US corporate governance: 2026 midyear review

The Securities and Exchange Commission (SEC or Commission) is proposing to make significant changes to the eligibility of issuers to utilize Securities Act registration Form S-3. If adopted, a substantial majority of public companies will now be able to utilize this form for the shelf registration of their securities and for continuous offering procedures. In addition, the proposal would substantially liberalize the qualification for automatic effectiveness of Form S-3 for issuers that have been publicly reporting for at least 12 months. The proposed rule changes would also make all Form S-3-eligible issuers eligible for certain offering-related communications. The comment period on the proposed rules expires on July 27, 2026.

The SEC is proposing to reduce public company filer status to just two primary categories — large accelerated filers (filers with a public float of $2 billion, subject to the seasoning requirement) and nonaccelerated filers (all other filers). The proposal would increase the time period, or seasoning requirement, to become a large accelerated filer; apply reduced disclosure requirements to all public companies other than large accelerated filers; and extend filing deadlines, particularly for the smallest reporting companies. If adopted, these changes would significantly affect the reporting obligations of a large swath of public companies by eliminating a significant number of items on which they are currently required to report. The proposed changes would also eliminate the required auditor attestation for internal control over financial reporting for nonaccelerated filers. Together, these changes would promote significant savings in terms of both costs and management time for many public companies. The comment period on the proposed rules expires on July 20.

Effective May 21, 2026, the SEC finally rescinded its controversial “no-deny” settlement policy. While constitutionally questionable as a restriction on free speech, since 1972 the SEC had employed this policy, which only permitted individuals and entities to settle civil enforcement proceedings without admitting or denying the Commission’s allegations against them if they also agreed not to publicly deny the claims. 

The SEC offered five reasons for its rescission: (1) the policy could create the false impression that the Commission was trying to insulate itself from criticism, (2) the Commission had little recourse to enforce no-deny provisions, (3) technology further made enforcement challenging and impractical, (4) other federal agencies lack a similar rule, and (5) rescinding the policy gives the Commission greater flexibility to settle enforcement actions. This rescission, which also applies retroactively, as the SEC will not enforce no-deny provisions in past settlements, vindicates years of criticism from courts, litigants, academics and SEC commissioners themselves, and it is one of the most significant changes to enforcement settlement practices in over 50 years.

See the linked article for a summary of our coverage of challenges to the no-deny policy, including decisions out of the U.S. Courts of Appeal for the Fifth and Ninth Circuits.

In February, the SEC updated its enforcement manual for the first time since 2017. The 2026 manual — which provides guidance about the policies and procedures that SEC enforcement staff follow when conducting investigations — modifies enforcement procedures governing Wells notices, disqualification waivers and credit for cooperating with the Commission.

Notably, when sending Wells notices, which are warnings to recipients that the SEC is recommending an enforcement action be taken against them, SEC staff will now have to disclose “salient, probative evidence” that may not be known to the recipient. Additionally, the SEC will use an expanded framework to consider the impact of a target’s cooperation on the investigation and its resolution. The 2026 manual expands the framework for considering corporate cooperation but does not add much to incentivize individual cooperation. It may behoove the SEC to apply aspects of its framework further for corporate cooperation to individual cooperators, whose testimony is often critical to uncovering wrongdoing.

Similarly, the SEC can incentivize individual cooperators by reducing disgorgement amounts through applying loss causation concepts or deducting appropriate expenses. The Supreme Court recently considered a related topic. In June, it resolved a circuit split on the issue of whether the SEC must show pecuniary loss to investors in order to obtain a disgorgement award, ruling that the Commission need not make such a showing. In Sripetch v. SEC, the Court held that disgorgement is available as an SEC enforcement tool while upholding the two limitations imposed by Liu v. SEC: that disgorgement amounts not exceed net profits and that they must be awarded for victims. The Court assumed, without deciding, that disgorgement is an equitable remedy. This leaves open questions as to whether the SEC will be allowed to argue that collected funds be sent to the Treasury if it is infeasible to trace losses to victims and what showing the SEC would be required to make under such circumstances. In a concurrence, Justice Clarence Thomas argued that disgorgement had effectively become a legal remedy to which a Seventh Amendment jury right attached.

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   No. 24–466, 608 U.S. __ (2026).

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   591 U.S. 71 (2020).

Market watchdogs — the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ) — have increased regulation, enforcement and oversight of prediction markets in recent months, sending a strong message that these markets will not become havens for illegal use of insider information. 

For example, the CFTC and DOJ charged a military service member civilly and criminally for his alleged misuse of classified nonpublic government information to profit from U.S. operations in Venezuela. In turn, prediction market platforms have taken up their “independent duty” to audit and enforce their exchanges: Kalshi bans trades by anyone who has any influence on the outcome of the underlying event, like athletes in their own sports, and Polymarket is utilizing data analytics to detect and report insider trading on its platform.

Chairman Paul Atkins of the SEC outlined three priorities for the Commission to ease the process for initial public offerings: (1) streamline disclosure report requirements to focus strictly on material information, (2) defer to states to regulate corporate governance and (3) prioritize enforcement that prevents investor harm rather than punishing technical mistakes.

Two affiliated large investment advisory groups reached a settlement with the SEC over allegations that their form investment advisory agreements violated the Investment Advisers Act of 1940. In particular, the SEC alleged that the groups used improper “hedge clauses” — contract clauses that limit the advisers’ liability — in advisory agreements with retail customers and impermissibly permitted contractual assignments. These alleged infirmities led to additional violations, including alleged failures to maintain adequate compliance systems. While the two firms did not admit to the allegations, they agreed to a censure, to cease and desist illegal activity and to one firm paying a fine. 

In Leadenhall Capital Partners LLP v. Advantage Capital Holdings, LLC, the U.S. Court of Appeals for the Second Circuit issued a cautionary decision for lenders depending on unsecured guarantees by parent companies and affiliates of their borrowers. Through this case, the court expanded Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc.’s long-standing rule — that federal courts lack authority to preliminarily enjoin assets where no lien or equitable interest exists — to secured creditors seeking to freeze assets held by a guarantor that did not pledge its own collateral. 

The district court had issued a preliminary injunction freezing the guarantors’ assets to prevent their dissipation before final judgment — an order that the Second Circuit vacated. Thus, even if a creditor is secured by the assets of the borrower, under Leadenhall, a federal court cannot enjoin a guarantor from diffusing its own assets if they are not subject to a lien. This is true even if the creditor is likely to prevail on the merits against the guarantor. Lenders may instead want to assert a claim for an equitable remedy at the outset of the case or utilize prejudgment attachment procedures to prevent asset dissipation. 

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   527 U.S. 308 (1999).

On June 1, the Supreme Court denied certiorari in Comm. of Asbestos Claimants of Bestwall LLC v. Bestwall LLC, declining to consider whether a concededly solvent debtor can invoke bankruptcy protection after participating in a restructuring strategy known as the Texas Two-Step. The Texas Two-Step occurs when a company separates its operating business and certain of its liabilities, often mass tort claims, into two different entities. The operating entity continues the core business while the liability-laden entity pursues Chapter 11 bankruptcy. 

Here, Georgia-Pacific undertook in such a partition, housing its asbestos liabilities in Bestwall LLC, which then filed for Chapter 11 bankruptcy. The Official Committee of Asbestos Claimants argued, among other points, that the court lacked subject matter jurisdiction. A divided panel of the U.S. Court of Appeals for the Fourth Circuit disagreed, holding that federal question jurisdiction was proper because the Constitution’s Bankruptcy Clause does not require insolvency for jurisdiction. The Supreme Court’s denial of certiorari leaves this holding in place. 

Separately, Congress is currently considering the Consumer Protection and Corporate Accountability in Bankruptcy Act, a bipartisan bill that would bar the Texas Two-Step.

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   No. 25-1013, __ S. Ct. __, 2026 WL 1513280 (Jun. 1, 2026).

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   H.R. 8393, S. 4346.

The Supreme Court significantly curtailed secondary liability under the Copyright Act in Cox Communications, Inc. v. Sony Music Entertainment earlier this year. The Court held that an internet service provider can be contributorily liable for a user’s copyright infringement only if the provider induced the infringement or it tailored its product to make the infringement easier. A provider’s mere knowledge that customers use its services for copyright infringement is not enough.

Cox dealt with an internet service provider (Cox) that serves millions of customers. Some of those customers illegally downloaded copyrighted works. Copyright holders sued Cox, asserting that it was contributorily liable for copyright infringement because it failed to adequately police its customers’ usage and terminate accounts known to infringe. A jury found Cox secondarily liable. The Fourth Circuit affirmed, reasoning that Cox “supplied a product with knowledge that the recipient w[ould] use it to infringe copyrights.” 

The Supreme Court reversed. It held that Cox could be held contributorily liable only if Cox (1) actively encouraged its customers to use its services for infringement or (2) tailored its services to make infringement easier. Because Cox did neither, the Court reasoned, it could not be held contributorily liable. Justice Sonia Sotomayor, who specialized in intellectual property when in private practice, concurred in the judgment. She would have allowed copyright plaintiffs to establish contributory liability based on common law doctrines like aiding and abetting. But she ultimately agreed that Cox was not liable because it lacked any intent to aid infringement.

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   No. 24-171, 607 US __, 146 S. Ct. 959 (2026).

In February, the Supreme Court held that the Trump administration lacks authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). In Learning Resources, Inc. v. Trump, the Court found that the tariffs exceeded the scope of the statute’s delegated authority — the president has only the power to regulate importation, not impose tariffs. Tariffs that had already been collected were therefore unlawful. 

The Court of International Trade (CIT) and U.S. Customs and Border Protection are managing the refund process. On March 4, the CIT ordered refunds. Since April 20, importers have been submitting IEEPA refund requests. Although refunds have begun to be issued for importers of record and authorized brokers, customers who paid tariffs have been excluded from the process. Other tariffs have been introduced by the Trump administration since the invalidation of the IEEPA tariffs.

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   No. 24-1287, 607 US __, 146 S. Ct. 628 (2026).

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   See Atmus Filtration, Inc. v. United States, No. 26-01259, 2026 WL 616128, at *1-*2 (Ct. Int’l Trade Mar. 4, 2026), amended 2026 WL 679285 (Ct. Int’l Trade Mar. 5, 2026).

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   See Cargo Systems Messaging Service # 68315804, “Introduction - Consolidated Administration and Processing of Entries (CAPE) for IEEPA Refunds, April 20, 2026 Deployment,” U.S. Customs and Border Protection (Apr. 10, 2026).

The Delaware Supreme Court affirmed the Court of Chancery’s dismissal of a stockholder’s derivative action against Armistice Capital LLC and Armistice Master Fund Ltd. (together, Armistice) in Witmer v. Armistice Cap. LLC. A shareholder of Aytu Biopharma Inc. derivatively sued Armistice, a hedge fund that (1) held a large but minority share of Aytu and (2) employed a director on Aytu’s board. The shareholder alleged that Armistice engaged in insider trading by acting on material nonpublic information (MNPI) it had learned from its director designee, thereby violating fiduciary duties owed under Brophy v. Cities Serv. Co.

Brophy established that issuers may recover damages from individuals deemed fiduciaries who abused their positions by trading on inside information. The Witmer court clarified that the scope of this designation is not unbounded. Liability cannot follow where the shareholder defendant merely has access to MNPI; they must also have something more: a position of special trust, control over something they do not own or a relationship of domination and influence. Here, the plaintiff’s claim failed: Armistice’s minority share in Aytu and employment of an Aytu director did not create the position of trust and confidence between Armistice and Aytu needed to impose fiduciary duties under Brophy. 

Regulation of insider trading is sometimes considered to be the exclusive province of federal securities law, particularly Rule 10-b(5) and Securities Exchange Act Section 16(b). However, Witmer highlights that state law too can be a source of liability for this activity. 

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   344 A.3d 632 (Del. Ch. 2025) aff’d, 2026 WL 849994 (Del. Mar. 27, 2026).

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   31 Del. Ch. 241, 243 (1949).

In Fortis Advisors, LLC v. Krafton, Inc., the buyer in an acquisition went to extraordinary lengths — including relying on an AI-generated plan instead of on legal advice — to avoid a $250 million earnout it was obligated to pay the seller’s “Key Employees,” its president and two co-founders. The buyer’s CEO came to regret the earnout provision of the deal, and despite his lawyers cautioning him that firing the Key Employees would not terminate the earnout obligation, he nevertheless acted on aggressive AI-generated advice to do just that while executing a “Takeover” of the seller’s operations. A representative of the seller’s former stockholders sued the buyer, seeking damages and specific performance for breach of contract and the implied covenant of good faith and fair dealing.

In a posttrial decision issued on March 16, the Delaware Court of Chancery resolved the first phase of the dispute in favor of the plaintiff-seller. The court found that the Key Employees’ terminations were not for cause and rejected the buyer’s offered rationales as pretextual. Among other relief, it reinstated one of the Key Employees — the CEO — and invalidated a board resolution purporting to remove that his operational control. 

This opinion highlights the risks of turning to AI for strategic advice, especially in the face of directors’ and officers’ fiduciary duties.

In April, the DOJ announced the creation of the National Fraud Enforcement Division (NFED), which is designed “to zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars.” The most immediate effect of the new division appears to be organizational rather than substantive. For instance, the NFED took immediate operational control of the Criminal Division’s existing Tax Section, Health Care Fraud Unit and Market, Government, and Consumer Fraud Unit. Its initial investigations and indictments concerned healthcare and Medicaid fraud. Civil fraud enforcement, such as actions under the False Claims Act, remain outside the purview of the NFED. 

The Freedom of Information Act (FOIA) exempts government agencies from disclosing information that has been provided as part of a grand jury investigation, since it is protected by Federal Rule of Criminal Procedure 6(e). This year, a circuit split developed concerning the extent to which Rule 6(e) protects documents that existed prior to a grand jury investigation and are possessed by the federal government solely because of that investigation. 

Under existing Second Circuit precedent, documents are exempted if the government can show that disclosure would “reveal secret aspects of the grand jury’s proceedings.” This could include records where disclosure would reveal sources of information and the criminal actions under investigation. However, the mere existence of a grand jury subpoena does not exempt preexisting documents from FOIA disclosure if the disclosure would not expose anything about the proceedings. 

In April, the Ninth Circuit provided a more generous exemption that burdens the requesting party instead of the government. The requestor must show that the documents were in the government’s possession from a source unconnected to the grand jury and were sought for reasons unrelated to the investigation and that their disclosure would not compromise the integrity of the grand jury process. It remains a best practice to label all documents produced in response to a grand jury subpoena with “FOIA Confidential” and making clear the connection to the grand jury investigation.

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   See Grynberg v. U.S. Dep’t of Just., 758 F. App’x 162, 164 (2d Cir. 2019).

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   See Kalbers v. U.S. Dep’t of Just., 166 F.4th 783 (9th Cir. 2026).

Earlier this year, the New York attorney general (NY AG) filed a complaint against former Emergent BioSolutions CEO Robert Kramer, showcasing state-led enforcement of securities markets. Companies should pay attention to such actions, as state law may involve unfamiliar — and more expansive — standards.

Here, Robert Kramer initiated an SEC Rule 10b5-1 plan to sell stock options at a time when he allegedly knew MNPI that would harm the stock’s value. Traditionally, the SEC would bring a claim for violating Rule 10b-5, which requires proof of scienter. The NY AG alleged violations of the state’s Martin Act, which arguably does not require such a showing.

This complaint comes on the heels of the NY AG successfully reaching a $900,000 settlement with Emergent for its role in Robert Kramer’s plan. The settlement requires Emergent to amend its insider trading policy to require senior officials to, among other things, certify that they do not possess MNPI. 

In March, Sens. Elizabeth Warren and Richard Blumenthal sent a letter to the CEO of NVIDIA suggesting that the company may have engaged in a transaction for avoidance in violation of the premerger notification requirements of the Hart-Scott-Rodino (HSR) Act. Rather than purchase the stock or assets of Groq Inc., a maker of AI accelerator application-specific integrated circuits, NVIDIA acquired a nonexclusive license to Groq’s technology and agreed to hire its key employees. Because of this “acquihire,” the parties did not file under the HSR Act and avoided a pretransaction review by antitrust agencies.

Rule 801.90 of the HSR Act provides that transactions or devices designed to avoid compliance with the requirements of the act are to be disregarded and the act is to be applied to the substance of the transaction. However, precedent does not support treating an acquihire as a per se mechanism to avoid antitrust laws. Though Rule 801.90 has been applied unevenly, precedent demands applying it to acquihires only if there is some further indication that the deal was structured intentionally to avoid antitrust scrutiny. 

After four days of deliberation, a New York jury found that Live Nation and its Ticketmaster subsidiary unlawfully monopolized concert ticketing services for major venues in the United States in violation of Section 2 of the Sherman Act. The decision illustrates two emerging trends in Sherman Act enforcement. First, while states have generally joined DOJ-led antitrust suits, they are increasingly willing to proceed without federal help. Here, the DOJ reached a settlement many states found inadequate, so a coalition of more than 30 states and the District of Columbia tried the case to verdict. 

Second, though cases brought under Section 2 of the Sherman Act have historically seldom gone to trial, this matter is one of three recent cases that has. This trial also underscores how broad discovery can be in antitrust cases and how salacious documents can be persuasive — public reporting revealed that jurors took particular note of leaked text messages from Live Nation employees who bragged about up-charging customers.

Recent bipartisan calls for enforcement of the Robinson-Patman Act (RPA) have been reviving the Depression-era antitrust law that has not been federally enforced in decades. The RPA prohibits sellers from charging competing buyers different prices for commodities of the same grade and quality unless specific affirmative defenses apply. This revival is deceptively heterogeneous, and future enforcement actions under the RPA may be determined by which competing interpretation of the act courts and policymakers adopt. Specifically, it is unclear whether the RPA should be interpreted as primarily designed to protect competitors, the process of competition or consumer welfare. Businesses whose actions may trigger scrutiny should be aware of this uptick in RPA enforcement and the uncertain legal landscape surrounding it. 

In February 2025, new rules came into effect under the HSR Act that substantially increased the burden on transacting parties to produce internal documents and information and the time to make an HSR filing after deal signing. Approximately one year later, the U.S. District Court for the Eastern District of Texas vacated these rules.

The Federal Trade Commission (FTC) appealed the order, but in March, the Fifth Circuit denied the FTC’s request for a stay that would allow the rule to become effective pending further appeal. On May 26, the court granted the FTC’s unopposed motion to stay further proceedings — which the FTC had sought as it and the DOJ continue revising the challenged rule — through the end of this year. The FTC announced that it is accepting filings using the old form. 

California became the third state to adopt the Uniform Antitrust Premerger Notification Act (Uniform Act) earlier this year, following Colorado and Washington. The Uniform Act requires parties filing premerger notification forms under the HSR Act with the FTC and DOJ to file copies of those forms with the adopting states if certain jurisdictional requirements are met.

The California statute primarily adopts the Uniform Act. However, its jurisdictional requirements vary slightly from the Uniform Act, as do its confidentiality provisions, the imposition of filing fees, the maximum penalties for failing to file and the opportunity to cure a failure to file. Prospective filers in California should ensure that they understand the unique aspects of California’s law, as the statute takes effect on January 1, 2027.

California is also poised to adopt a state equivalent to Section 2 of the Sherman Act, amending California’s antitrust statute, the Cartwright Act, to cover not just anticompetitive conspiracies but also monopolization. The COMPETE Act, passed by the California Assembly in late May, would amend the Cartwright Act to apply to conduct by “one or more persons” and would explicitly divorce it from federal case law interpreting the Sherman Act. The act must clear the California Senate by August 31 before it can advance to Gov. Gavin Newsom’s desk.

The COMPETE Act would permit the California attorney general to bring monopolization cases under state law, not just federal law. It also employs more liberal pleading standards than its federal analog. These are two of the ways in which the California bill would make it easier to bring — and win — antitrust claims as compared to claims under federal law.

General Motors and its subsidiary OnStar LLC agreed to pay a record $12.75 million in civil penalties to resolve the California attorney general’s allegations that they violated the California Consumer Privacy Act (CCPA) by allegedly collecting and selling hundreds of thousands of drivers’ personal information to third-party data brokers without the drivers’ knowledge or consent. Those brokers then allegedly used the information to create driver rating products, which were in turn sold to insurance companies and, in some cases, used to increase premiums. 

The settlement also bars General Motors and OnStar from selling drivers’ data to consumer reporting agencies for five years and requires the companies to delete data within 180 days if they do not obtain consent to retain it. 

Regulators of California’s data privacy regime are leaning heavily on negotiated settlements and injunctive relief when enforcing the CCPA. Under this statute, businesses must allow consumers to opt out of having their personal information shared or sold. Deficiencies in notice or ease of opt-out may create liability. 

Recent alleged violators have been subject to robust injunctive obligations paired with settlement payments well below the statutory maximum. Agreements are mandating simplified opt-out flows and clear notice of data use, account-wide propagation of consumer preferences, downstream vendor oversight and multiyear compliance monitoring. Nevertheless, companies should be wary of exposure to penalties closer to the statutory maximum, especially where violations are egregious or involve sensitive personal information.