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

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

Overview

On September 17, 2025, the Securities and Exchange Commission (SEC) issued a final rule and policy statement clarifying that the inclusion of mandatory arbitration provisions between issuers and investors will not affect the staff’s decision to accelerate the effectiveness of registration statements under the Securities Act of 1933. The SEC’s new policy focuses on the adequacy of disclosures in registration statements, including those related to arbitration provisions, and confirms that federal securities statutes do not override the Federal Arbitration Act (FAA) in this context.

Key Takeaways

  • No Impact on Acceleration Decisions: The presence of issuer-investor mandatory arbitration provisions in registration statements will not influence the SEC staff’s decision to accelerate effectiveness. The staff will instead focus on whether the registration statement provides complete and adequate disclosure, including clear information about any arbitration provisions.
  • Federal Arbitration Act Prevails: The SEC’s analysis, informed by recent Supreme Court precedent, concludes that the FAA’s policy favoring arbitration agreements is not displaced by federal securities statutes. There is no “clearly expressed congressional intention” in the securities laws to override the FAA with respect to issuer-investor arbitration provisions.
  • Disclosure is Paramount: The SEC emphasizes that any issues related to the enforceability or appropriateness of arbitration provisions are best addressed through robust disclosure in the registration statement, rather than through the acceleration process.
  • State Law Considerations Remain: While the SEC’s policy is clear at the federal level, state laws may still impact the permissibility or enforceability of mandatory arbitration provisions. For example, recent amendments to Delaware law may restrict such provisions in corporate charters or bylaws.
  • No Endorsement of Arbitration Provisions: The SEC does not express a view on the merits or appropriateness of mandatory arbitration provisions for issuers or investors, nor does it opine on the enforceability of any specific provision.

Legal and Practical Implications

  • Issuer Certainty: Issuers seeking to include mandatory arbitration provisions in their governing documents or offering materials can do so without concern that such provisions will delay or prevent the acceleration of their registration statements, provided disclosures are adequate.
  • Investor Considerations: The adoption of mandatory arbitration provisions may affect investors’ ability to bring class actions or pursue claims in court, potentially impacting the cost and outcome of dispute resolution. However, the SEC’s policy does not address the substantive fairness or enforceability of such provisions, which may still be subject to state law or judicial review.
  • Market Dynamics: The SEC acknowledges that the new policy may influence issuer behavior, potentially leading to broader adoption of arbitration provisions. However, the ultimate impact will depend on market forces, including investor preferences, proxy advisory firm recommendations, and stock exchange requirements.
  • No New Regulatory Burden: The policy statement does not impose new rules or requirements on issuers but clarifies the SEC’s approach to a recurring issue in the registration process.

Conclusion

The SEC’s final rule provides clarity for issuers and market participants regarding the treatment of mandatory arbitration provisions in registration statements. By deferring to the FAA and focusing on disclosure, the SEC aims to provide regulatory certainty while leaving substantive questions about the appropriateness and enforceability of arbitration provisions to other forums. Issuers should ensure that any such provisions are clearly disclosed and consider potential state law and market reactions before adoption.

The U.S. Department of the Treasury issued a Request for Comment required by the  Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the GENIUS Act, which furthers the Trump Administration’s policy of supporting the responsible growth and use of digital assets, as outlined in Executive Order (E.O.) 14178 on “Strengthening American Leadership in Digital Financial Technology.”  A press release indicates the request for comment fulfills Treasury’s obligation pursuant to section 9(a) of the GENIUS Act, which creates a comprehensive regulatory framework for stablecoin issuers in the United States.

 The Genuis Act is U.S. legislation focused on the regulation of stablecoins, specifically “payment stablecoins”. It aims to create a comprehensive framework for the issuance, redemption, and oversight of these digital assets, prioritizing consumer protection, fostering innovation, and strengthening the US dollar’s status as a global reserve currency.

This request for comment offers the opportunity for interested individuals and organizations to provide feedback on innovative or novel methods, techniques, or strategies that regulated financial institutions use, or could potentially use, to detect illicit activity involving digital assets.  In particular, Treasury asks commenters about application program interfaces, artificial intelligence, digital identity verification, and use of blockchain technology and monitoring.

Halinski v. ADS Grp. Acquisition, LLC (Del. Ch. (7/25) discusses the propriety of indemnification claims.  The relevant SPA deferred payment of a $4,439,000 Tax Holdback to cover certain possible post-closing tax liabilities. Over time, the SPA required Purchaser to release the Tax Holdback to Sellers in three unequal installments.  Purchaser released the First Intermediate Tax Holdback, but never paid the Second Intermediate Tax Holdback. The seller representative filed suit to recover the unpaid Tax Holdback.

On the eve of the deadline to respond to the Complaint, Purchaser sent an indemnification demand to Sellers. The indemnification demand alleged Sellers breached certain representations and warranties in the SPA.  However, Purchaser did not follow Section 7.07 of the SPA which included a dispute resolution provision which provided that in the event of a dispute the parties were to negotiate in good faith to resolve the dispute before pursuing remedies.

 Purchaser sought to avoid compliance with the dispute resolution provision by asserting compliance would be futile.  

The Court noted Delaware courts regularly enforce contractual pre-suit dispute resolution provisions.  According to the Court, courts excuse noncompliance with a pre-litigation dispute resolution provision where it “would be futile in achieving its intended purpose.” Performance is futile “only when the defaulting party expressly and unequivocally repudiates the contract or where the actions of the defaulting party have rendered future performance of the contract by the non-defaulting party impractical or impossible.  Those circumstances were not present here, and the court found Purchaser’s position insufficient to prevent distribution of the Second Intermediate Tax Holdback.

Purchaser also claimed it could set off the indemnification claim against the Second Intermediate Tax Holdback. The Court rejected that argument.  The reason was the SPA specifically required any remedy for breach of a representation to be recovered from a distinct holdback arrangement and after that from an R&W insurance policy.

The Delaware Court of Chancery dismissed three claims in Ritchie v. Baker (6/25). Broadly speaking, the plaintiff failed to adequately plead demand futility under Court of Chancery Rule 23.1 because the complaint did not establish that a majority of the demand board faced a substantial likelihood of liability on non-exculpated claims.

The plaintiff sought to sue derivatively on behalf of Corcept Therapeutics, Inc.  Corcept is a pharmaceutical company that derives most of its revenue from a single drug, Korlym, which treats endogenous Cushing’s syndrome. In early 2019, investigative reports claimed Corcept had increased profits by marketing Korlym for off-label uses in violation of federal law. Litigation followed.

The three claims alleged by plaintiff were as follows:

  • Caremark Theory:  The defendants breached their fiduciary duties by failing to adequately oversee operations at Corcept that resulted in a corporate trauma.
  • Massey Theory: The defendants breached their fiduciary duties by causing Corcept to violate positive law.
  • Malone Theory: The defendants breached their fiduciary duties by deliberately issuing false or misleading disclosures.

The Court also noted that Caremark liability was an “ill fit” for the facts alleged because the company had not suffered “enormous legal liability” or any corporate trauma but rather had experienced dramatic revenue growth during the relevant period. In addition, the Court reasoned that the complaint contradicted itself by alleging both that the board failed to implement adequate oversight systems and that the board was “well-informed” of “all significant Korlym-related matters.” The Court found that the board had implemented reporting systems through regular board and audit committee meetings where Korlym marketing and sales were discussed.

Likewise, there was no basis for a “red flag” claim under Caremark.  The Court found that none of the alleged red flags (marketing to non-specialist physicians, prescriber “whales,” and changing specialty pharmacies) would have alerted the board to illegal activity. The Court noted that the complaint failed to allege facts supporting a reasonable inference that the board knew about or consciously disregarded evidence of illegal marketing practices.

On the Massey claim, the Court determined that the complaint failed to allege that directors purposely caused the company to violate the law, which is an even higher burden than alleging conscious disregard under Caremark.  The Court stated the Complaint falls short of alleging red flags that should have alerted the director defendants to an illegal scheme, let alone that the director defendants knew about and purposely caused the violations.

With respect to the Malone claim, the Court concluded that without adequately alleging the directors knew of an off-label marketing scheme, the complaint failed to establish the scienter necessary for a disclosure violation claim.

The SEC has withdrawn proposed rules captioned “Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals Under Exchange Act Rule 14a-8″. In conjunction therewith the SEC announced “The Commission does not intend to issue final rules with respect to these proposals.”

The SEC also withdrew 13 other proposed rules related to the Division of Investment Management and Division of Trading and Markets.

The SEC announced today that it will host a roundtable on June 26, 2025, to discuss executive compensation disclosure requirements. The roundtable’s agenda and speakers will be disclosed at a later date.

Concurrently with the announcement of the roundtable, SEC Chairman Paul S. Atkins issued a statement regarding the roundtable, including questions for the staff to consider.  Chairman Atkins noted “While it is undisputed that [the executive compensation rules], 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.”

The nine questions posed by Chairman Atkins pretty much cover the waterfront on the patchwork of disclosure requirements implemented by the SEC over the years.  The topics include compensation discussion and analysis, say-on-pay, pay versus performance and perquisites.  Interested persons can submit comments as noted in the two statements.

Amongst the issues discussed in a Delaware Chancery Court opinion in a case captioned In re Plug Power Inc. Stockholder Derivative Litigation, was whether SEC comment letters formed a basis for a Caremark Claim.

The Company received five comment letters from the SEC between mid-2018 and early 2021. The letters were dated September 5, 2018, April 24, 2019, June 20, 2019, December 16, 2020, and February 10, 2021. The Company responded to the letters on September 19, 2018, May 8, 2019, July 5, 2019, and January 14, 2021.12  The allegations reflect that the Audit Committee discussed SEC letters during that period, although there was scant mention of those letters in the minutes.

The comment letters inquired into the following, among other things:

  • Discussing revenue and gross profit on a gross basis excluding the effects of the provision for the fair value of warrants issued as sales incentives;
  • Presenting non-GAAP measures that substitute individually tailored revenue recognition and measurement methods for those of GAAP;
  • Presenting revenue by line item and in total, excluding the provision for the fair value of warrants issued as sales incentives;
  • Presenting non-GAAP measures with greater prominence than the directly comparable GAAP measure, or failing to discuss the comparable GAAP measure at all;
  • Describing adjusted EBITDA as purely a liquidity metric, not a performance measure;
  • Excluding cash flow effects associated with changes in working capital from the adjusted EBITDA measure, which was inconsistent with presenting it as a liquidity measure and potentially misleading investors; and
  • Lease accounting and accounting for lease financing implicating Plug Power’s application and presentation of Topic 842, including “right of use” accounting issues.

Caremark claims can be brought in one of two ways if a plaintiff alleges particularized facts that establish:

  • the directors utterly failed to implement any reporting or information system or controls (an information systems claim), or
  • having implemented such a system or controls, consciously failed to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention (a red flag claim).

To support their information systems claim the Plaintiffs argued:

  • SEC comment letters generally present a distinct risk that requires its own monitoring system beyond the ambit of the Audit Committee; and
  • The Audit Committee discussions were not sufficiently robust.

The Court noted that Delaware law does not dictate what structure a reporting system must take. Rather, under Delaware law, “how directors choose to craft a monitoring system in the context of their company and industry is a discretionary matter.”   That is, the law requires courts to exercise good faith oversight, “not to employ a system to the plaintiffs’ liking.”

Turning toward the allegation that the Audit Committee discussions were not sufficiently robust, the Court noted the “absence of regular board-level discussions on the relevant topic” “alone is not enough for the [c]ourt to conclude a board of directors acted in bad faith.” Plaintiffs’ disagreement with the adequacy of the Audit Committee’s or Board’s consideration of the SEC comment letters did not mean that the Board failed to make a good-faith effort to establish a system.

As to the Plaintiff’s red flag allegations, the Court doubted receipt of an SEC comment letter alone was a red flag.  Even if the comment letters constituted a red flag, it was not reasonable to conclude based on the facts alleged that the Board ignored them in bad faith.  Plug Power’s system in place worked to some degree—Plug Power responded promptly to each of them and the Audit Committee received reports about them.

Finally, the Court noted the Plaintiff’s had not specifically plead any corporate trauma resulting from the comment letters.  Even assuming for purpose of the analysis that Plaintiffs adequately pled a corporate trauma, they have not proffered any theory that connects the dots between the Board’s alleged conduct and that harm.

Accordingly, the Court dismissed the Caremark claim pursuant to Rule 12(b)(6).

Govern Walz has signed legislation that includes the following changes to the Minnesota Business Corporation Act:

  • Provides that bylaws may address emergency powers of a corporation where it is impracticable for the corporation to conduct affairs in accordance with the Minnesota Business Corporation Act
  • Permits ratification or validation of defective corporate acts
  • Allows a board to approve a “substantially final” form of an agreement and addresses later ratification in certain circumstances
  • Permits a public corporation to provide for exculpation of officers similar to permitted exculpation of directors if set forth in the articles of incorporation
  • Creates a right of specific performance for shareholders, beneficial owners and holders of voting trust certificates to enforce inspection rights with an award of attorney fees in certain circumstances
  • Provides that a corporation can recover lost premiums paid on stock upon breach of a merger agreement in certain circumstances when set forth in the merger agreement
  • Recognizes the right to appoint a shareholders’ representative to enforce certain rights in connection with a merger

The legislation will become effective August 1, 2025.

As part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets, the SEC’s Division of Corporation Finance has provided its views about the application of certain disclosure requirements under the federal securities laws to offerings and registrations of securities in the crypto asset markets.

Detailed guidance covers the following topics:

  • Description of Business
  • Risk Factors
  • Description of Securities
  • Rights, Obligations, and Preferences
  • Technical Specifications
  • Supply
  • Directors, Executive Officers, and Significant Employees
  • Financial Statements
  • Exhibits