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McGuireWoods Quarterly Securities & Capital Markets Update

July 20, 2026 | 41-minute read
By James M. Anderson, III, Carly E. Ginley, Barlow T. Mann, Stephen Older, W. Lake Taylor, Jr., Lawton B. Way, Joshua T. Gopaul, Jake Ingoglia, Kendall F. Jones, Christian M. Knoble, Allison M. Lizotte, Nicole S. Tronolone, Matthew E. Weir
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Welcome to the McGuireWoods Quarterly Securities & Capital Markets Update, a review of important securities law developments from the previous quarter that alerts readers to significant considerations for the upcoming reporting period.

This edition provides updates on developments during the second quarter of 2026 and considerations for calendar year-end public companies regarding their upcoming Quarterly Reports on Form 10-Q, proxy statements and annual meetings of shareholders; the third quarter reporting period; and other topics.

Table of Contents

SEC Proposal to Make Quarterly Reporting Optional

Overview of the Proposal

On May 5, 2026, the SEC proposed amendments that would permit public companies currently required to file quarterly reports on Form 10-Q to instead elect to file one semiannual report on new Form 10-S for the first six months of the fiscal year with the second six-month period covered by the annual report on Form 10-K. Public companies that do not affirmatively elect semiannual reporting would continue filing Form 10-Qs on the current quarterly schedule.

Under the proposal, a public company would make its election annually by checking a box on the cover page of its Form 10-K, and a newly public company would make its initial election by checking a corresponding box on the cover page of its registration statement. Once made, the election would apply for the full fiscal year, although a company could change its reporting cadence in a subsequent year and could correct an inadvertent election error by timely filing a Form 10-K amendment. The proposed Form 10-S would require substantially the same narrative disclosures and financial information as Form 10-Q, but for a six-month period rather than a fiscal quarter, and the financial statements would be required to be prepared in accordance with U.S. GAAP and reviewed by an auditor.

Regulation S-X Staleness Amendments

The SEC also proposed related amendments to Regulation S-X intended to align the “staleness” requirements for financial statements included or incorporated by reference in registration statements and proxy statements with the applicable Form 10-Q or Form 10-S filing cadence. As a result, semiannual filers generally would not be required to update financial statements in registration statements with quarterly financial data because the historical Regulation S-X staleness framework was built around quarterly reporting. The proposal would not eliminate Form 8-K obligations, Regulation FD obligations or market-driven expectations around earnings releases and other investor communications.

Practical Considerations for Public Companies

Although the proposal is framed as an optional burden reduction, the practical decision for public companies may be more nuanced than simply comparing the cost of preparing three quarterly reports on Form 10-Q versus one semiannual report on Form 10-S. Public companies considering semiannual reporting should evaluate, among other things:

  • Investor and analyst expectations and peer practices
  • The likelihood of continuing voluntary quarterly earnings releases
  • The impact on trading windows and Rule 10b5-1 plans, and whether less frequent SEC filings would create longer periods during which insiders may possess material nonpublic information
  • Debt agreements, indentures, stockholder agreements and other contracts that may require quarterly financial statements or compliance certificates, as those requirements could limit the practical benefit of electing semiannual reporting

Capital Markets Implications

Capital markets considerations may be especially important for public companies that regularly access the public or private markets. Even if Regulation S-X is amended to accommodate semiannual filers, underwriters, initial purchasers, auditors and investors may continue to expect current quarterly financial information in certain securities offerings, particularly because current comfort letter practices can limit auditors’ ability to provide negative assurance more than 135 days after the most recent audit or review period. Current foreign private issuer practice may provide a useful reference point. While they are not subject to domestic Form 10-Q requirements (and therefore not directly affected by this proposal), such issuers often provide quarterly or other interim financial information in response to market practice, investor expectations or similar considerations.

Next Steps and Timing

Public companies do not need to decide whether they will elect to participate in the semiannual reporting regime at this time, as it remains to be seen whether the SEC adopts final rules, whether final rules will be adopted in time to affect 2027 reporting for calendar year-end companies and whether the SEC provides a transition period. In the meantime, public companies may want to begin assessing whether semiannual reporting would be a realistic option by:

  • Inventorying quarterly reporting obligations
  • Consulting with auditors and other advisors
  • Considering investor relations messaging
  • Identifying any governance, disclosure controls, insider trading policy or contractual changes that would be necessary if the proposal is adopted

McGuireWoods continues to monitor developments as the SEC considers whether to adopt final rules and will provide updates as warranted.

SEC Proposal to Reform Registered Offerings

On May 19, 2026, the SEC proposed sweeping amendments to modernize the registered offering framework under the Securities Act of 1933, as amended (Securities Act). The proposed amendments would broaden access to Form S-3 and shelf offering eligibility, expand registration and communication flexibility, and update registered offering rules and procedures.

Form S-3 Eligibility

The proposal would dramatically expand Form S-3 eligibility by:

  • Eliminating the 12-month Securities Exchange Act of 1934, as amended (Exchange Act), reporting “seasoning” requirement
  • Eliminating the $75 million public float threshold for unlimited primary offerings on Form S-3
  • Eliminating the “baby shelf” limitation (the one-third public float cap for smaller issuers)
  • Forgiving a single untimely filing if made within seven calendar days of the due date

Any reporting issuer that is current and timely in its Exchange Act filings would be eligible, regardless of size — resulting in an estimated 60% increase in eligible issuers. Form S-3 would remain unavailable to “ineligible issuers” (blank check, shell and penny stock issuers and those with certain disqualifying events). Notably, former special purpose acquisition companies (SPACs) and de-SPAC companies would not be deemed shell companies solely due to SPAC history.

New Issuer Classification Framework: ELI and SELI Tiers

The proposal replaces the domestic Well-Known Seasoned Issuer (WKSI) framework with a three-tier system (WKSI status would be retained only for foreign private issuers):

  • Form S-3 Eligible Issuers: meet the new, expanded Form S-3 eligibility requirements
  • Eligible Listed Issuers (ELI): Form S-3 eligible and have at least one class of common equity listed on a national securities exchange
  • Seasoned Eligible Listed Issuers (SELI): ELI status plus at least 12 months of Exchange Act reporting

Approximately 74% of Exchange Act reporting issuers would qualify as SELIs, compared to approximately 35% that qualify as WKSIs today. However, up to 184 current WKSIs lacking exchange-listed common equity could lose some benefits.

Form S-1 Modernization: Incorporation by Reference

The proposal would expand backward incorporation by reference on Form S-1 to all issuers that have filed at least one annual report and extend forward incorporation by reference to all eligible Form S-1 issuers. These changes would reduce the need for repetitive auditor consent exercises and prospectus updates. Importantly, Form S-1 would not become a substitute for Form S-3 for delayed primary shelf offerings or at-the-market (ATM) programs.

Federal Preemption of State Blue Sky Laws

The proposal would define “qualified purchaser” under Section 18(b)(3) of the Securities Act to preempt state blue sky registration requirements for all registered offerings — not just those involving listed securities. This would extend federal preemption to unlisted securities, significantly benefiting OTC-traded companies, nontraded companies (including nontraded REITs) and Form S-8 offerings by non-exchange-listed reporting companies by eliminating multistate compliance costs.

ATM Offering Expansion

The proposal would expand ATM offering eligibility by amending Rule 415(a)(4). Securities listed on national securities exchanges, the OTCQX or the OTCQB would qualify, and the SEC proposes a mechanism to recognize additional eligible markets.

Investment Companies and Funds (Form N-2)

Exchange-listed business development companies and registered closed-end funds would be treated in parallel with operating companies. Short-Form N-2 eligibility would expand to all ELI funds, and SELI funds with 12 months of reporting would qualify for automatic shelf registration. Rule 139b research-report treatment would be expanded by removing the minimum public float requirement. Unlisted affected funds would not receive Short-Form N-2 eligibility.

Expansion of Research Safe Harbors

Rules 137 and 138 would be simplified by replacing current conditions with a single prohibition on research regarding blank check, shell and penny stock issuers. Rule 139 would be expanded to cover any Form S-3 eligible issuer, allowing broader research coverage without triggering Securities Act “offer” concerns.

Other Modernizing Amendments

The proposal also includes elimination of the successor registrant provision, conforming and technical amendments to simplify rules and avoid redundancy, and an extended grace period under Regulation S-X.

Comment Period and Next Steps

The proposal is subject to a 60-day public comment period (Release No. 33-11418) closing July 27, 2026. Public companies, underwriters, broker-dealers and their advisers should carefully evaluate the potential impact of these proposals and consider submitting comments to the SEC during the open comment period. McGuireWoods will continue to provide updates as the rulemaking process progresses.

SEC Approves Nasdaq’s Move to 23-Hour Trading

On April 10, 2026, the SEC approved Nasdaq’s proposal to nearly double the length of its trading day, moving from the current 16-hour window to a 23-hour-per-day, five-days-per-week model. This decision is part of an emerging regulatory trend as the SEC previously authorized comparable extended-hours proposals from 24X and NYSE Arca. NYSE Arca and Nasdaq anticipate launching their expanded schedules during late 2026.

New Two-Session Trading Framework

Nasdaq’s current framework of three separate sessions (pre-market, regular hours and post-market) will give way to a streamlined two-session framework:

  • Day Session: 4 a.m. to 8 p.m. ET
  • Daily Intermission: 8-9 p.m. ET (system maintenance and corporate actions processing)
  • Night Session: 9 p.m. to 4 a.m. ET

Night Session Restrictions

Each trading week will open with the night session on Sunday at 9 p.m. ET and close at the conclusion of Friday’s day session at 8 p.m.

Overnight trading will be more limited than daytime activity and will include the following restrictions:

  • Participants are restricted to limit orders; unpriced order types will be unavailable.
  • Firms wishing to trade during the night session must establish a dedicated connectivity port.
  • Heightened trading halt protocols and supplemental risk disclosures will govern night session activity.

Day session market mechanics, including opening and closing crosses, the full suite of order types, market maker obligations, listing and membership standards, disciplinary rules, and clearly erroneous trade protections, will continue to operate as they do now.

Prerequisites Before Launch

DTCC expanded its operational hours to support the new schedule, officially announcing the shift to 24/5 operations as of June 29, 2026. Before overnight trading can go live, additional prerequisites must be satisfied:

  • Nasdaq must submit a follow-up rule filing demonstrating that it can satisfy all operational and regulatory obligations during extended hours.
  • The national market system’s equity data plans must verify their capacity to handle quotation and transaction data during the overnight window.

Implications for Public Companies

The shift toward near-continuous trading warrants proactive review across several dimensions:

  • Public companies and their counsel should audit existing transaction documents, indentures and offering materials for references to “trading hours” or timing mechanics that assumed a limited trading day.
  • Disclosure policies may need to be updated, as the window in which material information can move will be substantially wider.
  • Thinner overnight trading and potentially sharper price swings during the night session may influence how capital markets transactions are structured and priced.

Background and Proposed Rescission

On May 29, 2026, the SEC unanimously voted to propose rescinding the climate-related disclosure rules it adopted in March 2024 under then-Chair Gary Gensler (Release No. 33-11421) in their entirety. The Climate Rules, which created new Regulation S-K Subpart 1500 and Regulation S-X Article 14 requirements for reporting material climate-related risks, Scope 1 and Scope 2 greenhouse gas emissions, third-party attestation, and financial statement effects of severe weather events, were immediately challenged by a broad coalition of states, business groups and industry organizations, and the SEC voluntarily stayed the rules on April 4, 2024, pending consolidated litigation in the U.S. Court of Appeals for the Eighth Circuit (Iowa v. SEC, No. 24-1522). The Climate Rules never took effect.

The SEC’s Rationale and Comment Period

Following the change in administration, the SEC withdrew its defense of the rules in March 2025. After the Eighth Circuit ordered the SEC to either reconsider the rules through notice-and-comment rulemaking or renew its defense, the SEC issued its proposal to rescind the Climate Rules. The SEC’s stated rationale centers on its view that the rules exceeded its statutory authority; were inconsistent with a registrant-specific, materiality-based disclosure framework; addressed policy concerns beyond the scope of the federal securities laws; and imposed unjustified compliance costs estimated at $4.9 billion per year. As Chairman Paul Atkins stated, “SEC disclosure obligations should comply with the SEC’s statutory authority, be guided by materiality as the North Star, avoid the practical effect of dictating corporate behavior, and be imposed only when the expected benefits justify the likely costs and burdens.” The proposal is subject to a 60-day public comment period (File Number S7-2026-19) closing Aug. 3, 2026, after which a final rescission would require a subsequent SEC vote.

Continuing Obligations and Recommended Actions

Although the proposed rescission would eliminate the Climate Rules, it would not relieve public companies of their existing obligations to disclose material climate-related information. Public companies remain subject to disclosure requirements under Regulation S-K — including Items 101, 103, 105 and 303 — as well as the SEC’s 2010 Climate Disclosure Guidance (Release No. 33-9106) and the antifraud provisions of the Securities Act and the Exchange Act. Public companies that invested resources in preparing for compliance with the Climate Rules may wish to preserve the data-collection infrastructure and risk-assessment capabilities they developed, particularly given continuing state-level and international disclosure requirements. In the near term, public companies should:

  • evaluate whether to submit comments during the open comment period
  • review voluntary climate disclosure practices to ensure accuracy and consistency
  • continue to assess whether climate-related risks are material under existing disclosure frameworks

McGuireWoods continues to monitor the comment period and any further action by the SEC and will provide updates as developments warrant.

Prediction Markets, CFTC Rulemaking and Insider Trading Policy Considerations

The rapid growth of prediction markets has created significant compliance risks for public companies and their employees. On June 10, 2026, the Commodity Futures Trading Commission (CFTC) issued a comprehensive Notice of Proposed Rulemaking (RIN 3038-AF65), Prediction Markets; Public Interest Determinations, establishing a durable regulatory framework for event contracts. The CFTC also made insider trading enforcement in prediction markets a top priority, bringing charges against individuals who traded on material nonpublic information (MNPI). Public companies should reassess their insider trading policies, codes of conduct and compliance frameworks to address this evolving landscape.

The Growth of Prediction Markets

Prediction markets have grown at a staggering pace:

  • Total trading volume grew from less than $1 billion in June 2024 to nearly $24 billion in April 2026, with total volume exceeding $25 billion across CFTC-registered platforms in 2025.
  • The total number of contracts traded grew from roughly 220 in 2021 to more than 8,000 in May 2026 alone.

Major platforms include Kalshi (a CFTC-regulated designated contract market) and Polymarket (crypto-based). Event contracts now cover a wide range of outcomes including politics, economics, sports, corporate events, product launches, M&A activity and FDA approvals. Critically, traders can now buy contracts on highly granular corporate outcomes — for example, when a particular company will announce an IPO, whether one public company will acquire another, the timing of FDA drug approval decisions or how many spacecraft a company will launch in a given quarter. This granularity creates direct opportunities for monetization of corporate inside information.

The CFTC’s Comprehensive Notice of Proposed Rulemaking

The CFTC’s Notice of Proposed Rulemaking establishes a three-step framework:

  1. Whether the contract qualifies as an “event contract” based on an excluded commodity under the Commodity Exchange Act (CEA)
  2. Whether it involves an enumerated activity (e.g., gaming, unlawful activity, terrorism, assassination or war)
  3. Whether the contract is contrary to public interest

Key definitional positions narrow prior interpretations: “Involves” means settlement is determined by an occurrence in the enumerated activity itself, and “gaming” is limited to rule-based recreational or entertainment activities depending on luck, skill or athletic ability. Political elections, award contests (e.g., Nobel Prize, Academy Awards) and evaluative processes are expressly excluded as “contests” rather than gaming. The proposal requires contract-by-contract analysis and implements a 90-day structured review process.

Insider Trading Enforcement in Prediction Markets

The CFTC aggressively signaled its enforcement posture. On March 31, 2026, CFTC Division of Enforcement Director David Miller stated that “insider trading in the prediction markets — where there is misappropriated information — is precisely the kind of serious violation that we are going after vigorously.” In February 2026, the Division of Enforcement issued its Prediction Markets Advisory (Release No. 9185-26), confirming the CFTC has “full authority” to police insider trading on designated contract markets (DCMs) under CEA Section 6(c)(1) and Rule 180.1, which mirrors SEC Rule 10b-5.

On May 27, 2026, the CFTC charged a Google software engineer with insider trading for trading event contracts on who would be the most frequently searched person on Google while possessing confidential information about search result trends. U.S. Attorney Jay Clayton (SDNY) indicated he anticipates bringing cases based on improper insider use of corporate information on prediction markets, and Kalshi announced enforcement actions against individuals who traded while possessing MNPI.

The enforcement apparatus is multi-layered: The CFTC charges event contracts as “swaps” subject to anti-fraud rules; the DOJ can pursue wire fraud charges (18 U.S.C. § 1343) independent of whether the instrument is a security or derivative; and the SEC flagged overlapping jurisdiction. Chairman Atkins testified in February 2026 that prediction markets are a “huge issue” with “overlapping jurisdiction potentially” between the SEC and CFTC.

Implications for Public Companies: Updating Insider Trading and Compliance Policies

Prediction markets create unique risks for public companies because they allow all employees — not just executives — to profit from nonpublic information. Lower-level employees may have access to granular operational data (e.g., product launch timing, search trends and earnings metrics) that can be directly monetized through prediction market trades. This represents a fundamental shift from the traditional insider trading landscape, in which risk is often concentrated among officers, directors and other senior insiders.

Several key legal dynamics heighten the risk:

  • Duty creation through policies: Insider trading liability under the CEA requires a breach of duty to the information source. Company policies create that duty. If policies are limited to “securities” transactions, they may not establish the duty required for prosecution — leaving a gap in both protection and accountability.
  • Information leakage: Insider trades on prediction markets can leak confidential information about corporate events (e.g., product launch timing), signaling corporate plans to competitors and the market.
  • Manipulation risk: Insiders may be tempted to manipulate corporate events to ensure favorable market outcomes.
  • Hedging complications: Companies that use prediction markets to hedge their own risks face additional complexities, as exchange rules may restrict trading on their own nonpublic information.

Recommended Policy Updates and Best Practices

Public companies should consider the following updates to their insider trading and compliance programs:

  • Expand policy scope beyond “securities” to cover all event contracts, swaps and prediction market instruments
  • Define key terms, including definitions of “prediction markets” and “event contracts” with illustrative examples in policies
  • Extend coverage to all employees, not just officers, directors and designated insiders
  • Explicitly prohibit misuse of MNPI in connection with prediction market trading, including tipping
  • Consider account disclosure requirements for personal prediction market accounts and account statements
  • Evaluate blackout and pre-clearance extensions for prediction market trades, particularly for employees with access to earnings, M&A, product launch or operational information
  • Update NDAs and confidentiality agreements to expressly cover prediction market activity and address third-party vendor and contractor access
  • Revise compliance training and annual certifications to cover prediction markets, with practical scenarios
  • Reevaluate trading policies holistically for nonsecurities contracts regulated by the CFTC and consider whether codes of conduct adequately address broader confidentiality, conflicts of interest and reputational risk

Next Steps

Comments on the CFTC’s Notice of Proposed Rulemaking are due by July 27, 2026. The CFTC’s March 2026 Advanced Notice of Proposed Rulemaking — which drew approximately 3,500 comments — may lead to further rulemaking. The CFTC has also been actively litigating to assert exclusive federal jurisdiction, suing multiple states including Arizona, Connecticut, Illinois, Minnesota, New Mexico, New York, Rhode Island and Wisconsin.

Legislative activity continues in Congress, including the PREDICT Act and the Public Integrity in Financial Prediction Markets Act of 2026. Public companies should not wait for final rules — enforcement is already active, involving the CFTC, DOJ/SDNY, potential SEC actions and platform-level enforcement by exchanges such as Kalshi.

Public companies should proactively update their insider trading policies and compliance programs now, in advance of final rulemaking, to address the risks presented by prediction markets.

SEC Expands Shortened Tender Offer Periods for Certain Equity and Debt Offers

In April and June 2026, the SEC’s Division of Corporation Finance (Division) issued exemptive orders that materially shorten the minimum offering periods for specified tender offers under the Exchange Act. These exemptive orders significantly reshape the timeline for certain equity and debt tender offers. The April 16, 2026, exemptive order (Equity Order) permits qualifying equity tender offers to remain open for as few as 10 business days, reducing the prior 20-business-day minimum that has long applied under Rules 13e-4 and 14e-1 of the Exchange Act. This relief, effective immediately upon issuance, represents a major expansion of the SEC staff’s prior abbreviated tender-offer positions, which until now had been limited largely to debt securities. Similarly, the June 30, 2026, exemptive order (Debt Order) broadens the availability of the five-business-day minimum offering period that had developed through a series of no-action letters for abbreviated debt tender offers. The SEC stated that these orders are intended to address market inefficiencies, better reflect technological advancements in information dissemination and reduce exposure to market fluctuations that may disadvantage holders during an extended offer period.

The Equity Order

The Equity Order applies to three categories of tender offers.

  1. Third-Party Tender Offers Subject to Regulation 14D. The 10-business-day minimum is available provided the offer is made pursuant to a negotiated merger agreement (hostile or unsolicited bids do not qualify), the offer is for all outstanding securities of the class, the consideration is all-cash at a fixed price and the target’s board files its Schedule 14D-9 recommendation statement no later than 5:30 p.m. ET on the first business day following commencement. The bidder must also issue a press release by 10 a.m. ET on the commencement date with an active hyperlink to all tender offer materials, and there must be no competing bid publicly announced or pending at the time of commencement. If a competing bid is subsequently announced, the offer must be extended to at least 20 business days from the original commencement date.
  2. Issuer Tender Offers Under Rule 13e-4. Any issuer may use the shortened period if the offer is for less than all outstanding securities of a class, with cash-only fixed-price consideration, and is not a going-private transaction. This relief may make issuer tender offers more attractive for public companies seeking to execute share repurchases quickly or as a defensive response to an unsolicited offer.
  3. Tender Offers by Nonreporting Companies (or their wholly-owned subsidiaries) For Cash at a Fixed Price. Third-party offers for nonreporting company securities remain excluded from the exemptive relief.

For all categories, material changes to the percentage of securities sought or the consideration must be publicly disclosed by 9 a.m. ET on the fifth business day before expiration, and other material changes must be publicly disclosed by 9 a.m. ET on the second business day before expiration.

Excluded Offers

The following categories of offers are expressly excluded from the Equity Order’s relief:

  • Hostile or unsolicited bids
  • Offers involving stock or mixed consideration
  • Going-private transactions subject to Rule 13e-3 of the Exchange Act
  • Offers relying on Tier II cross-border exemptions
  • Partial third-party offers
  • Dutch auction tender offers (which lack a single fixed-price consideration)

All existing anti-fraud and anti-manipulation provisions continue to apply in full to these offers.

The practical impact of the Equity Order is substantial: Negotiated, all-cash public company acquisitions structured as two-step tender offers may now close at least a month faster than mergers requiring a shareholder vote of the target company, making the tender offer path even more attractive for qualifying transactions.

The Debt Order

The Debt Order broadens the availability of the five-business-day minimum offering period that had developed through a series of no-action letters for abbreviated debt tender offers. The relief applies to tender or exchange offers for any class or series of nonconvertible debt securities, without regard to ratings, but only if the offeror is the issuer of the subject debt securities, a direct or indirect wholly-owned subsidiary of the issuer, or a parent company that directly or indirectly owns 100% of the issuer’s capital stock other than directors’ qualifying shares. Consideration for the tender offer must consist solely of cash and/or “qualified debt securities,” meaning nonconvertible debt securities that are substantially similar in all material respects to the subject debt securities or the issuer’s most recent pari passu debt issuance, subject to specified differences such as maturity, interest payment dates, redemption provisions and interest rate, with interest payable only in cash.

Relief under the Debt Order is subject to significant conditions. If the offer is for less than all outstanding securities of the relevant class or series and tenders exceed the amount the offeror will accept, securities must be accepted as close as practicable to pro rata. Exchange offers using qualified debt securities must be limited to qualified institutional buyers (as defined under the Securities Act), non-U.S. persons and/or institutional accredited investors in a transaction that is exempt from the registration requirements of the Securities Act. The offer may not be made in connection with a consent solicitation requiring more than a simple majority approval to amend the governing indenture, during an existing default or event of default, while the issuer is in bankruptcy or insolvency proceedings, or in specified restructuring discussions. The offer must be announced by widely disseminated press release by 10 a.m. ET on the commencement date, with basic terms and an active hyperlink to the offer materials. Material changes to the amount sought or consideration for the offer must be announced by 9 a.m. ET on the third business day before expiration and other material changes by 9 a.m. ET on the second business day before expiration. Withdrawal rights must be available at least until the earlier of expiration and, if extended, the 10th business day after commencement, and again after the 60th business day after commencement if the offer has not been consummated.

Additional conditions address proration announcements, payment only promptly after expiration and restrictions on offers commenced around change-of-control, extraordinary, competing or material asset transactions.

Practical Challenges and Next Steps

The expedited timeframes may create certain logistical and administrative challenges for public companies:

  • Equity tender offers will require earlier coordination of Hart-Scott-Rodino Act and other regulatory filings, day-one disclosure mechanics and Schedule 14D-9 timing.
  • Debt tender offers will require careful planning around press releases, dissemination to beneficial holders, results announcements, exchange-offer eligibility, withdrawal rights and proration mechanics.

The SEC staff emphasized that anti-fraud and anti-manipulation provisions continue to apply to all offers and that the SEC may reconsider, modify or withdraw the relief if material issues arise. Public companies considering acquisitions, share repurchases, liability-management transactions or other qualifying offers should assess at the outset whether the relevant order’s conditions can be satisfied and adjust deal timelines and execution strategies accordingly.

Reminder Concerning Rule 21F-17 (Whistleblower Protection Rule) in Light of Foot Locker Settlement

Background: Rule 21F-17(a)

Congress created the SEC’s whistleblower program in Section 21F of the Exchange Act to encourage individuals to report potential securities law violations through financial incentives and anti-retaliation protections. To implement that mandate, the SEC adopted Rule 21F-17 in 2011, which provides in relevant part: “No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.” Since its first enforcement action in 2015, the SEC brought over 20 enforcement actions for Rule 21F-17 violations against public issuers, registered investment advisers, broker-dealers and private companies.

The Foot Locker Settlement (May 22, 2026)

On May 22, 2026, the SEC announced a settled enforcement action against Foot Locker, Inc. for using separation agreements that required departing employees to waive their right to receive SEC whistleblower awards, in violation of Exchange Act Rule 21F-17(a). From at least July 2020 through June 2024, approximately 148 departing employees — senior executives, directors and employees in finance, legal, supply chain and operations — signed separation agreements containing an “award waiver provision.” While the agreements expressly permitted employees to file charges with or participate in government agency investigations, they also required employees to “waive the right to receive any award of monetary or other benefits” arising from those proceedings.

The SEC concluded that conditioning severance on a waiver of potential whistleblower awards “raised impediments” to participation in the SEC’s whistleblower program, regardless of whether Foot Locker ever attempted to enforce the clause or whether any individual was actually deterred from whistleblowing. There are no known instances in which the company took action to enforce the provision or in which the provision otherwise impeded specific whistleblower activity.

Foot Locker began phasing out the award-waiver language in March 2024 and fully removed it from its templates by June 2024 — before it was contacted by SEC staff. Without admitting the findings, Foot Locker consented to a cease-and-desist order and agreed to pay a $148,000 civil penalty. The penalty amounts to $1,000 per violative separation agreement, potentially establishing a benchmark for a more formulaic penalty approach in future Rule 21F-17(a) actions.

Significance: Continuity Across Administrations

This is the first Rule 21F-17(a) enforcement action under Chairman Atkins and the first such settlement since January 2025. The Foot Locker order signals that whistleblower protections remains a priority for SEC enforcement across administrations, and the current Commission will continue to pursue cases in which agreements contain language viewed as clearly violative. Enforcement actions against companies that included whistleblower-impeding language were common during the Gensler Commission, and this action is a rare but meaningful indication that the Atkins Commission will continue that focus.

Key Observations for M&A and Corporate Governance

Legacy exposure persists post-acquisition. Foot Locker was no longer a public company at the time of the order, having been acquired in 2025, yet legacy documents and past practices still created enforcement exposure. This is directly relevant in M&A due diligence — acquirers should review the target’s historical employment-related agreements for potentially violative whistleblower provisions.

No actual deterrence required. The SEC applies Rule 21F-17(a) prophylactically. The mere existence of language that could chill whistleblowing is sufficient for a violation, even without enforcement of the provision or evidence that anyone was actually deterred.

Self-remediation does not forestall enforcement. Although the SEC credited Foot Locker’s cooperation and remedial actions (phasing out the offending language before SEC contact), these steps did not prevent the enforcement action — they merely influenced the penalty amount.

Scope extends beyond employment agreements. The SEC applied Rule 21F-17(a) beyond the employee-employer context to consulting agreements, client agreements and customer releases. Both public and private companies are subject to enforcement.

Compliance Recommendations

Public companies should conduct a comprehensive review of documents across their businesses to ensure they do not contain language that could be read as prohibiting, discouraging or otherwise interfering with protected whistleblowing activity. Documents to review include:

  • Employment-related agreements (e.g., employment agreements, separation agreements, confidentiality agreements, restrictive covenant agreements, equity agreements and retention agreements)
  • Settlement agreements
  • Consulting agreements
  • Confidentiality or nondisclosure agreements
  • Company policies (e.g., compliance manuals, codes of conduct and employee handbooks)
  • Training materials, including electronic communications practices training
  • Client, customer and investor agreements, including releases

Public companies should also ensure that prior versions of documents containing violative language are no longer in use. In the M&A context, acquirers should treat whistleblower-compliance diligence as a standard component of pre-closing review, given that legacy agreements can create post-closing enforcement risk even after a target has been taken private.

ExxonMobil Retail Shareholder Voting Program Update — 2026 Annual Meeting Results

On May 27, 2026, shareholders of Exxon Mobil Corporation voted down a proposal that would have required the company to modify its retail voting program to provide multiple independent voting options that were not aligned with the recommendations of the company’s board of directors. The Exxon Board had recommended shareholders vote against the proposal.

Background on the Retail Voting Program

In September 2025, the Division issued a no-action letter to Exxon regarding its retail voting program, which is designed to encourage greater participation by individual investors in corporate governance. Under the program, all of Exxon’s retail investors, whether registered owners or beneficial owners, may authorize a standing voting instruction requiring Exxon to vote their shares in line with the Exxon Board’s recommendations at each meeting of shareholders. Shareholders who opt in have two choices: (1) apply the standing instruction to all matters, or (2) apply it to all matters except contested director elections and certain M&A transactions requiring shareholder approval. Participating shareholders may opt out at any time at no cost, and they retain the ability to override their standing instruction by casting their own votes for any upcoming meeting. Exxon sends annual reminders regarding enrollment and opt-out rights.

The Shareholder Proposal

The proposal was submitted by the New York City Comptroller’s Office on behalf of the New York City Police Pension Fund. It requested that the Exxon Board adopt and disclose policies to ensure the retail voting program provides “multiple independent options to shareholders so that the retail voting program does not inordinately advantage the Exxon Board’s own voting recommendations.” Suggested options included independent voting options based on standing instructions, a general “against management” policy and customized policies.

The Exxon Board argued that the proposed changes went “far beyond” the scope of the SEC no-action letter, violated proxy rules, and was inconsistent with state law and the Exxon Board’s fiduciary duties.

Ultimately, Exxon shareholders rejected the proposal at the May 27, 2026, annual meeting. The vote represented a win for the Exxon Board, which actively opposed the measure alongside its broader defense of the retail voting program’s current structure.

Broader Context

The retail voting program faces ongoing opposition from shareholder advocacy groups. In September 2025, As You Sow and the Interfaith Center on Corporate Responsibility filed a reconsideration request with the SEC asking it to rescind its no-action relief, arguing the program may reduce active decision-making by shareholders. The program also remains subject to ongoing litigation in New Jersey. Despite these challenges, Exxon continues to promote the program on its investor relations website and noted that it may serve as a model for other public companies with significant retail ownership.

For more details regarding the Exxon retail voting program, see McGuireWoods’ previous alert. Exxon’s solicitation materials filed on Schedule 14A with the SEC also describe the retail voting program.

As this quarter’s developments illustrate, public companies face an evolving regulatory and compliance landscape requiring proactive attention across multiple fronts. Public companies should assess their periodic reporting strategies in light of the semiannual reporting proposal, evaluate the expanded capital markets opportunities presented by the registered offering reforms and shortened tender offer timelines, and review disclosure policies in connection with extended trading hours. Equally important is updating insider trading policies and codes of conduct to address the emerging risks posed by prediction markets, ensuring compliance with whistleblower protection requirements across all agreements and policies, and monitoring the status of the climate disclosure rescission. Taking a proactive approach now will help mitigate legal and reputational risk and position public companies to respond effectively as the regulatory environment continues to evolve.

For questions about these topics, contact the authors, your McGuireWoods contact or a member of the firm’s Public Company Advisory Practice Group.

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