Assurance providers do with sustainability-related claims what public accounting firms have long done with financial statements: certify the accuracy of claims by public companies. Assurance providers promise to reduce the information asymmetry between issuers of claims and their recipients. For our purposes, these recipients are investors in companies making sustainability claims.

Sustainability Disclosures

Public companies in the United States and the European Union are increasingly providing sustainability disclosures, whether to meet legal requirements or voluntarily. While both U.S. and EU legal systems mandate sustainability disclosures, they take markedly different approaches. Under U.S. securities laws, public companies may be required to disclose sustainability information when necessary to comply with broader disclosure requirements, even though these requirements do not specifically mention sustainability, or to prevent their other statements from being misleading. Beyond these general requirements, and given the stay of the SEC Climate Rule, public companies face few sustainability disclosure mandates.

In contrast, EU law mandates itemized sustainability disclosures. Under EU directives, including the recently adopted Corporate Sustainability Reporting Directive, disclosures are subject to the double materiality test: Undertakings must disclose not only sustainability matters material to themselves financially (financial materiality), but also those that have a material impact on people, the environment, and third parties (impact materiality). In insisting on both notions of materiality, the EU goes beyond SEC mandates, which focus on financial materiality.

Accordingly, investors are likely to see different sustainability information from U.S. and EU companies, hampering comparability. Even within each of the two systems, disclosures are often hard to compare. Heterogeneity of sustainability information is of particular concern in the United States, which has nothing equivalent to the European Sustainability Reporting Standards.

Assurance

Assurance is a familiar topic in legal scholarship because it is critical to the work of public accountants. In particular, auditing financial statements is a form of assurance. Strictly speaking, assurance is a form of third-party verification, but verification need not result in assurance.

A strong parallel can be drawn between sustainability assurance and financial auditing, but key differences remain. Most importantly, the sustainability assurance industry is in its nascent stages, whereas financial-audit services have existed since the 1800s. While financial audits follow established protocols, recent scholarship observes that sustainability assurance practices are heterogeneous and in flux. In the United States at least, sustainability assurance practices vary widely, including as to what sustainability information is assured, assurance standards used, and the level of assurance provided—a contrast to the homogeneous practices of financial statement auditing. This variation in practices may stem from the absence of generally accepted assurance standards—uniform procedures that assurance providers are meant to follow before certifying sustainability disclosures—and from heterogeneity in the very nature of assurance providers. Whereas financial auditing is uniformly provided by public accounting firms, in the United States, engineering, consulting, and non-public accounting firms perform roughly 80% of sustainability assurance for S&P 500 companies. It may come as no surprise, then, that sustainability assurance has yielded less reliable assurance than has financial auditing.

The EU Corporate Sustainability Reporting Directive, in contrast, mandates uniform standards. All mandatory sustainability reporting by EU-based undertakings must be accompanied by an assurance opinion from a statutory auditor, an audit firm, or, if permitted by a member state, an independent assurance services provider. And that opinion is subject to detailed standards. In turn, assurance providers are subject to various conduct regulations meant to ensure their comportment with the uniform standards. 

The Role of Reputation and Regulation

Assurance providers’ reputation constraints might ensure the accuracy of their assurance. Yet, these constraints are likely weaker than those facing traditional gatekeepers. Drawing on our earlier work, Green Gatekeepers, we provide three reasons. First, assurance providers’ assurances may “work” even when they are inaccurate. Assurances enable environmentally conscious investors to feel virtuous from having made a sustainable investment decision, so long as they do not learn that an assurance is inaccurate. Second, even environmentally conscious investors are often unable to identify inaccurate sustainability assurances due to the complexity of the issues underlying them. Third, even investors who genuinely care about the accuracy of green claims often face limited or no private costs when they accept inaccurate assurance. That is, when a disclosure is impact material but not financially material, investors incur no private costs where assurances are inaccurate.

Taking account of both the private costs borne by investors and their incentives/ability to verify sustainability claims, we map how the effects of reputation constraint will vary, as shown in the figure below. We suggest that, where verification by users is difficult or users incur minimal private costs from unknowingly relying on inaccurate assurances, the reputational sanctions faced by assurers are likely to be low. By contrast, reputational mechanisms are likely to operate more intensely where assurances that are financially material and can easily be verified by users.

Figure: Mapping the relationship between verifiability by certification users, the private costs certification users face when relying on inaccurate certifications, and the intensity of reputational sanctions faced by assurance providers who issue inaccurate certifications.

We conclude that, for the three reasons indicated above, reputation constraints may fail to induce sustainability providers to issue accurate assurances.

We next consider the force of direct or primary regulation on firms, which complements reputational constraints. Under U.S. law, claims under federal securities law for false sustainability disclosures face impediments, such as both scienter and materiality requirements. In short, we suggest that these forces are likely ineffective in deterring inaccurate sustainability information.

Against this background, we consider the shape that regulatory intervention might take. We argue that, other things being equal, the appropriate policy mix should depend on two factors: first, the significance of private costs for users relying on inaccurate gatekeeper assurances and second, the extent to which policymakers and courts can verify these assurances, a factor in turn depending on the complexity of the methodologies underlying the assurances.Applying this framework, we comment on the merits of several policy interventions, including ex ante regulation, ex post liability, regulatory licenses, incentives for assurance providers that operate as non-profits, and transparency requirements.

Luca Enriques is a professor of business law at Bocconi University, Alessandro Romano is an associate professor of business law at Bocconi University, and Andrew Tuch is a professor of law at Washington University in Saint Louis. This post is based on their recent article, “Sustainability Assurance,” published in a symposium issue of Law and Contemporary Problems and available here. A version of this post appeared in the Oxford Business Law Blog.

• What’s new: New Article 21c of CRD VI prohibits cross-border provision of “core banking services” into the EU absent an authorised local presence, subject to limited exemptions.
• Why it matters: The restriction reaches routine wholesale cross-border activity of US banks in Europe, including syndicated facilities, corporate lending, fund finance and guarantees.
• What to do next: US banks should consider reviewing current operations, assessing exemptions for EU client relationships, monitoring member state transposition and evaluating branches or EU-authorised subsidiaries.

The European Union’s sixth Capital Requirements Directive (Directive (EU) 2024/1619) (CRD VI) introduces a number of new licensing and operational requirements applicable to certain non-EU credit institutions conducting cross-border banking services in the EU. There is not currently an equivalent restriction being implemented in the UK.

The most significant change for US banks is new Article 21c, which prohibits the cross-border provision of “core banking services” into the EU absent an authorised local presence, subject to limited exemptions. The restriction takes effect on 11 January 2027, but the critical grandfathering cutoff for existing contracts is 11 July 2026: Contracts entered into on or after that date will not benefit from transitional protection and should be structured with the new regime in mind.

Scope

CRD VI prohibits non-EU undertakings from providing certain core banking services on a cross-border basis unless they operate through an authorised third-country branch in the EU or an authorised EU subsidiary. These services include:

• Taking deposits.
• Issuing guarantees and commitments.
• Lending, including consumer credit, credit agreements relating to real estate, factoring (with or without recourse) and financing commercial transactions, including forfeiting.

The restriction therefore reaches routine wholesale cross-border activity of US banks in Europe, including participation in syndicated facilities, bilateral corporate lending, fund finance, trade finance and the issuance of guarantees and letters of credit in favour of EU beneficiaries. Investment services and activities within the scope of MiFID II (together with genuinely ancillary services, such as related lending provided for the purpose of MiFID business) are expressly excluded and remain subject to the existing third-country regime under MiFID/MiFIR.

Key Exemptions

Exemptions from the branch requirement can be relied upon for:

• Interbank services: Services provided by a third-country undertaking to an EU credit institution.
• Intragroup services: Services provided to entities belonging to the same group.
• Reverse solicitation: Where an EU client or counterparty approaches a third-country firm at its own exclusive initiative for the provision of core banking services, including their continuation. The exemption extends to services “closely related” to those originally solicited, but solicitation through affiliates, agents or other persons acting on the bank’s behalf will defeat it, and it cannot be relied upon to market new categories of products to the same client. Competent authorities have explicitly stated that this exemption is to be interpreted strictly. Regulators expect solid governance and confirmatory documentation to ensure that the relationship was a result of the borrower’s exclusive initiative.

These exemptions will preserve significant portions of wholesale activity, but each must be assessed against the bank’s actual origination and marketing model, and EU member states may interpret or supplement them differently in transposition.

Grandfathering

To protect the rights of clients under existing contractual relationships, a “grandfathering” provision provides that the branch requirement will not extend to contracts (including loan agreements) concluded prior to 11 July 2026, provided that no material changes are made in respect of the loan. Material changes could include an extension of the term of the loan, additional drawings and changes to the nature of the loan.

Although explanatory notes to CRD VI indicate that existing borrower rights should be respected where a borrower holds an enforceable right to require an extension, the mere possibility of amending the terms — without a clear pre-existing commitment from the relevant lender — would likely be insufficient to avoid triggering the third-country branch requirement in the event that the loan was extended.

Facilities signed on or after 11 July 2026 will obtain no such protection and, given that the transposed rules apply from 11 January 2027, transactions signing in the intervening period should be structured on the assumption that grandfathering will be unavailable once the regime takes effect.

Member State Divergence

CRD VI is a directive and does not have direct legal effect in EU member states but instead requires transposition into national law before its provisions apply to market participants. Member states were expected to adopt implementing measures by 10 January 2026, with the transposed rules relating to the licensed-branch requirement scheduled to apply from 11 January 2027. Member states may adopt stricter approaches on points including territorial scope, reverse solicitation and the treatment of legacy business.

Existing national accommodations relied on by US banks — notably licensing waivers of the kind granted in Germany — will fall away once the transposed rules apply. The position should therefore be confirmed on a member-state-by-member-state basis for each jurisdiction in which EU clients are served.

The Branch Regime

A third-country branch requires authorisation in each member state in which the bank operates; there is no EU passport for branches. Branches are classified as Class 1 (broadly, assets of €5 billion or more, certain retail deposit-taking, or head offices in nonequivalent third countries) or Class 2, with Class 1 branches subject to more stringent capital endowment, liquidity, governance, booking and reporting requirements. Given the absence of passporting and the compliance cost involved, most affected institutions are expected to migrate in-scope business to an existing or new EU subsidiary (which can passport across the EU), restructure activity to fit within the exemptions or combine both, rather than establish branches in multiple member states.

Syndicated Loans Under the Third-Country Branch Regime

Where a third-country credit institution seeks to lend to an EU-based borrower as part of a syndicate, it must determine whether an applicable exemption is available under the relevant national implementing measures. If none apply, the institution may be required either to obtain authorisation and establish a licensed branch in the applicable EU member state or to direct the transaction through an existing EU-authorised subsidiary.

Crucially, in syndicated facilities the question as to whether the third-country branch requirement applies cannot be determined at the syndicate level. Instead, each lender must evaluate its own position separately, as the availability of any exemption will be based on the circumstances of a lender’s relationship with the borrower.

Immediate Action Points

US banks already lending or considering lending to EU clients should consider reviewing their current operations to identify any activities that may fall within the scope of the new third-country branch regime. Practical measures could include:

• Conducting a review of current and potential EU client engagements to identify those that fall within the scope of core banking activities and to determine, for each client relationship, whether a viable exemption can be invoked. In circumstances where the reverse solicitation exemption is relied upon, credit institutions should retain evidence to demonstrate that the relevant client initiated contact with the lender on an unsolicited basis and without prior prompting.
• Monitoring legislative developments across relevant EU member states as transposition of CRD VI progresses.
• Evaluating the strategic and commercial case for establishing an authorised branch in certain key EU jurisdictions, or alternatively restructuring EU lending operations through a pre-existing locally licensed subsidiary.

This post is based on a Skadden, Arps, Slate, Meagher & Flom LLP memorandum, “CRD VI: What US Banks Need to Know,” dated July 7, 2026, and available here. 

Related-party transactions have always sat awkwardly in corporate governance. A company might transact with an affiliate, a director-linked entity, or a major shareholder because the arrangement lowers costs or reflects a genuine commercial need. The same transaction might, however, move value away from outside shareholders. Disclosure rules let investors see that a transaction happened. They do not tell investors why it happened, or whose interests it served.

In our article, we ask whether the CEO’s personality helps answer that question. Narcissism is a natural place to look. It is associated with grandiosity, a strong need for admiration, and a tendency to pursue personal recognition or private advantage, all of which matter when a CEO has discretion over transactions involving people and entities close to the firm. We measure CEO narcissism using a well-established, validated metric that is widely employed in academic research (Olsen et al. 2014 ; Abdel-Meguid et al. 2021). It combines three observable indicators of CEO narcissism: the prominence of the CEO’s photograph in the annual report, the CEO’s cash compensation relative to the second-highest-paid executive, and the CEO’s noncash compensation relative to the second-highest-paid executive.

Using hand-collected related-party transaction data for nonfinancial, nonutility firms in the S&P 1500 from 2011 to 2022, we find that CEO narcissism is positively associated with a firm’s likelihood of engaging in related-party transactions. This shows up mainly in nonbusiness transactions, the kind involving directors, officers, or major shareholders rather than ordinary commercial counterparties, and the kind prior research generally treats as more prone to opportunism.

The more interesting finding is about performance, and it is not a simple story of related-party transactions being good or bad. At low levels of CEO narcissism, such transactions are associated with better firm performance, consistent with efficient contracting. At high levels of CEO narcissism, that relationship reverses. The same category of transaction, filed under the same accounting label, has a different economic meaning depending on who approved it.

This is the real point of the paper. A related-party transaction is not just a line item to be checked against disclosure rules. It is a decision made by a specific person, inside a specific governance structure, and that context shapes whether the transaction helps the firm or quietly drains value from it.

Board monitoring turns out to matter a great deal here. We find that strong board oversight mitigates the negative effect that narcissistic CEOs otherwise have on the value of these transactions. It is far less effective where board oversight is weak.

For boards and audit committees, this points to a gap in how related-party transaction review usually works. The standard checklist asks whether the transaction was disclosed, approved, and priced fairly. It rarely asks whether the CEO has the kind of profile, and faces the kind of oversight, that should make the board look harder. Our findings suggest that second question deserves a place on the checklist.

For investors, the implication is to read related-party transactions in context rather than in isolation. A small transaction can still be a warning sign if it points to weak oversight or a CEO whose incentives are not well aligned with shareholders. Size is not the only thing worth watching.

For regulators, the findings reinforce the value of disclosure while also exposing its limits. Disclosure makes a transaction visible. It does not tell you whether the transaction was efficient, and it does not, by itself, protect shareholders when the CEO has an incentive to use the transaction for personal advantage. That second part is a governance problem, not only a disclosure problem, and it needs a governance solution.

Related-party transactions tend to be treated as legal or accounting events, something to log, disclose, and move past. Our evidence suggests they are also governance events. What they mean depends not just on what was disclosed, but on who initiated the transaction, who was watching, and whether the board was strong enough to stop private incentives from overriding shareholder interests.

REFERENCES

Abdel-Meguid, A., Jennings, J. N., Olsen, K. J., & Soliman, M. T. (2021). The impact of the CEO’s personal narcissism on non-GAAP earnings. The Accounting Review, 96(3), 1-25.

Olsen, K. J., Dworkis, K. K., & Young, S. M. (2014). CEO narcissism and accounting: A picture of profits. Journal of Management Accounting Research, 26(2), 243-267.

Anwer S. Ahmed is a professor at Texas A&M University, Bilal Al-Dah is an assistant professor at Kean University, Mustafa A. Dah is an associate professor at Lebanese American University, and Moataz El-Helaly is an associate professor at the American University in Cairo. This post is based on their recent article, “CEO Narcissism and Related Party Transactions,” published in the Journal of Business Finance & Accounting and available here.

Of course, I should also like to thank the Society for Corporate Governance for the invitation to join you today. While it is always an honor to speak with the Society, this occasion is rendered especially significant for two reasons. First, as a graduate of Vanderbilt Law School, returning to Nashville always feels like a homecoming. But second—and more importantly—because we gather in the immediate wake of our nation’s 250th anniversary, it is a moment that lends particular weight to our discussion today.

***

Just days removed from this milestone, it behooves us to ask: what, precisely, have we inherited?

Two hundred and fifty years ago, our Founders embraced basic principles. That government must be limited. That its purpose is to set the conditions for prosperity, not to engineer it—trusting that the collective ingenuity of individuals pursuing their own interests, Adam Smith’s “invisible hand,” will serve the common good more reliably than any top-down design.

Yet they understood that these principles were not self-preserving. So they built a framework around them—one that amounted to more of a trellis than a cage—a structure along which prosperity could climb.

For two and a half centuries, that trellis has liberated the invisible hand to lift an entire nation—and has built the most prosperous, resilient capital markets in the world.

Of course, periods of prosperity have been punctuated by downturns and panics. Across 250 years, however, a clear pattern emerges: every crisis threatened to shatter our markets. Yet none succeeded—not because we abandoned the first principles of free enterprise, but because we adhered to them.

Perhaps nowhere is this clearer than in our first federal securities law, the Securities Act of 1933. Indeed, this law was not a rejection of free markets, but rather an effort to preserve them, built on the premise that markets function best when investors can make decisions based on honest information. True to our Founders’ ideals, Congress did not seek to substitute the judgement of regulators for that of investors. It sought to restore trust through transparency so that capital formation could rise again—proving that first principles work when we have the resolve to rekindle them.

In the decades surrounding this paradigm—through triumph and trial, war and peace—our capital markets ultimately endured not because a central planner constructed their recovery, but because, when tested, our nation returned to first principles rather than renounce them.

***

Today, the SEC must do likewise. Presented with a 40 percent decline in public companies over the past few decades, we are summoned not to create more complexity nor reinvent our mandate, but to restore it to its foundation: that is, disclosure of material information.

Years of accretive rulemakings—some eliciting immaterial information—have produced reams of paperwork that can do more to obscure than to illuminate. As Justice Thurgood Marshall once warned, “Some information is of such dubious significance that insistence on its disclosure may accomplish more harm than good. Bury[ing]…shareholders in an avalanche of trivial information [is] a result that is hardly conducive to informed decision[]making.”1

As investors struggle to parse and understand—or choose to simply ignore—today’s lengthy annual reports and proxy statements, companies also incur substantial costs to prepare those documents. These costs are financial, of course, but temporal no less—composed not only of fees for armies of specialized lawyers, accountants, and consultants, but also the opportunity costs resulting from significant use of boards’ and management’s time.

In light of this current state of the SEC’s public company disclosure regime, one of my top priorities as Chairman is to restore the regime to one rooted in materiality—a fundamental concept that Congress weaved throughout the federal securities laws. Unfortunately, over the past several years, this term has been hijacked or substituted with phrases such as “double materiality” or “decision useful.” But these purported standards have no standing in the relevant jurisprudence.

So, I must first remind us that the Supreme Court has held that information is material “if there is a substantial likelihood that a reasonable investor would consider it important.”2 When applying this objective standard, it is indisputable that the common interest of reasonable investors is the financial returns of the investment.3 Or, said another way, materiality, as defined by the Supreme Court, is and has always been a concept inherently rooted in financial considerations. Accordingly, information must, at a minimum, facilitate an evaluation of financial returns to qualify as material.

Yet despite this clear definition and direction, in recent years, special interest groups, politicians, and, at times, the SEC itself have lost sight of—or blatantly disregarded—what qualifies information as material, and have weaponized the disclosure framework that Congress created, bending it towards social and political agendas that stray far from the SEC’s mission.

In contrast, as I mentioned, the SEC under my Chairmanship is redirecting what has been pulled off course back toward our founding mandate of materiality. So, this past January, the SEC began soliciting public feedback on reforming Regulation S-K.4 Since then, we have received over 100 comment letters,5 including a letter from the Society with detailed recommendations.6 I very much appreciate your engagement on this important area for reform.

A few of these letters have recommended inclusion of an overarching materiality qualifier—or a “materiality overlay”—applicable throughout Regulation S-K.7 This idea is not new; it was raised as early as 2015 in response to the SEC’s prior Disclosure Effectiveness Initiative.8 As suggested by commenters, this qualifier would permit companies to omit information otherwise called for by a line item of Regulation S-K if the information is not material. Some commenters suggested exceptions where the qualifier would not apply, such as for executive compensation disclosure, while others did not recommend exceptions.9

My chief aim of revising Regulation S-K is for these rules to elicit material information, without overly prescriptive line-item requirements that frequently elicit immaterial information. However, even with the best intentions and execution, the Commission may be unable to ensure that information called for by every line item will be material to investors of every public company. Additionally, disclosures mandated by prescriptive requirements that appear material today may become immaterial over time as corporate structures and business practices develop and change.

Because of these concerns, the “materiality overlay,” as suggested by commenters, may be helpful to creating a principles-based disclosure regime that represents the “minimum effective dose of regulation” and elicits material information based on the facts and circumstances of each company. Meanwhile, market forces would drive disclosure of other information that may be desired by the company’s investors. This already occurs to some extent today when companies provide non-GAAP financial measures and key performance indicators tailored to their business and their investors’ expectations.

Of course, a “materiality overlay” will reduce immaterial disclosures in filings only if companies use the discretion afforded to them and omit information called for by a line-item. Likewise, any amendments to Regulation S-K that replace prescriptive rules with principles-based rules will require companies to exercise judgement for the amendments to be effective. If companies are unwilling to do so, no disclosure regime can achieve the goal of providing material information to investors, without burying them in trivial information, as Justice Marshall warned.

I sometimes hear that companies are reticent to remove existing disclosures—or will always include certain disclosures simply because they appear in a peer’s filings—without carefully considering whether the information continues to be required or is material. But such an approach to drafting SEC filings can result in a disclosure death spiral that benefits neither companies nor their shareholders.

To be certain, the Commission, through its rules, can create an environment for companies to provide investors with material disclosures without tacking on burdensome immaterial information—but we cannot force companies to take advantage of such conditions. Rather, they must own responsibility for the volume, clarity, and substance of the information in their filings. To put it plainly to this group, the buck stops with you.

***

Now, reforming Regulation S-K and the broader disclosure regime is just one area of focus to make going and staying public more attractive. At the same time, we are also rethinking Rule 14a-8 and the shareholder proposal system.

To put it mildly, this past shareholder proposal season was a unique one for both companies and shareholder proponents alike. Last November, the Division of Corporation Finance announced that it would not respond to companies’ no-action requests during the 2025-2026 proxy season, other than requests submitted under Rule 14a-8(i)(1).10 Much to my surprise, the Division did not receive a single request under paragraph (i)(1).

Following the Division’s announcement, some skeptics predicted that companies might systematically exclude most or all proposals that they receive. Others, meanwhile, cited litigation risk or adverse recommendations from proxy advisors as reasons why companies might include proposals that they believed were excludable under Rule 14a-8.

Nearly eight months later, it is clear that neither of these dire predictions materialized, and I am happy to report that the world did not end simply because the Commission staff stopped responding to no-action requests. As one law firm recently reported, “Despite the heightened drama of the 2026 shareholder proposal season…the year-over-year trends remained largely consistent with the prior year.”11 Another service provider noted that “the overall proposal omission rate is on track to closely mirror 2025 levels despite the procedural changes and heightened litigation risk.”12

While there were six lawsuits filed against companies for excluding a proposal, they represent but a small fraction of the overall proposals excluded.13 I also find it worth noting that one of these lawsuits was resolved in the company’s favor while three were settled. Furthermore, adverse recommendations from proxy advisors in connection with companies’ exclusions of proposals this season were rare.14 Finally, several investor groups said that their engagement with companies this season increased and, as a result, they were able to resolve proposals without the Commission staff serving as an intermediary.15

These statistics and anecdotes may not be representative of every company’s experience, and I do not doubt that this season was challenging for some. But my greatest takeaway is that the Commission staff’s interposition between companies and shareholder proponents is unnecessary to effectively and efficiently resolve whether shareholder proposals should be included in proxy statements.

Consider the significant time and costs expended by the SEC in prior proxy seasons that have been avoided this season. It is difficult for me to order our talented staff to return to a tedious, and evidently ineffectual, task in future years when so many other vital filings and issues lie unattended awaiting a delayed resolution. That is certainly not good government, nor public service.

The staff’s absence this season did not create the chaos that many feared. Markets—including the market for corporate governance—are more resilient and self-correcting than some give them credit for. The system—when left to function without regulators calling balls and strikes—functioned as it should, impelling companies and shareholders to engage with one another directly. Ultimately, this season proved both a turning point and a proof of concept.

In a sense, the Division’s decision to not issue non-binding no-action letters was akin to removing the training wheels from the shareholder proposal bicycle. Over the years, companies and shareholder proponents have grown all too comfortable leaning on that support simply because it was there—not because they needed it. As it turns out, both can pedal just fine on their own.

Companies, their shareholders, and their respective advisors make difficult judgement calls all the time—largely without no-action letters or staff guidance—on many federal securities law issues, such as whether information is material, whether someone is an affiliate, or whether a communication is a solicitation. Applying Rule 14a-8 should be no different. For example, to omit a proposal pursuant to the “ordinary business” exclusion under paragraph (i)(7), companies do not need a no-action letter to reasonably conclude that what was once extraordinary—and perhaps constituted a significant social policy issue—may now be treated as ordinary.

Beyond the Commission staff’s role in the Rule 14a-8 process, the SEC is also holistically evaluating the rule itself. I have long considered the relationship between Rule 14a-8 and state corporate law. In my final speech as a then-Commissioner in 2008, I stated the following:

Some would argue—and perhaps correctly—that the SEC’s Rule 14a-8 on shareholder proposals inappropriately infringes upon state laws that govern the relationships among shareholders and between shareholders and the corporations that they own.

***

Despite the presence of Rule 14a-8, the Commission would be wise to continue to respect the principles of federalism and avoid the temptation to exceed the limitations on its authority delegated by the Congress.16

Since the Commission first adopted Rule 14a-8’s predecessor in 1942,17 it has amended the rule on numerous occasions. These amendments added bells and whistles that have increased the rule’s complexity, but they have not given serious consideration to a more fundamental question—what is the federal government’s appropriate role in regulating shareholder proposals?

As the SEC under my Chairmanship evaluates Rule 14a-8 in this light, I maintain my conviction that the Commission’s authority to prescribe rules “in the public interest”18 is not plenary, as some glibly assert. Government agencies may not add to their powers by adverse possession; longevity is not a substitute for legal authority.

Regardless of the fate of Rule 14a-8 next season and beyond, I implore all who have a role in the shareholder proposal process to not let it be weaponized by those who represent fringe interests. Annual meetings are not vehicles for political or social debates that have little or no bearing on investors’ financial returns.

In this endeavor, companies have mechanisms at their disposal to help them fight for themselves—on behalf of those shareholders that represent the strong majority. But if companies remain lackadaisical and refuse to pick up the substantial tools that we have laid on the table to help them do so, then I do not know what more we can do to intervene in their stead in the years to come.

Likewise, I also call on States that are competing to become—or remain—the leading destination for corporate domestication to ensure that their corporate laws do not enable the politicization of shareholder meetings.

Finally, I repeat a warning that I gave in that 2008 speech: “[W]e must be vigilant that the shareholder proposal process does not result in the tyranny of the minority.”19 This past season, one—yes, one—individual was the sole or lead proponent for approximately 41 percent of the shareholder proposals that were voted upon.20 Of this individual’s proposals, only eight percent received majority support.21 Simply put, when a single shareholder can seize annual meetings to present scores of proposals on issues that are not generally supported by other shareholders, the system is woefully ineffective and in desperate need of reformation.

***

Now, let me close with the theme that animates each issue and aim that I have outlined today: the enduring strength of our markets comes not from expanding government’s reach, but from enshrining the principles that have guided our nation since its inception. Reforming our disclosure regime and reevaluating the shareholder proposal process are, at their root, both expressions of that same resolve.

As we work toward this end, we realign our markets with their most fundamental purpose—and with our Founders’ first principles—which is to empower American citizens, to enable enterprise to flourish without unnecessary friction, and to help capital flow more freely to its highest and best use.

So, I am grateful, once again, for the opportunity to join you today. And Keir, I look forward to our discussion ahead,

ENDNOTES

In a forthcoming chapter, I make two novel contributions. First, I explain why creditors’ incentives to support debtor-driven climate-change mitigation measures are limited. Second, building on this insight, I explore the possible effects of various proposals for insolvency reform and show that they risk impeding creditors’ incentives and reduce insolvency law’s potential to help battle climate change. It is organized as follows:

Empirical studies show that a growing number of physical assets are at risk from the effects of climate and environmental change. Moreover, business is affected by transition risk in a world of changing regulatory frameworks and the need to adapt supply chains and business operations to phenomena such as increasingly frequent floods, heat waves, and other natural disasters. Despite these mounting risks, creditors have less incentive than shareholders to demand adaptive measures. First, the upside potential for creditors is lower than for shareholders. Holding fixed claims, they may not participate in gains above a threshold defined in advance. Second, in insolvency, creditors profit from a better position than shareholders in the distribution of proceeds. This explains why creditors’ incentives to engage in climate-change mitigation and “greening” business are lower than those of holders of equity. Activist debt investors face a fundamental problem, afflicting both private and public debt claimants: limited governance rights. Creditors’ claims do not entail voting rights relating to the going concern as a whole. Especially in the case of green bonds and green loans, investors act within the confines of the project they finance.

Building on this general framework, I analyze possibilities and limitations of insolvency reform, taking up proposals in recent insolvency scholarship. First, I demonstrate why the idea of mandating liquidation of insolvent carbon-intensive businesses is misguided. Mandatory liquidation would end carbon-intensive operations, thus solving the issue of ongoing emissions. Such a reform, however, would not only be dubious public policy, it would also impair creditors’ incentives to pursue greening strategies in a corporate reorganization.

Second, I examine priority as a tool to integrate sustainability concerns into insolvency law. At least for claims and liabilities defined by law, the system of priority and conditions for a discharge can contribute towards advancing the public interest in safeguarding the environment and protecting the population against harm from polluting activity. Many creditors will or should react by demanding better environmental policy. Closer inspection, however, uncovers a plethora of difficult ramifications rule makers would need to consider, especially issues like judgment proofing. Moreover, preferring environmental claims over, say, those of employees invites thorny questions of distributional justice.

Third, I show why proposals to implement an environmental trustee as an institutional representative of the environment and related stakeholders as party to the insolvency proceedings falls short. If invested with strong rights, the trustee would impair creditors’ incentives to reorganize. There may be a case for a weaker version to open the path for green creditor activism, especially when tied to a system placing environmental claims high on the priority ladder.

Finally, I explain the value of money-oriented creditor value maximization in insolvency, contending that it protects minority rights. For example, Section 1124(2)(d) of the U.S. Bankruptcy Code covers “claim[s] or . . . interest[s] aris[ing] from any failure to perform a nonmonetary obligation” and denies impairment if the plan “compensates the holder of such claim or such interest . . . for any actual pecuniary loss incurred by such holder as a result of such failure. . .” Should nonmonetary goals become a valid factor compensating for an impairment of financial claims, the door is open for manipulative strategies to the detriment of minority shareholders. Considering the large room for manoeuvre and the uncertainty of long-term climate-change mitigation strategies, the most powerful creditors hold a lever enabling them to justify impairments of claims of smaller creditors. Just as with the many-masters problem in corporate law, there will always be an interest legitimizing a decision.

Acknowledging that, compared with shareholders’ incentives, creditors’ incentives to engage in climate-change mitigation and greening business are limited has important implications for insolvency reform. Recent proposals risk impeding creditors’ incentives and reduce insolvency law’s potential to help battle climate change. The most promising approach is to award priority or non-dischargeability to environmental liabilities in insolvency. However, considering various evasion strategies such as judgment proofing, it requires careful regulatory planning.

Thilo Kuntz is a professor of private, commercial, and corporate law and managing director of the Institute for Corporate Law at Heinrich-Heine-University Düsseldorf, Germany. This post is based on his recent book chapter, “Creditors’ Incentives and ESG in Insolvency – Creditors Are not Shareholders,” forthcoming in Insolvency Law and Environmental, Social, and Corporate Governance and available here.

Spoofing is the practice of placing non-bona fide orders—which the trader at the time of placement intends to cancel before execution—to create a false impression of supply or demand and move a financial instrument’s price in the trader’s favor. According to the charging documents in this matter, which involved alleged spoofing in securities markets, between October 2021 and November 2024, Wang engaged in more than 3,000 instances of such trading, ultimately generating approximately $1.3 million in proceeds.

Central to the scheme was Wang’s choice of targets: thinly traded, illiquid ADRs that could make a spoofing scheme easier to execute. As the charging documents allege, compared to more actively traded securities with greater trading volumes, thinly traded securities often have fewer interested buyers and sellers and wider bid-ask spreads. In that context, even a small number of orders can move the National Best Bid or Offer, because each non-bona fide order represents a larger share of total apparent market supply or demand than it would in a more liquid security. In this case, the resulting leverage appears significant. For example, the SEC’s complaint alleges that on January 23 and 24, 2023, Wang’s trading reportedly accounted for 100% of the trading volume in one targeted ADR.

The structure of the scheme across different brokerage accounts is also notable. Wang allegedly separated the manipulation from the profit-taking, routing the two sides of his trading through different brokerage firms, using a single account at one brokerage for his spoof orders and three accounts at a second brokerage for his bona fide orders. He allegedly placed his non-bona fide “spoof” orders through an account at one brokerage and executed his genuine opposite-side trades through accounts at a second brokerage, frequently in an account held in his wife’s name. The government alleged this cross-brokerage structure helped conceal that a single trader controlled both sides of the strategy—another hallmark of spoofing in anonymous markets.

This case is also noteworthy for the documentary record Wang allegedly left behind. The government alleges investigators recovered notes from Wang’s personal computer instructing that the “[m]ost important thing is to hide,” with tactics including to “[r]andomize the pattern as much as possible,” reduce the frequency at the expense of gains, and “[r]otate on symbols.”   Other notes allegedly scripted a cover story for the cross-trading, contemplated claiming that he “[d]oesn’t know layering or spoofing or those things!!,” and assessed that the “[w]orst case” might be a monetary penalty and “[m]ost likely civil charges!!” A search of Wang’s residence also allegedly turned up two noteworthy books: A Convicted Stock Manipulator’s Guide to Investing and How Stocks Are Manipulated.

As to the resolutions, Wang pleaded guilty to one count of using interstate commerce for the purpose of securities fraud in violation of Section 17(a) of the Securities Act of 1933. He faces a statutory maximum of five years in prison and is scheduled to be sentenced on September 30, 2026. On the civil side, Wang consented to a judgment permanently enjoining him from violating the antifraud and anti-manipulation provisions (Sections 17(a)(1) and (3) of the Securities Act of 1933, and Sections 10(b) and 9(a)(2) of the Exchange Act and Rule 10b-5 thereunder), imposing a five-year brokerage-account notification requirement, and leaving disgorgement, prejudgment interest, and civil penalties to be set later.

The matter offers several practical takeaways. First, spoofing prosecutions remain robust and frequently proceed in parallel across civil and criminal regulators. The Criminal Division’s Fraud Section is prosecuting the DOJ case, continuing the Section’s prominent nationwide focus on spoofing and market manipulation, and has regularly brought spoofing matters in coordination with the SEC’s Division of Enforcement (whose Market Abuse Unit investigated the SEC case here) and, in the commodities and derivatives context, with the Commodity Futures Trading Commission. Second, illiquid instruments, such as thinly traded ADRs, continue to present heightened manipulation risk and corresponding regulatory scrutiny. Third, cross-account execution remains a prominent method of executing a spoofing scheme, highlighting compliance risks and challenges. Fourth, as Wang’s own files illustrate, contemporaneous notes, search histories, and similar materials can supply powerful evidence of fraudulent intent and concealment.

This post is based on a Sullivan & Cromwell LLP memorandum, “DOJ and SEC Bring Parallel Spoofing Actions Against Fund Founder and Investment Manager,” dated June 26, 2026, and available here. 

Literature from finance, management, sociology, and psychology illustrates that both identity-based diversity and diversity, broadly defined, enrich the decision-making capacity of groups. Furthermore, academic research supports the value of inclusion in corporate governance at companies whose boards and shareholders have resoundingly rejected anti-DEI efforts.

The Historical Pendulum: From Exclusion to Mandates and Backlash

The trajectory of DEI in corporate governance over the past two decades has swung dramatically. Even past the start of this century, corporate leadership operated as an old-boys’ club, almost exclusively the domain of white males. In 2000, women occupied less than 10% of board seats in the S&P 1500 and less than 0.5% of CEO positions in the Fortune 500. Selection processes relied on personal networks and homophily rather than a meritocratic search for expertise.

The mid-2010s marked the pinnacle of inclusion efforts as U.S. companies faced significant pressure from a variety of stakeholders to diversify their corporate governance institutions. Whereas institutional investors primarily advanced the business case for diversity, other advocates stressed its moral and social justifications. Meanwhile, large asset managers such as Vanguard, BlackRock, and State Street pushed for progress by utilizing their voting power to demand greater board diversity.

Legislative mandates followed in this transition, with California passing Senate Bill (SB) 826 in 2018 (mandating women on boards) and Assembly Bill (AB) 979 in 2020 (mandating representation from underrepresented communities). Additionally, in 2021 Nasdaq introduced a “comply-or-explain” rule for board diversity. By 2024, the tangible results of these efforts were evident: Women held 34% of S&P 500 board seats.

However, this political shift engineered a coordinated reversal starting in 2024, with conservatives scrutinizing assertive moves to diversify the corporate world. The Los Angeles Superior Court invalidated California SB 826 and AB 979 as unconstitutional, while the U.S. District Court for the Eastern District of California heard a challenge only to AB 979 and also struck it down. The Fifth Circuit Court of Appeals overturned the Nasdaq rule, arguing that the SEC had exceeded its statutory authority. This major shift in diversification efforts began with the Supreme Court’s Students for Fair Admissions (SFFA) decision, which voided affirmative action policies at public and private universities, overturning decades of precedent.

The backlash intensified in January 2025 with President Trump’s executive orders (EO), notably EOs 14151 and 14173, which barred federal DEI programs and pressured the private sector to eliminate “preferences.” The Trump administration has relentlessly continued to pressure industries, firms, and universities to eliminate DEI efforts. Consequently, several major firms chose to swing the pendulum back, including BlackRock, John Deere, and Harley Davidson, which reduced or eliminated their DEI commitments.

The Tech Sector and the Normalization of Weak Governance

While U.S. firms have experienced unprecedented growth in recent decades, corporate governance has experienced a troubling decline in quality, which sporadic DEI efforts have failed to counteract. Good governance depends on effective teamwork on boards and in C-suites, and diverse perspectives play a central role in enabling such teams to achieve the most careful, deliberate, and effective processes. The retreat from DEI serves as both a symptom of and a contributor to weak governance.

The rapid rise of founder-dominated technology firms has driven this decline in governance quality. While tech firms have achieved soaring valuations, they have also normalized governance pathologies, such as the concentration of power within individual founders and the sidelining of traditional safeguards. This model, referred to as “Founder Mode,” prioritizes the individual genius of the leader over independent oversight.

This institutional failure can be observed in the case study of WeWork. This global company, well known for providing shared workspace environments, consisted of a largely male board and executive team. This homogenous environment enabled CEO Adam Neumann’s erratic behavior, self-dealing, and a discriminatory workplace culture, which led the company from a $47 billion valuation to bankruptcy in just four years. Executives consistently proposed male-bonding activities such as surfing and sitting in a sauna or an ice bath with Neumann, leaving little room for women to access valuable informal time with Neumann outside of the office. WeWork’s governance structure rewarded conformity and discouraged dissent, creating an echo chamber that validated Neumann’s erratic behavior while systematically marginalizing women and people of color who might have provided essential reality checks.

Several interconnected factors characterize “bad governance”:

• Imperial CEOs: Leaders who run firms through a highly centralized form of governance in which these they define the firm’s strategy and future.
• Impulsivity: Knee-jerk decisions, such as the rapid adoption and subsequent abandonment of DEI policies, rather than deliberate process.
• Short-Termism and Regulatory Entrepreneurship: A focus on rapid scaling by circumventing or breaking laws rather than on long-term institutional stability.
• Compensation Cushions: Multi-million dollar pay packages and “golden parachutes” that insulate executives from the consequences of failure, engendering a reckless disregard for the socio-political costs of their actions.

The Empirical Foundation: Inclusion and Group Decision-Making

Interdisciplinary research from finance, sociology, and psychology demonstrates that inclusive practices are essential to effective group processes. There are three key elements of group decision-making that correlate with diversity:

1. Deliberative Process: Heterogeneous teams consider a wider range of alternatives and engage in “cognitive conflict,” which prevents groupthink and leads to more innovative solutions. Diverse boards are more likely to challenge entrenched assumptions and slow down decision-making in productive ways. For example, studies show that gender-diverse boards are less likely to overpay for acquisitions or acquiesce to overconfident CEOs.
2. Addressing Information Gaps: Diverse boards often bring a heightened awareness of stakeholder perspectives (employees, customers, community groups), ensuring that decisions are based on more comprehensive and accurate information. This leads to more balanced decisions that consider the organization’s broader environment.
3. Risk Management: Inclusion strengthens a board’s ability to monitor legal compliance and oversee risk. Research suggests that directors from diverse backgrounds ask more questions and engage in more rigorous discussions, which can prevent catastrophic failures like those seen at Enron, Lehman Brothers, or FTX.

Ultimately, research finds that identity-based diversity (gender, race) is a vital component of this cognitive diversity because lived experience fundamentally shapes how individuals perceive and solve problems.

Resilience Amidst Backlash: 2025 Proxy Evidence

Proxy statements from 2025 challenge the narrative that DEI is dead. While some firms have retreated, many influential corporations have vigorously defended their inclusive practices against anti-DEI shareholder proposals. The boards at these companies argued that inclusion is a strategic business imperative that generates competitive advantages, fosters innovation, and enhances shareholder value.

Examples include:

• Costco: Defended DEI as crucial for enhancing employee satisfaction and providing diverse consumer insights; 98% of shareholders rejected an anti-DEI proposal.
• Walmart: Emphasized that an inclusive culture helps attract and retain the talent necessary to drive the business.
• Levi Strauss: Argued that inclusion ensures that its products remain relevant to a diverse global consumer base.
• Mastercard: Stated that financial inclusion and an inclusive culture drive long-term shareholder value.
• Bristol Myers Squibb and Gilead Sciences: Both pharmaceutical giants insisted that inclusion is critical for reaching diverse patient populations and fostering agility in their supply chains.

In nearly all these cases, shareholders resoundingly rejected anti-DEI proposals, whose support often fell below 2%. This suggests that boards and institutional investors recognize that the long-term value created by inclusion outweighs its political risk.

The Turning Point for Governance

The current anti-DEI backlash provides a test of fundamental assumptions about how firms should govern themselves. The rapid abandonment of inclusive practices by some firms reflects a susceptibility to reactionary thinking. Conversely, firms that have “stuck to their guns” understand that diversity is a prerequisite for excellence, not a constraint.

Boards must slow down and prioritize processes. Decisions about inclusion programs should proceed deliberately and should reflect the core principles of effective governance—deliberation, information sharing, and risk assessment. Ultimately, robust, inclusive governance is the only way for firms to remain resilient in an era of unprecedented global uncertainty. Long-term corporate success inextricably requires integrating radically different points of view to balance opportunity and risk.

Afra Afsharipour is John D. Ayer Endowed Chair in Business Law & Martin Luther King, Jr. Professor of Law at UC Davis School of Law. Darren Rosenblum is a professor of law at St. John’s University and McGill University. This post is based on their recent article, “The Inclusion Imperative For Repairing Corporate Governance,” available here.

This Commission recognizes the importance of advancing our regulatory framework to reflect the realities of today’s operating environment – embracing innovation and new technology. To deliver on President Trump’s goal to ensure that the United States is the crypto capital of the world, we are embracing innovation to bring more products onshore, creating clear rules of the road for capital raising with crypto assets, and providing clarity as to how market participants can custody and facilitate trading of tokenized securities onchain. All while ensuring strong investor protection guardrails are in place and continuing to pursue bad actors who violate the law.

I have also consistently highlighted the importance of reversing the decline of public companies and revitalizing our public markets to Make IPOs Great Again. This agenda includes a number of proposals critical to realizing that mission by transforming our disclosure regime. Every IPO is an invitation to workers and savers to participate in the prosperity of the next generation of American enterprise. When fewer companies go public, fewer investors receive that invitation. Guided by materiality, the proposed reforms aim to reduce compliance burdens and further facilitate capital formation in our public markets, while maintaining critical investor protections.

Lastly, as it relates to the private markets, this agenda reflects our key priority to ensure a regulatory framework that is transparent, accessible, and remains safeguarded. Exposure to the full dynamism of our markets – both public and private – should not be reserved for wealthy insiders. Our agenda includes a proposal to better facilitate retail investor participation in private markets while preserving their protection with appropriate safeguards.

Having just celebrated the 250th year of our Republic, we have a mandate to preserve the promise of our capital markets for the next quarter millennium, and we intend to fulfill it. Anchored to the mission that Congress set for the agency, we will ensure that the next chapter of financial leadership is written in the U.S., and that our capital markets continue to lead the world – in their depth, their dynamism, and their unrivaled ability to transform ingenuity into prosperity.

This statement was issued on July 7, 2026, by Paul S. Atkins, chair of the U.S. Securities and Exchange Commission, in Washington, D.C.

In a new article, I discuss this “policy in command” dynamic in which governments prioritize certain overriding policy goals in response to what they view as serious political, economic, social, or national security concerns. In doing so, governments may influence the practical allocation of value among stakeholders in ways that materially affect creditor recovery prospects, even though the formal legal priority of claims remains unchanged.

This dynamic has recently emerged in two different contexts: the United States and China. Despite the countries’ vastly different political systems and economic models and their intense geopolitical rivalry, the U.S. and Chinese governments have recently advanced broader policy objectives while constraining or potentially constraining creditor recoveries. In neither case did the  governments formally alter creditor priorities, yet in both cases government policy objectives could potentially influence the practical allocation of  value and financial resources  in a restructuring scenario.

In the U.S., the policy in command dynamic emerged following the capture of Venezuelan President Nicolás Maduro in early January 2026. Shortly thereafter, the Trump administration issued an executive order placing Venezuelan oil revenues into custodial accounts controlled by the U.S. Treasury Department. The order not only protected Venezuela’s oil revenues from attachment and other enforcement actions, but it also gave the U.S. government broad discretion regarding the allocation and use of those revenues.

Because oil revenues have historically constituted the principal source of foreign exchange and government revenues for Venezuela, how those oil revenues are ultimately deployed could have significant implications for creditor recoveries in any future Venezuelan debt restructuring.  The executive order does not specifically set forth how the U.S. government will make decisions regarding the allocation of the oil revenues and to what precise purposes the oil revenues will be directed beyond broad foreign policy, national security, and other government objectives.

Nonetheless, to the extent that oil revenues are directed toward broader U.S. foreign policy, national security, and other government objectives (e.g., humanitarian assistance, economic or political stabilization, etc.) rather than debt service, creditors may find that their recovery prospects are influenced by policy considerations that lie outside traditional restructuring frameworks and creditor recovery analyses.

At the same time, measures that protect revenues from creditor attachment may serve legitimate objectives, such as preventing a scramble for assets and preserving resources needed for economic stabilization and reconstruction. The key point, though, is that government policy objectives may become an important factor in determining how value is allocated in practice.

A similar dynamic arose in China during the recent crisis involving the country’s largest property’s developers. The collapse of major developers such as Evergrande, Country Garden, and dozens of other firms left millions of Chinese homebuyers with unfinished apartments despite their having paid substantial deposits and being obligated to continue making payments on mortgages.

As public frustration mounted, evidenced by homebuyer protests across China and by the threat of mortgage boycotts, Chinese authorities viewed the situation not merely as a financial problem. Rather, they viewed it as a challenge to social stability in China, which has long been an overarching policy priority of Chinese authorities.In response, Chinese policymakers, at both the national and local levels, adopted a series of measures designed to ensure the completion and delivery of housing projects under a “guaranteed delivery of homes” policy.  Local authorities tightened supervision over escrow accounts holding homebuyer deposits, directed liquidity toward project completion, and supported bank lending programs intended to facilitate the delivery of homes.

These policies reflected an overriding governmental objective: protecting homebuyers and maintaining social stability. Yet they also had implications for creditors because financial resources that otherwise might have been available for debt service were increasingly directed toward housing completion and related policy goals.

The Chinese case is particularly noteworthy because many offshore bondholders of Chinese property developers were already structurally subordinated to onshore creditors that had more direct access to the assets and cash flows of operating companies in mainland China. The Chinese government’s policy response to the property developer crisis did not create that structural disadvantage. Nevertheless, by directing liquidity and financial resources toward project completion and social stability objectives, government policy may have further constrained recovery prospects for offshore creditors.

These examples of the policy in command dynamic in the U.S. and China suggest that, if this dynamic can manifest itself in such different systems, it could potentially arise in many other national contexts.  They also underscore that traditional credit analysis conducted before loans are made may not always capture the full range of risks that may affect recoveries if a loan subsequently experiences financial distress.

Creditors typically focus their credit analysis on matters such as contractual rights, priority provisions, capital structure, collateral packages, the borrower’s financial condition and business prospects, and political risk. Increasingly, however, creditors may also need to consider the possibility that governments confronting economic distress, social unrest, geopolitical tensions, or actual or perceived national emergencies will intervene in ways that influence the practical allocation of value without formally changing legal priorities.

In such circumstances, the most important determinant of creditor recoveries may not be the legal waterfall set forth in the relevant financing and related documents such as loan agreements, bond indentures, or intercreditor agreements.  Instead, the decisive factor may be the policy priorities that governments choose to pursue when faced with challenges to domestic stability or to their broader foreign policy, national security, or geopolitical objectives.

Steven T. Kargman is the founder and president of Kargman Associates/International Restructuring Advisors. This post is based on his recent article, “’Policy in Command’: Government Objectives and Creditor Recoveries in the US and China,” published in International Insolvency & Restructuring Report 2026/27 (IIRR) and available here. The article is reprinted with the kind permission of the publisher of IIRR, Capital Markets Intelligence.

The Debt Order expands the criteria under which a Five Business Day Tender Offer may be conducted as compared to the 2015 No-Action Letter in several critical ways, including, among other things, by permitting Five Business Day Tender Offers to be:

• Combined with consent solicitations, provided the consent of no more than a majority of the outstanding principal amount of the subject securities is required for the amendments;
• Financed with the proceeds of debt offerings senior to the subject securities;
• Structured as partial tenders, subject to proration (rather than “any and all” tenders); and
• Conducted in connection with a change-of-control transaction, so long as the offer is not commenced within ten business days following the announcement or consummation, which may facilitate the use of Five Business Day Tender Offers in the M&A context.

However, issuers that are distressed or considering liability management transactions should be mindful of certain of the Debt Order’s requirements. For instance, a Five Business Day Tender Offer may not be conducted if the board of directors “has authorized discussions with the issuer’s creditors to effect a consensual restructuring of the issuer’s outstanding indebtedness.” In addition, while the limitations on the “Qualified Debt Securities” that may be offered in exchange for the subject securities have been loosened, such securities must (i) have the same issuer, guarantors and lien priority as those of the subject securities (or the most recent issuance of pari passu debt securities), and (ii) be cash-pay only, thereby limiting structuring flexibility, particularly for distressed issuers.

Overall, the Debt Order is an important development in the SEC’s ongoing project to streamline and modernize federal securities regulation and should provide meaningful additional flexibility for issuers. This is in line with the SEC’s recent exemptive order permitting 10-day all-cash equity tender offers in certain circumstances, as well as its proposed rules related to registered offering and filer status reforms.

This post is based on a Wachtell, Lipton, Rosen & Katz memorandum, “SEC Expands Five Business Day Debt Tender Offer Criteria,” dated July 6, 2026.