Public companies gaining leverage on governance

Topline

• Rethinking public company governance

• SEC’s IAC issues recommendations to expand retail access to private capital

• FTC signals continued focus on interlocking directorates

• Quick hits

Policy shifts aim to reinvigorate public markets 

The Trump administration and the SEC signaled major policy shifts to help address two of the biggest challenges companies face when deciding to go public or remain public: short-termism and shareholder litigation.

Quarterly reporting: This week, President Trump renewed his call for allowing companies to move from quarterly to semiannual reporting as a way to reduce compliance costs and combat short-termism. Less frequent reporting could enable management to focus more on innovation, capital investment, and long-term strategy rather than 90-day cycles and guidance management. Trump floated the same idea in his first term, and while it sparked debate at the SEC and Congress, no rule changes were ultimately adopted. This time may be different. In response to the president’s renewed push, the SEC has committed to prioritizing reforms to address reporting frequency alongside a broader review of materiality standards and public company disclosure requirements.

Shareholder litigation: The SEC reversed its long-standing posture on mandatory arbitration provisions in corporate governance documents, providing companies greater flexibility to channel investor disputes away from litigation. For decades, the agency signaled that it would block registration statements from companies seeking to go public if their charters contained arbitration clauses, effectively barring issuers from adopting them. In a new policy statement, the Commission announced it would no longer influence  governance choices around dispute resolution, so long as there is full and adequate disclosure of arbitration policies to ensure investors understand the terms under which they are purchasing shares. Market forces, rather than the regulator, will determine investor appetite for how companies choose to address shareholder claims.

Why it matters: A central pillar of SEC Chairman Paul Atkins’s regulatory agenda is to ease frictions that discourage companies from going or staying public. Efforts to move to less frequent reporting could lower compliance costs associated with compiling the reports, reduce legal exposure, and ease the pressure of meeting Wall Street’s quarterly expectations. Enabling companies to pursue arbitration could help mitigate the threat of costly shareholder class-action litigation, further lowering the perceived risk of being public. Taken together, these actions—along with other anticipated efforts to streamline compliance and reduce disclosure burdens—could help boost public listings and reshape corporate incentives—further blurring the line between public and private markets. 

SEC’s IAC adopts recommendations to expand retail access to private markets

The SEC’s Investor Advisory Committee (IAC) issued new recommendations aimed at expanding retail investor access to private markets while maintaining strong investor protections. The recommendations include:

• Expanded access to private market investments through registered funds, which offer protections like diversification, fiduciary obligations, and regulatory oversight under the Investment Company Act

• More transparent valuation practices, clearer and more prominent disclosures around liquidity, and enhanced protections around conflicts of interest, fees, and marketing practices

• Coordination between the SEC, FINRA, and state securities regulators on guidance to when alternative investments are in an investor’s best interest

• Expanding direct access to private markets that are tied to investment sophistication (rather than income or wealth), enhanced information reporting on Form D, and prudential limits on private market investments for retail investors who do not meet sophistication or wealth thresholds

Why it matters: Private markets have grown rapidly, while retail investors are largely unable to participate. There is increasing interest at the SEC and Congress to change these dynamics, with many efforts already underway. The IAC’s recommendations acknowledge the need to recalibrate the current regulatory regime that was built around public markets to enable greater retail access to private market opportunities without sacrificing core investor protections around transparency, liquidity, valuation, and conflicts. While the IAC’s recommendations are not binding on the Commission, they highlight areas that the SEC and industry will need to address to mitigate concerns regarding transparency, asymmetry, and illiquidity to help promote investor confidence. With increased access comes increased scrutiny.

FTC signals continued focus on interlocking directorates

The FTC announced the resignation of three Sevita Health board members following enforcement efforts under its Section 8 authority under the Clayton Act that prohibits interlocking directorates. Interlocking directorates occur when an individual concurrently serves as an officer or director for two competing corporations. This is particularly common in private equity, where the firm often acquires board seats in its portfolio companies. If those portfolio companies are in overlapping or adjacent markets, interlocks naturally happen. While interlocks are considered a per se violation of antitrust law, enforcement has been historically rare. This posture began to shift under the previous administration, where the FTC and DOJ ramped up enforcement and moved to dismantling interlocking directorates.

Why it matters: While there have been significant policy shifts between the Biden and Trump administrations, antitrust enforcement remains strong. The Trump FTC is sending a clear message that companies—particularly those backed by private equity with directors spread across multiple portfolio companies—should proactively review and unwind potential overlaps or face regulatory intervention.

Quick hits

• SEC and CFTC extend Form PF compliance date to Oct. 1, 2026. During the extension, the SEC is expected to conduct a broader review of Form PF’s data-collection framework and consider targeted reforms designed to streamline reporting, reduce compliance costs, and better align disclosure requirements with the realities of private fund operations.

• SEC eases path for crypto ETP listings. The SEC approved generic listing standards for commodity-based exchange-traded products, including those holding digital assets. Under the new rules, national securities exchanges can list these products without needing individual SEC approval, which could significantly shorten time to market and further integrate digital assets into mainstream financial markets. 

• House passes one-year SBIR/STTR extension. The “clean” one-year extension keeps the current program rules in place until Sept. 30, 2026, to prevent a lapse while longer-term reauthorization negotiations continue.

• Fed cuts rates. The Federal Reserve cut rates by 25 bps for the first time in nine months and signaled at least two additional cuts this year, reflecting concern over slowing labor markets even as inflation lingers. This could signal a more pro-growth, liquidity-friendly environment in the near term, but expect higher policy (and political) uncertainty ahead.

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