Capital Markets & Securities Law Watch

On May 23, 2024, in a surprise move, the Securities and Exchange Commission (SEC) issued an order that will allow exchanges to list Ethereum-based exchange-traded funds (ETFs). The SEC’s order follows its recent decision to allow trading of Bitcoin ETFs, in what has been interpreted by some as a softening approach towards the regulation of digital assets. Shortly after the SEC’s approval of Bitcoin ETFs, at least 10 asset managers—including BlackRock, Fidelity, Grayscale, and Invesco—initiated applications with the SEC to begin listing Ether ETFs.

Over the last two decades, sustainability has become a mainstream global concern, shaping innovative financial instruments (in the form of loans and debt securities) that integrate environmental, social, and corporate governance (ESG) factors with broader considerations for long-term economic sustainability, collectively defined as sustainable finance.

On 3 April 2024, the Bank of England (BoE) and the Financial Conduct Authority (FCA) invited responses in relation to the UK’s Digital Securities Sandbox (the DSS), a regulatory testing environment, or ‘sandbox,’ which aims to allow participants to use developing financial technologies, including distributed ledger technology (DLT), in the issuance, trading, and settlement of securities. The consultation period ended on 29 May 2024 and we anticipate that the DSS will soon open to applications. Set forth below is a summary of the anticipated features of the DSS.

Last year, the Securities and Exchange Commission adopted its final rule to shorten the settlement cycle for most broker-dealer securities transactions to one business day after the trade date (T+1). Previously, the standard settlement cycle was two business days after the trade date (T+2).

For a number of reasons, certain London-listed companies have been considering, and in some cases implementing, US listings, whether as an additional listing or by way of a unilateral move away from London. In addition to increasing access for US investors, some of these reasons relate to a perception of a valuation gap between New York and London in addition to what some perceive to be a wider and more receptive investor base in the US.

On May 3, 2024, the SEC announced charges against audit firm BF Borgers CPA PC and its owner, Benjamin F. Borgers, of deliberate and systemic failures to comply with PCAOB standards in its audits and reviews incorporated in over 1,500 SEC filings from January 2021 through June 2023, in what the SEC called “one of the largest wholesale failures by gatekeepers in our financial markets.” In this post, we review the SEC’s order and the SEC staff’s statement regarding the disclosure and reporting obligations of impacted issuers.

On April 11, 2024, the New York Stock Exchange (NYSE) filed a proposed rule change with the Securities and Exchange Commission, proposing a new subsection of Rule 123D that alters the rules governing the halting and resumption of trading in a security undergoing a reverse stock split. 

On April 17, 2024, the New York Stock Exchange (NYSE) proposed a rule that, if adopted by the U.S. Securities and Exchange Commission (SEC), would amend Section 802.01D of the NYSE Listed Company Manual to provide the NYSE with discretionary authority to commence immediate suspension and delisting proceedings for a listed company that has “changed its primary business focus to a new area of business that is substantially different from the business it was engaged in at the time of its original listing or which was immaterial to its operations at the time of its original listing.”

With consumer and investor interest in artificial intelligence (AI) surging, there has been heightened concern among regulatory agencies, including the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC), with companies engaging in a deceptive practice the FTC and SEC have dubbed “AI washing.”

On April 23, 2024, the U.S. Federal Trade Commission promulgated a final rule banning non-compete clauses in contracts with employees and other workers (the Rule). 

Under its current rule, the New York Stock Exchange (NYSE) commences delisting procedures against a listed special purpose acquisition company (SPAC) if it fails to complete a business combination within 36 months of its initial listing date, regardless of whether it has entered into a definitive agreement for a business combination.

In connection with the 2024 proxy season, pension funds associated with the United Brotherhood of Carpenters and Joiners of America (the Carpenter Funds) have submitted a director resignation bylaw proposal (the Proposed Bylaw or Proposal) to at least 30 companies for inclusion in the companies’ 2024 proxy statements and to be voted on at the companies’ 2024 annual meetings of stockholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the Exchange Act).

On March 7, 2024, the Securities and Exchange Commission (SEC or Commission) announced charges against Skechers U.S.A. Inc. (Skechers) for violating Rules 13a-1 and 14a-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), by failing to disclose certain transactions with related persons in reports filed with the SEC for the years 2018 through 2021. 

The Financial Conduct Authority (FCA) has now published a revised draft of the UK Listing Rules (UKLRs) as expected. As a reminder, on 20 December 2023, the FCA published Consultation Paper 23/31: Detailed proposals for listing rules reforms (CP 23/31). This was part of the FCA’s mission to reform the UK’s listing regime and strengthen the attractiveness of UK capital markets. 

On February 20, 2024, the United States Supreme Court denied a petition for writ of certiorari and declined to review the 3-0 decision of the United States Court of Appeals for the Second Circuit (the Second Circuit) in Kirschner v. JP Morgan Chase Bank, N.A., which held that certain syndicated loan notes were not securities. By refraining from hearing the case, the Supreme Court left the Second Circuit’s decision in place. The result is that syndicated loan lenders do not need to comply with securities laws in the ordinary course of selling syndicated loan notes to other lenders.

On March 6, 2024, the US Securities and Exchange Commission (SEC or Commission) announced the adoption of final rules requiring registrants – both domestic companies and foreign private issuers (FPIs) – to include climate-related information in their registration statements and annual reports. 

As discussed in prior blog posts, on June 9, 2023, the Securities and Exchange Commission (the SEC) approved listing standards promulgated by the New York Stock Exchange (NYSE) and Nasdaq Stock Market (Nasdaq) regarding the recovery of erroneously awarded incentive-based compensation, referred to as “clawbacks.” 

The proposed rules, if adopted, would create new disclosure requirements covering, among other things, climate-related risk factors and identification and mitigation of climate-related risks, climate targets and goals and plans for energy transitions, greenhouse gas emissions, and financial statements that include climate-related financial impact and expenditure metrics.

The Securities and Exchange Commission (the Commission) has a longstanding policy under its No-Admit/No-Deny Rule (or the Gag Rule) that prohibits defendants from openly denying, or even criticizing, allegations made by the Commission after settling an enforcement action. The Gag Rule has come under scrutiny for its First Amendment implications and “muzzling” effect, even as the Commission stands behind the policy’s reasoning.

On January 31, 2024, the New York Stock Exchange (the NYSE or the Exchange) issued its annual Listed Company Compliance Guidance Memo for 2024 (the Memo). The Memo describes new rules and important reminders for all NYSE-listed companies, with any rule or policy distinctions for domestic versus foreign private issuers (FPIs) identified within.