Securities Snapshot: 4th Quarter 2022 - Flurry of Rulemaking from SEC this Winter

During the fourth quarter of 2022, the Securities and Exchange Commission continued its brisk pace of rulemaking across several disclosure initiatives. The Commission reopened the comment period for its share repurchase disclosure proposal, established compliance deadlines for the new compensation recovery rules, updated compliance dates for the Nasdaq board diversity rules, issued new and updated compliance and disclosure interpretations (CDIs) for non-GAAP measure disclosures, issued CDIs for the new universal proxy rules, and posted a sample comment letter regarding developments in crypto markets.

The Commission also secured a record $6.5 million penalty in a textbook Regulation FD action which provides a cautionary tale for executives who communicate with analysts around the time of earnings reports. 

Finally, we included a summary of recent ISS policy updates, an update on where other Commission rule proposals are in the comment and rulemaking process, and links to our fourth quarter advisories reporting the Commission’s new insider trading rules and compensation recovery rules.

Commission Reopens Comment Period for Share Repurchase Disclosure Proposal

On December 7, 2022, the Commission reopened (again) the comment period on proposed amendments intended to modernize and improve the disclosure required about an issuer’s repurchases (or buybacks) of its equity securities. Recall that under proposed amendments, the SEC would: (i) require daily repurchase disclosure on a new Form SR, which would be furnished to the SEC one business day after execution of a company’s share repurchase order; (ii) require additional detail regarding the structure of a company’s repurchase program and its share repurchases; and (iii) require information disclosed pursuant to the new rules and Form SR to be reported using Inline XBRL.

The Commission’s announcement related to the proposal notes: “The Commission is reopening the comment period because, after the proposed amendments were published for public comment, The Inflation Reduction Act of 2022 was enacted. The law imposes upon certain corporations a non-deductible excise tax equal to one percent of the fair market value of any stock of the corporation repurchased by such corporation during the taxable year. As a result, the Commission staff has prepared a memorandum that discusses potential economic effects of the new excise tax that may be helpful in evaluating the proposed amendments.”

The amendments were initially proposed by the Commission in December 2021, and the comment period for the proposal was reopened in October 2022.

Compliance Deadlines Established for Clawback Rules

The Commission published its final clawback rule in the Federal Register on November 28, 2022, which establishes the following deadlines:

  • The stock exchanges are required to update their listing standards to incorporate the Commission’s final clawback rule no later than 90 days after the publication date, or February 26, 2023.
  • The rule includes the minimum requirements for establishing a compliant clawback policy and each exchange has the discretion to incorporate more rigorous provisions.
  • The stock exchanges’ updated listing standards must become effective no later than one year after publication, or November 28, 2023.
  • Companies have 60 days from the effective date of the listing standards to adopt a compliant clawback policy; assuming the exchanges set the effective date as of November 28, 2023, companies will need to adopt a compliant clawback policy no later than January 27, 2024.
  • Incentive-based compensation (as defined under the rules) earned by current or former executive officers based on the attainment of financial measures (including stock price or TSR measures) for fiscal years ending after November 28, 2023 or compensation granted, earned, or vested on or after November 28, 2023 is covered by the clawback rules.

Our October 31, 2022 advisory addresses the new clawback rules.

Nasdaq Updates Compliance Dates for Board Diversity Rule

On December 14, 2022, the Commission posted a notice for an immediately effective change to Nasdaq’s “disclose or comply” board diversity rule. Because it was one year after the original approval date of the rule, August 8, 2022 was set as the initial compliance deadline for board matrix disclosures under this rule, and all of the other compliance deadlines in the rule were keyed to that anniversary date. Nasdaq is attempting to simplify the timeframe for disclosures made outside of the proxy statement.

  • Nasdaq modified the deadline for companies on The Nasdaq Global Select Market, The Nasdaq Global Market, and The Nasdaq Capital Market to have at least one “Diverse” director (or explain why not) from August 7, 2023 to December 31, 2023.
  • Nasdaq modified the deadline for companies on The Nasdaq Global Select Market and The Nasdaq Global Market to have at least two “Diverse” directors (or explain why not) from August 6, 2025 to December 31, 2025.
  • Nasdaq modified the deadline for companies on The Nasdaq Capital Market to have at least two “Diverse” directors (or explain why not) from August 6, 2026 to December 31, 2026.
  • The rule change will also permit companies to submit the URL link to disclosures that are made outside of the proxy statement via email, to (in addition to being able to submit it through the Nasdaq Listing Center).

This rule change is immediately effective, although the Commission may temporarily suspend it if it determines that it is necessary to do so.

Division of Corporation Finance Issues New and Updated Non-GAAP CDIs

On December 13, 2022, the Division of Corporation Finance issued seven Non-GAAP Financial Measures CDIs. Several of these CDIs update or replace the language of existing CDIs, while the remainder are new. The CDIs address circumstances when certain measures and adjustments are deemed to be misleading, among other disclosures.

SEC Staff Provides New Universal Proxy Guidance

On December 6, 2022, Commission staff published three new Proxy Rules and Schedule 14A Compliance and Disclosure Interpretations addressing the new universal proxy rules. Two of the new CDIs deal with the company’s obligations when a dissident shareholder’s nominees are rejected based on advance notice bylaw requirements, and one of the CDIs makes the point that a dissident must provide its own proxy card as part of its meaningful solicitation efforts and not just rely on the company’s proxy card.

We addressed the new universal proxy rules in our Third Quarter Snapshot.

Division of Corporation Finance Posts Sample Comment Letter Regarding Developments in Crypto Markets

On December 8, 2022, the Division of Corporation Finance posted a new sample comment letter addressing recent developments in the crypto markets which notes:

“Recent bankruptcies and financial distress among crypto asset market participants have caused widespread disruption in those markets. Companies may have disclosure obligations under the federal securities laws related to the direct or indirect impact that these events and collateral events have had or may have on their business. The Division of Corporation Finance believes that companies should evaluate their disclosures with a view towards providing investors with specific, tailored disclosure about market events and conditions, the company’s situation in relation to those events and conditions, and the potential impact on investors. Companies with ongoing reporting obligations should consider whether their existing disclosures should be updated.”

The sample comments focus on a company’s business description, MD&A and risk factors and address a number of topics, including:

  • The exposure companies have to crypto markets;
  • The impact of recent bankruptcies in the crypto space;
  • The steps companies have taken to safeguard crypto assets;
  • The use of crypto assets as collateral;
  • Recent experience with redemptions and withdrawals; and
  • Material risks, including risks arising from excessive redemptions and withdrawals (or suspension of such activity), reputational risks, jurisdictional issues, regulatory developments, safeguarding of assets concerns, risk management issues, access to capital and liquidity issues, and market disruption risks.

Commission Secures Largest Regulation FD Penalty on Record

On December 6, 2022, AT&T agreed to pay $6.25 million as part of a settlement with the Commission in connection with Regulation FD violation allegations. This is the largest penalty ever in a Regulation FD case.  The three company executives who were named in the lawsuit also agreed to pay $25,000 each for their part in the alleged MNPI disclosures.

The settlement follows a September 8, 2022 ruling from a federal court in the Southern District of New York denying cross-motions for summary judgment in the case brought by the Commission against AT&T and three individuals who worked in the company’s investor relations department alleging Regulation FD violations. The case provides a cautionary tale, especially to executives who engage with analysts on calls before the release of quarterly earnings. Calls to analysts before quarterly earnings are risky. Calls immediately following earnings calls that point to public results should remain relatively low risk. The further into a quarter conversations with analysts take place, the more risky those conversations may be. The facts of this case are worth noting for any public company executive who communicates with analysts.


AT&T failed to meet analysts’ consensus updates in 2015 for both Q3 and Q4. In the months leading up to the Q1 2016 results announcement, executives were sensitive to avoiding missed revenue for the third quarter in a row. Consequently, there was a concerted effort to “walk down analysts’ estimates” for that quarter in internal documents and emails.

Most of AT&T’s revenue was derived primarily from providing services, rather than equipment upgrades which did not have much impact on the bottom line. Although equipment upgrades accounted for only a small percentage of revenue, a steep decline in smartphone sales and customer reluctance in upgrading to new phone versions added to AT&T’s concerns about missing its earnings forecast. AT&T considered highlighting this concern by issuing a Form 8-K in early March 2016 that would have indicated wireless sales were down, but decided against it. Instead, the CFO discussed the issue at a scheduled investor conference in early March and strongly suggested analysts reduce their projections. The CFO did not provide any quantitative guidance for Q1 2016.

After the investor conference, when analysts did not reduce their projections, AT&T reached out to the analysts through private calls where they provided specific data points with metrics documenting the downward trend. After the calls, analysts reduced their estimates. When AT&T announced financial results, the results beat consensus revenue by less than 1%.

Court Ruling

The court determined the information conveyed to analysts was material. AT&T argued that the upgrade rate and equipment revenue metrics were quantitatively insignificant because the information shared with analysts would impact revenue by less than 5%. Additionally, AT&T argued that although earnings results were material, total revenue was not material because of the inconsistent impact on earnings.

The court disagreed and found the information disclosed to analysts was overwhelmingly material, despite the minor effect this information had on earnings, because it enabled AT&T to meet and exceed analysts’ consensus expectations for Q1 2016. The court focused on the emphasis AT&T placed on these metrics in its prior public statements about this information, as well as the records demonstrating internal concern surrounding missing analysts’ expectations due to these metrics. Additionally, after phone calls with AT&T employees and the disclosure of these metrics, analysts adjusted their estimates. 

The court also found the information the defendants disclosed to be overwhelmingly nonpublic. AT&T did not dispute that the values of the metrics themselves were not publically available, but argued both investors and analysts, using public information, could extrapolate much of the information. The court disagreed and found the evidence does not reflect that any analysts performed this analysis or reached this result. 

ISS Updates Benchmark Policies

Following are highlights from ISS’s updates to its benchmark voting polices that will be effective for the 2023 proxy season:

  • Officer Exculpation– In light of DGCL changes, ISS is adopting a policy to recommend case-by-case on proposals providing for exculpation provisions in a company’s charter.
  • Board Gender Diversity– Now in effect for all Russell 3000 and S&P 1500 companies, generally vote against or withhold from the nominating committee chair where there are no women on the board (exception if there was a woman at the preceding annual meeting and there’s a “firm commitment” to return to gender-diverse status within one year).
  • Unequal Voting Rights– The previous grandfathering of older companies with unequal voting rights will be removed in 2023. As part of this update, a de minimis exception has been defined as no more than five percent of total voting power.
  • Problematic Governance Structures – For the U.S. policy on companies that go public with other problematic governance structures (including classified boards and supermajority vote requirements), a “reasonable sunset period” to fully eliminate the provision is being defined as no more than seven years from the date of going public.
  • Climate Disclosure & Targets– Globally, there’s a new “climate board accountability” policy for companies in the Climate Action 100+ Focus Group. If the company isn’t adequately disclosing climate risk and doesn’t have either medium-term GHG emission reduction targets or Net Zero-by-2050 for at least Scope 1 & Scope 2, ISS will generally recommend voting against the appropriate directors and/or other voting items available. There will also be additional info in research reports on this, for all Climate Action 100+ companies.
  • Political Expenditures Alignment Transparency Shareholder Proposals– A new specific policy is being introduced for shareholder proposals requesting company transparency on the congruency of its political contributions and lobbying with its public commitments and policies, including climate lobbying congruency to its climate goals.

Status of Select Commission Rulemaking

Status of Select Commission Rulemaking

To see all proposed rules for 2022 see here.

To see all final rules implemented in 2022 see here.

Quarterly Roundup

Below is a link to our third quarter 2022 Corporate and Securities Law publications and blogs posted on

SEC Amends Insider Trading Rules: New Conditions, Requirements, and Related Disclosures

SEC Adopts Dodd-Frank Clawback Rules: Executive Compensation Recovery Expands to “little r” restatements

SEC Reopens Comment Period for 11 Proposed Rules Due to Technological Error

Should you have any questions or need assistance, please contact us.

James C. Kennedy

F. Mark Reuter

Allison A. Westfall

Olivia M. King

KMK Law articles and blog posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. The laws/regulations and interpretations thereof are evolving and subject to change. Although we will attempt to update articles/blog posts for material changes, the article/post may not reflect changes in laws/regulations or guidance issued after the date the article/post was published. Please consult with counsel of your choice regarding any specific questions you may have.


© 2024 Keating Muething & Klekamp PLL. All Rights Reserved

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