) joined the interpretation, confirming the CFTC will administer the Commodity Exchange Act consistent with the SEC’s interpretation. Some crypto assets that are not considered securities will instead meet the definition of “commodity” and thus be regulated by the CFTC.

This new guidance is part of a series of recent federal regulatory decisions, guidance, laws and orders, including Project Crypto launched by the SEC last year, which have provided substantially greater clarity in this growing sector of the economy.

Classification of Crypto Assets

In its interpretation, the SEC identified four types of crypto assets that are not considered securities under federal securities laws:

  • Digital Commodities: crypto assets that are intrinsically linked to and derive their value from the programmatic operation of a functional crypto system.
  • Digital Collectibles: crypto assets that are designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends.
  • Digital Tools: crypto assets that perform a practical function, such as memberships, tickets, credentials, title instruments, or identity badges.
  • Stablecoins: payment stablecoin issued by a permitted payment stablecoin issuer, as defined in the recent GENIUS Act.

This release also confirmed that digital securities (or “tokenized securities”) are financial instruments that fall within the definition of “security” under federal securities laws. Digital securities are formatted as or represented by a crypto asset, where the record of ownership is maintained in whole or in part on or through one or more crypto networks.

Investment Contracts

In addition, the SEC explained that otherwise non-security crypto assets may be considered securities and thus subject to federal securities laws if offered and sold pursuant to an investment contract. This occurs, for example, when there is an investment of money in a common enterprise with a reasonable expectation of profits derived from the essential managerial or entrepreneurial efforts of others, based on the issuer’s representations or promises. These tests flow from the long-standing “Howey test” articulated by the U.S. Supreme Court on the question of what is and what isn’t a security, found in SEC v. W.J. Howey Co.

The analysis focuses on the nature of the issuer’s representations or promises necessary to form an investment contract. Specifically, explicit and unambiguous (written or oral) representations demonstrating the issuer’s ability to implement the proposed project and provide profits to the purchaser resulting from managerial efforts by the issuer are more likely to give rise to reasonable reliance. On the other hand, vague or generalized statements are unlikely to do so.

Furthermore, otherwise non-security crypto assets that are determined to be securities for a time for reasons described above can cease to be subject to federal securities laws if the relevant investment contract no longer exists or terminates. This happens when the issuer has either fulfilled its representations or promises or has failed to satisfy its representations or promises.

The release further explains that “protocol mining,” “protocol staking,” and the “wrapping” of an otherwise non-security crypto asset do not generally involve the offer and sale of a security, and that certain crypto asset disseminations known as “airdrops” do not involve an investment of money under Howey.

As an interpretation of the SEC’s views, the release states that it takes effect immediately.

Applying Howey to evolving crypto assets and transactions can be challenging because of the novelty, variety and evolving nature of such products. The release provides additional significant clarity in the space.

For more information on the SEC’s interpretative guidance on cryptocurrency asset classification and regulation, please contact Eric Mikkelson or the Stinson LLP contact with whom you regularly work.

The Securities and Exchange Commission, with aligned guidance from the Commodity Futures Trading Commission, issued a comprehensive interpretation clarifying how federal securities laws apply to crypto assets and certain crypto transactions. The release introduces a functional taxonomy, explains when non‑security crypto assets can become subject to an investment contract under Howey, and addresses the securities status of protocol mining, protocol staking, wrapping, and airdrops. The agencies intend to administer their statutes consistent with this interpretation and are soliciting public comment. The interpretation is effective upon publication.

A Practical Taxonomy: Five Buckets

  • Digital commodities: Native assets of functional crypto systems whose value is tied to programmatic operation and supply/demand—not to expected profits from others’ essential managerial efforts. They may enable staking, governance, and pay “gas” fees. The assets themselves are not securities.
  • Digital collectibles: Assets designed for collection or use (e.g., art, music, in‑game items, memes). They may carry limited IP licenses or creator royalties, but do not convey rights to income, profits, or assets of an enterprise. Fractionalization can introduce securities issues.
  • Digital tools: Functional utilities (e.g., membership, ticket, credential, title, identity badges), often non‑transferable. Value is in utility; the tools themselves are not securities.
  • Stablecoins: A broad category designed for price stability. By statute, a “payment stablecoin” issued by a permitted issuer under the GENIUS Act will be excluded from the securities definition when the Act becomes effective. Prior to effectiveness, the SEC interprets “Covered Stablecoins,” as described in the staff’s 2025 statement, as not securities. Other stablecoins may be securities depending on facts and circumstances.
  • Digital securities: Tokenized versions of instruments enumerated in the securities definition, or structured rights to distributions from a centrally managed enterprise. Format does not affect substance—securities remain securities whether onchain or offchain.

When a Non‑Security Crypto Asset Becomes a Security via Howey

  • Creation of an investment contract: A non‑security crypto asset becomes subject to an investment contract when an issuer induces an investment of money in a common enterprise by making representations or promises to undertake essential managerial efforts from which purchasers would reasonably expect profits.
  • What matters: The source, content, timing, and channel of issuer communications. Explicit, detailed promises (e.g., milestones, resourcing, timelines, how profits may arise) conveyed through formal channels (agreements, website, official social media, whitepaper, regulatory filings) are more likely to create reasonable profit expectations. Vague statements or post‑sale promises do not.
  • Secondary market implications and “separation”: The asset does not transform into a security. But the associated investment contract can “travel” with the asset in secondary trades if purchasers would reasonably expect the issuer’s promised essential managerial efforts to remain connected. The connection can cease—separating the asset from the investment contract—when:
    • Fulfillment: The issuer completes the promised essential efforts (e.g., achieves stated functionality, decentralization, or open‑sources code), and publicly discloses completion.
    • Abandonment/failure: The issuer clearly and publicly announces it will no longer perform the promised essential efforts, or sufficient time has passed without performance and investors would no longer reasonably expect those efforts.
  • Continuing obligations: The offer and sale of an investment contract must be registered or exempt, regardless of later separation. Anti‑fraud liabilities for misstatements or omissions remain.

Airdrops: When No “Investment of Money,” No Investment Contract

  • Covered airdrops: Disseminations of non‑security crypto assets where recipients provide no money, goods, services, or other consideration in exchange for the airdropped assets.
  • Examples within the interpretation:
  • Unannounced airdrops to holders of a specified asset.
  • Post‑facto airdrops to users of a testing environment for a prior period, with no prior announcement or conditioning.
  • Unannounced, free airdrops to users based solely on prior use of a related application.
  • Exclusions: If recipients must provide consideration (e.g., purchases, services, tasks) in exchange for the airdropped asset, the interpretation does not apply. The analysis addresses only the “investment of money” prong of Howey.
  • Note: Even if an airdropped asset is not subject to an investment contract at dissemination, later transactions could create an investment contract (e.g., subsequent offers/sales).

The Department of Treasury has issued an Advance Notice of Proposed Rulemaking (ANPRM) to implement the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Comments are due October 20, 2025.

Through this ANPRM, Treasury is seeking public comment on potential regulations that may be promulgated by Treasury, including regarding regulatory clarity, prohibitions on certain issuances and marketing, Bank Secrecy Act (BSA) antimony laundering (AML) and sanctions obligations, the balance of state-level oversight with federal oversight, comparable foreign regulatory and supervisory regimes, and tax issues, among other things.

Treasury is seeking comment on all aspects of the ANPRM from all interested parties and also requests commenters to identify other issues that Treasury should consider. However, the ANPRM poses questions for comments with respect to the following areas:

  • Stablecoin Issuers and Service Providers
  • Illicit Finance
  • Foreign Payment Stablecoin Issuers
  • Taxation
  • Economic Data
  • Other Topics