SEC Rescinds Requirement to Recognize Crypto Liability

On January 23, 2025, the SEC issued Staff Accounting Bulletin No. 122 (“SAB No. 122”) rescinding the interpretive guidance included in Section FF of Topic 5 in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users. SAB No. 122 is effective as of January 30, 2025 and should be applied on a retroactive basis in annual periods beginning after December 15, 2024. Companies may elect to effect the recission in any earlier interim or annual financial statement period included in filings after the effective date of SAB No. 122.

Previously, under Staff Accounting Bulletin No. 121 (“SAB No. 121”), entities were required to recognize a liability and corresponding asset for their obligation to safeguard crypto assets and to disclose detailed information about the crypto asset being safeguarded. Under SAB No. 122, entities that have an obligation to safeguard crypto assets for others must determine whether to recognize a liability related to the risk of loss under such an obligation and, if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Subtopic 450-20, Loss Contingencies, or International Accounting Standard 37, Provisions, Contingent Liabilities and Contingent Assets, under U.S. generally accepted accounting principles and International Financial Reporting Standards Accounting Standards, respectively.

While SAB No. 122 rescinds the disclosure requirements under SAB No. 121, SAB No. 122 notes that entities should continue to consider existing disclosure requirements under Items 101, 105 and 303 of Regulation S-K; FASB ASC Subtopic 450-20; and FASB ASC Topic 275, Risks and Uncertainties to ensure investors understand an entity’s obligation to safeguard crypto-assets held for others.

For more information, see SAB No. 122 here.

Acting SEC Chairman Expresses Concerns about Climate-Related Disclosure Rules; SEC Requests Delay in 8th Circuit Case

On February 11, 2025, Mark T. Uyeda, the Acting Chairman of the SEC, released a statement addressing the Enhancement and Standardization of Climate-Related Disclosures for Investors rule that was adopted by the Commission on March 6, 2024 (the “Rule”). The Rule is currently being challenged in the U.S. Court of Appeals for the Eighth Circuit, and the effectiveness of the rule has been stayed pending completion of the litigation.

In his statement, Uyeda expressed serious concerns about the Rule, including the SEC’s lack of regulatory authority to enact the Rule and the burdensome and duplicative financial disclosure required. Uyeda also stated that, given his views on the Rule, the change in the composition of the SEC and the recent Presidential Memorandum regarding a Regulatory Freeze, the SEC has requested that the Eighth Circuit not schedule the case for argument to provide time for the Commission to deliberate and determine the appropriate next steps in the litigation.

For more information, see the full statement here.

SEC Releases New Guidance on Triggers to Lose Schedule 13G Eligibility

On February 11, 2025, the staff of the Division of Corporation Finance of the SEC (the “Staff”) issued a new Compliance and Disclosure Interpretation (“C&DI”) regarding the eligibility of shareholders to file beneficial ownership reports on Schedule 13G. The C&DI addresses the circumstances in which a shareholder’s engagement with an issuer’s management on a particular topic would cause the shareholder to be deemed to hold the subject securities with the “purpose or effect of changing or influencing control of the issuer”—thereby losing its eligibility to report on Schedule 13G.

Prior SEC guidance (C&DI Question 103.11, last updated July 14, 2016) stated that engagement with the issuer’s management, without more, on topics such as executive compensation and social policies would not mean that a shareholder acquired or held the securities with a purpose or effect of “changing or influencing” control of the issuer. Similarly, engagement on corporate governance topics, such as staggered boards, majority voting standards and poison pills, would not disqualify a shareholder from relying on Rule 13d-1(b) or Rule 13d-1(c) to file on Schedule 13G so long as the discussion was part of a broad effort to promote particular governance practices for all companies rather than to facilitate a change in a particular company. In contrast, under the prior guidance, Rule 13d-1(b) and Rule 13d-1(c) would not be available to a shareholder that engages with the issuer’s management on particular “control” transactions, such as the sale of the issuer, the sale of a significant amount of assets, a restructuring or a contested election of directors.

The new C&DI takes a broader view as to what constitutes a disqualifying “purpose or effect of changing or influencing control of the issuer” for purposes of Rule 13d-1(b) and Rule 13d-1(c). First, the C&DI states that the specific topics on which a shareholder engages with the issuer’s management may be dispositive in determining whether the securities are held with a purpose or effect of “changing or influencing” control, citing as examples the same types of transactions mentioned in the prior guidance (e.g., sale of the issuer, the sale of a significant amount of assets, a restructuring or a contested election of directors). In this respect, the C&DI mirrors the prior guidance, which provides that engagement, in any form, on such topics precludes reliance on Rule 13d-1(b) and Rule 13d-1(c).

Second, the C&DI notes that the context in which a shareholder’s engagement with management occurs is highly relevant in determining whether a shareholder’s holding of securities has a purpose or effect of influencing control of the issuer. According to the C&DI and consistent with prior guidance, a shareholder who merely discusses its views on a topic and how these views may influence their voting decisions, without more, would not be disqualified from relying on Rule 13d-1(b) or Rule 13d-1(c).

The C&DI then expands upon the prior guidance and discusses specific actions or situations that could be deemed to influence control over the issuer. The C&DI notes that, generally, a shareholder that discusses its views with management as to specific measures or policy changes and also exerts pressure on management to implement such matters may be deemed to be influencing control. Specifically, in the context of either a specific recommendation to an issuer on governance or policy matters, or discussions with management on a shareholder’s voting policy that may be inconsistent with the issuer’s policies, if a shareholder explicitly or implicitly conditions its support of one or more of the issuer’s director nominees at the next director election on the issuer’s adoption of its recommendation or policy changes, a shareholder may be disqualified from relying on Rule 13d-1(b) and Rule 13d-1(c).

SEC Releases Guidance on PX14A6G Filings for Shareholder Letters

On January 27, 2025, the Staff released two updated and three new C&DIs relating to the use of PX14A6G filings pursuant to Exchange Act Rule 14a-6(g).

Pursuant to Exchange Act Rule 14a-6(g), SEC Form PX14A6G is a notice of exempt solicitation filed with the SEC. The form acts as a cover page for copies of soliciting materials (e.g., letters sent to shareholders) used by a shareholder who wants to communicate or recommend a particular issue to other shareholders (for example, electing board members), owns more than $5 million of a company’s securities and who is not seeking to act as a proxy (or furnishing or requesting a form of revocation, abstention, consent or authorization).serials omitted

The updates clarify certain use and criteria of PX14A6G filings, including:

• Voluntary Submission. A voluntary submission of a PX14A6G filing by a soliciting person who does not beneficially own more than $5 million of the class of subject securities (i.e., does not meet the requirements of Rule 14a-6(g)(1)) is permissible with appropriate disclosure. The Staff notes that the cover page must clearly state that “the soliciting person does not beneficially own more than $5 million of the class of subject securities; and the notice is therefore being provided on a voluntary basis.” (Q&A 126.06)

• Cover Page. Whether filing voluntarily or to satisfy the requirements of Rule 14a-6(g)(1), written soliciting material must be submitted “under cover” of the Notice of Exempt Solicitation. In particular, the C&DIs state that “all of the information required under Rule 14a-103 must be presented in the submission before any written soliciting materials.” (Q&A 126.07)

• Previously Disseminated Written Soliciting Material. The Staff reminds filers that the filing of a Notice of Exempt Solicitation is intended to only notify the public of the written soliciting material that the person has previously sent or given to security holders through other means. The Staff further notes that the filing itself is not meant to be the means through which a person provides written soliciting material to security holders. (Q&A 126.08)

• Must Constitute a “Solicitation.” Only written communications that constitute a “solicitation” under the Rule 14a-2(b)(1) exemption should be submitted under the cover of a Notice of Exempt Solicitation as Rule 14a-6(g) only applies to solicitations made pursuant to the Rule 14a-2(b)(1) exemption. Under Rule 14a-1(l)(1)(iii)(A), a “solicitation” for purposes of Regulation 14A, is any proxy voting advice that recommends how a security holder should vote on a specific matter. The Staff provides, as an example, that, generally, a written communication on matters that are not the subject of a solicitation by the registrant or a third party for an upcoming shareholder meeting would not be viewed as a solicitation and thus should not be submitted under the cover of a Notice of Exempt Solicitation. (Q&A 126.09)

• Rule 14a-9 Liability. Any written soliciting material attached to a Notice of Exempt Solicitation is subject to liability under Rule 14a-9, which prohibits materially false or misleading statements in soliciting materials. The Staff further reminds filers that Rule 14a-2(b) does not provide an exemption from Rule 14a-9. The notes to Rule 14a-9 provide the following examples of what, in certain circumstances, may be deemed misleading:

• Predictions as to specific future market values.

• Material which, directly or indirectly, impugns character, integrity or personal reputation or, directly or indirectly, makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation.

• Failure to so identify a proxy statement, form of proxy and other soliciting material as to clearly distinguish it from the soliciting material of any other person or persons soliciting for the same meeting or subject matter.

• Claims made prior to a meeting regarding the results of a solicitation. (Q&A 126.10) For more information, see The Debrief.

NY State Lawmakers Introduce Climate Reporting Bill

On January 27, 2025, New York state senator Brad Hoylman-Sigal introduced the Climate Corporate Data Accountability Act in the New York Senate, which if passed, would require certain business entities within New York to annually disclose Scope 1, Scope 2 and Scope 3 emissions.

The bill would require the New York Department of Environmental Conservation to adopt regulations mandating business entities that do business in the state of New York with total revenues in excess of $1 billion in the preceding fiscal year to annually disclose their Scope 1, Scope 2 and Scope 3 emissions. The annual disclosure requirements would be rolled out in phases: (i) starting in 2027, reporting entities must publicly disclose their Scope 1 and Scope 2 emissions and (ii) starting in 2028, reporting entities must publicly disclose their Scope 3 emissions. The bill would authorize the state attorney general to bring civil actions against a reporting entity seeking civil penalties up to $100,000 per day for willful failure to comply with the requirements, including for non-filing, late filing, or other failures to meet the requirements.

This New York bill is similar to the California climate reporting requirements. However, the New York bill does not mention any specific exemptions while the California requirements exempt insurance companies. Additionally, while California requires companies to report on climate-related financial risks and measures to address those risks, the New York bill does not.

For more information on the California Climate Disclosure Laws, see Debevoise Update.

Nasdaq Removes Board Diversity Listing Requirements

On December 11, 2024, the Fifth Circuit held that the SEC had exceeded its authority under the Exchange Act by approving the Nasdaq Stock Market’s (“Nasdaq”) board diversity rules (the “Board Diversity Rule”) in 2021. The Board Diversity Rule required companies listed on Nasdaq’s stock market to publicly disclose the total number of board members and the demographic composition of those board members. Additionally, each company was required to have at least two diverse board members or to explain the company’s reason for failing to meet the diversity objectives set forth by the Board Diversity Rule.

On January 24, 2025, the SEC issued an order approving Nasdaq’s proposal to remove the board diversity provisions from its rules. Per Nasdaq’s request, the SEC waived the traditional 30-day operative delay, making the order effective immediately as of February 4, 2025, the effective date of the Fifth Circuit’s decision.

In its decision, the Fifth Circuit noted that the revocation of the Board Diversity Rule does not prohibit companies from voluntarily disclosing the diversity makeup of their board if investors seek such information.

For more information on the SEC’s order, see the order linked here.

Notable SEC Controls and Disclosure-Related Enforcement Actions

SEC Charges Failure to Report Employment Relationships

On January 10, 2025, the SEC announced it had settled charges against Shift4 Payments, Inc. (“Shift4”), a publicly traded company for failure to disclose employment relationships with two immediate family members of its executives as well as the payment of commissions to another immediate family member of its executives. The related parties included siblings, children and/or stepchildren of one or more Shift4 officers or directors.

By failing to disclose these relationships and transactions on their Form 10-K, Shift4 violated Item 404 of Regulation S-K, which governs related party transaction disclosures for reporting and proxy solicitations. Without admitting or denying the SEC’s findings, Shift4 agreed to a settlement that includes a cease-and-desist order and a civil monetary penalty of $750,000.

For more information, see the SEC’s order linked here and the consent linked here.

SEC Charges Improper Accounting and Disclosure Controls Failures Related to Modification of Stock Awards

On January 17, 2025, the SEC announced charges against fitness beverage company, Celsius Holdings, Inc. (“Celsius”) for reporting, books and records, internal accounting controls and disclosure controls procedures violations.

According to the SEC’s order, Celsius violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-11, 13a-13 and 13a-15 thereunder. Celsius improperly accounted for stock-based compensation expenses when it modified the terms of stock awards for six departing employees and retiring board members in 2021. As a result, Celsius issued materially inaccurate and misleading financial statements in its quarterly reports for the second and third quarters of 2021, as well as in certain other public reports. Additionally, Celsius failed to devise and maintain adequate internal accounting control to address modifications to stock awards, and from at least September 2019 to August 2023, Celsius did not have disclosure controls or procedures in place to ensure that required disclosure of nonfinancial information was timely reported in company filings.

Celsius consented to the entry of a cease-and-desist order and will pay a $3 million penalty without admitting or denying the findings. The SEC investigation remains ongoing.

For more information, see the SEC’s order linked here and the consent linked here.

SEC Charges Long-standing Internal Controls Failures for Repeated, Multiple Material Weaknesses

On January 17, 2025, the SEC announced it had settled charges against Singularity Future Technology, Ltd. (“Singularity”), a publicly traded shipping and logistics company, for violations related to internal control, disclosure controls, financial reporting and maintenance of books and records under Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, and 13a-15 thereunder.

According to the SEC’s order, Singularity had disclosed in each of its past eight fiscal years that its internal control over financial reporting and disclosure controls and procedures were ineffective. The company had reported multiple material weaknesses and had yet to remediate these issues. These ineffective controls and material weaknesses, along with the company’s failure to maintain required books and records, contributed to Singularity restating certain prior period financial statements in March 2023.

Without admitting or denying the findings, Singularity consented to a cease-and-desist order and agreed to pay a civil penalty of $350,000. Additionally, Singularity is required to remediate its material weaknesses and publicly report on the remediation process. An additional $1 million civil penalty will be imposed if Singularity fails to comply with the remediation and related disclosure requirements.

For more information, see the SEC’s order linked here and the consent linked here.

SEC Brings Charges for Fraudulent Disclosure Related to Payments to Nonprofit

On January 17, 2025, the SEC charged American Electric Power Company, Inc. (“AEP”) with fraud in connection with statements AEP made in a press release regarding AEP’s relationship with a related party and payments made to entities associated with politicians in violation of Section 17(a)(2) of the Securities Act of 1933, as amended, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder.

The violations occurred during a July 2020 press release in which AEP made misleading statements regarding its connection to Empowering Ohio’s Economy, Inc. (“Empowering Ohio”), an Ohio-based 501(c)(4) nonprofit organization. The statements created the false impression that AEP had not made payments to certain 501(c)(4) organizations associated with politicians and that AEP only contributed to Empowering Ohio to further Empowering Ohio’s mission. Contrary to its statements, AEP was Empowering Ohio’s sole source of funding and AEP employees directed Empowering Ohio’s contributions totaling $1.2 million to 501(c)(4) organizations associated with politicians. Additionally, AEP failed to disclose material related party transactions with Empowering Ohio, as required by Item 404 of Regulation S-K, and violated the books and records and internal accounting controls provisions of the federal securities laws.

Without admitting or denying the findings, AEP agreed to a cease-and-desist order and to pay a $19 million civil penalty.

For more information, see the SEC’s order linked here and the consent linked here.

SEC Rulemaking Agenda

The latest SEC Regulatory Agenda was posted on October 17, 2024. The SEC approved the publication of an agenda of its rulemaking actions for publication in Fall 2024, which was expected to be released by January 2025 but has not to date been published. However, we expect the SEC’s regulatory agenda and timing to be impacted by the incoming administration’s personnel and priorities.

For more information, see the full regulatory agenda here.

PCAOB Standard-Setting and Rule-making Agenda

On November 4, 2024, the PCAOB released standard-setting and rulemaking agendas for the remainder of 2024 and 2025, and a summary of these key changes is included below. For more information, see the full regulatory agenda here. Of note, on February 11, 2025, the PCAOB filed with the SEC notice to withdraw its Firm and Engagement Metrics project.

Recently Completed and Pending Standard‐Setting Projects
Project	Date of PCAOB Adoption	Date of SEC Approval
Firm and Engagement Metrics	November 21, 2024; Withdrawn February 11, 2025	N/A
Short-Term Standard‐Setting Projects
Project	Next PCAOB Action	Anticipated Timing
Noncompliance with Laws and Regulations (NOCLAR)	TBD pending analysis of comment letters on June 6, 2023 proposal and March 6, 2024 Roundtable and responses to targeted inquiries of firms about their approach relating to noncompliance with laws and regulations or illegal acts	2025
Attestation Standards Update	Proposal	2025
Going Concern	Proposal	2025
Substantive Analytics Procedures	Adoption	2025
Inventory	Proposal	2025
Recently Completed and Pending Rulemaking Projects
Project	Date of PCAOB Adoption	Date of SEC Approval
Registration (Constructive Requests to Withdraw from Registration)	November 14, 2024	January 2, 2025
Firm Reporting	November 21, 2024	Pending

This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.