SEC Staff Publishes Revisions to S-K Item 103 Legal Proceedings C&DIs

On June 20, 2025, the staff of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) updated its three Compliance & Disclosure Interpretations (“C&DI”) related to Regulation S-K Item 103 – Legal Proceedings. While the amendments to Questions 105.01 and 105.03 were primarily reflecting amendments to Item 103 of Regulation S-K adopted in 2020, the updates included the withdrawal of C&DI Queston 105.02. The withdrawn C&DI stated that the reference in former Instruction 5 to Item 103 to an administrative or judicial proceeding arising under “local provisions” is sufficiently broad to require disclosure of environmental actions by a foreign government.

On June 25, 2025, the SEC’s Office of the Investor Advocate delivered to Congress its Report on its Objectives for Fiscal Year 2026. While the report identifies an array of objectives, public companies are likely to be most interested in the goal of enhancing the accessibility of disclosures for investors in view of the increasing length and complexity of the disclosures being provided under the SEC’s rules. The report indicates that the Investor Advocate will continue to advocate for ways to enhance the accessibility to retail investors of disclosures by public companies, including exploring different approaches to making required disclosures more user-friendly and comprehensible to investors, particularly retail investors, while also considering the extent to which this may add to the costs and burdens on issuers and other providers of disclosure. The Office of the Investor Advocate indicates that it intends to engage with retail investors and other relevant parties to develop a more thorough understanding of how investors use this information and to solicit a range of views on how to improve the effectiveness of the current disclosure system.

On June 26, 2025 the SEC’s Division of Economic and Risk Analysis announced the publication of new reports and data on broker-dealers, mergers and acquisitions and business development companies. The mergers and acquisition report includes data on acquisitions by public companies for every year since 1990. It also discusses SPAC activity and acquisition-related de-listings. The report includes a number of findings about public/public acquisitions. First, it notes that there were a few number of very large acquisitions that skewed median reporting on deal size. For example, the average deal value was $3.5 billion, while the median deal value was $0.5 billion. The average acquirer had assets of $40 billion, but the median was close to $7 billion. In contrast, targets were significantly smaller, with the average target reporting assets of $5 billion and the median target reporting assets of $1 billion. These contrasts between acquirers and targets were also seen with respect to revenues, EBITDA, and net income leading up to the deal. The report’s data also shows that, during the sample period, deals frequently relied on stock consideration as a method of payment and reflected a significant premium over the market price. The average deal required five and a half months from announcement to completion.

Vanguard casts tens of thousands of proxy votes each year. On an annual basis, the firm’s Investment Stewardship team issues a report on the highlights of its engagement with public companies during the prior year. In the Vanguard Investment Stewardship Annual Report 2024, the firm provides detail on its four pillars of good corporate governance: board composition and effectiveness; board oversight of strategy and risk; executive pay; and shareholder rights. For example, in its discussion of board oversight of strategy and risk, Vanguard’s engagement team indicates, “In 2024, companies continued to focus on disclosure and discussions of board oversight of material risk areas. Companies touched on common risk areas such as cybersecurity, emerging technologies, and human capital, as well as more idiosyncratic risks specific to their industry or business strategy.” These topics were also the subject of 401 shareholder proposals Vanguard evaluated that requested actions from U.S. portfolio companies related to risk oversight practices that were focused, to one degree or another, on environmental or social matters. Ultimately, Vanguard funds did not support any of the proposals.

On June 26, 2025, the SEC hosted a Roundtable on Executive Compensation Disclosure Requirements focusing, in part, on the evolution of executive compensation disclosure requirements and whether the rules have achieved their policy objectives, challenges in disclosure preparation, what disclosure is material to investors and what future disclosure requirements should be. In his remarks kicking off the event, SEC Chair Paul Atkins described the current disclosure requirements as a Frankenstein patchwork of rules. Atkins urged participants to consider whether the current executive compensation disclosure requirements achieve certain objectives, including whether they are cost-effective to comply with and provide material information to investors, and the information required to be disclosed is material to the company and understandable by the reasonable investor, and if not, how the rules should be amended.

In our prior Public Company Advisory Roundup, we noted that the Texas Senate had passed a bill that would mandate disclosures when proxy advisory firms recommend casting a vote for “non-financial reasons” or provide conflicting advice to clients that differs from the advice given to other clients. Further, proxy advisors, when providing clients that have not expressly requested services for a nonfinancial purpose with either advice or a recommendation on how to vote on a proposal that is materially different from that provided to other clients, would be required to (i) provide additional disclosure, (ii) notify each client, the relevant company and the Texas attorney general, and (iii) disclose which of the conflicting advice or recommendations is provided solely in the financial interest of shareholders and supported by specific financial analysis. On June 20, 2025, Texas Governor Greg Abbott signed the legislation into law. It will become effective on September 1, 2025.