The idea that companies might be able to avoid securities class action litigation through the adoption of bylaws requiring securities law claims to be submitted to arbitration has been around for years.

Traditionally, the SEC has opposed these types of bylaw provisions. However, in an interesting development, on September 17, 2025, the Commission, in a new policy statement approved by a 3-1 vote along party lines, announced that the decision whether or not to “accelerate the effectiveness of a registration statement” will “not be affected” by the presence of provision requiring the arbitration of investor claims arising under the federal securities laws.

This development suggests that in the future IPO investors could find themselves compelled to arbitrate securities law claims rather than being able to file a securities class action, although, as noted below, there is a lot more that is yet to be told on these issues.

Continue Reading SEC Revises Policy on Arbitration Provisions in IPO Companies’ Bylaws
Sarah Abrams

In a social media post earlier this week, President Trump proposed eliminating quarterly reporting for public companies. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at the President’s proposal and considers its prospects and potential implications. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.

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If the SEC heeds President Trump’s call to eliminate quarterly reporting, the implications for D&O underwriting exposure could be significant.  Specifically, the President wants to change the long-standing requirement under the Securities Exchange Act of 1934 that public companies file a Form 10-Q with the SEC quarterly, in addition to a Form 10-K annually. If corporate financial reporting decreases, will shareholder scrutiny over each disclosure increase? Also, will longer intervals between public reports complicate causation arguments, affecting plaintiffs’ ability to meet pleading requirements under the Private Securities Litigation Reform Act of 1995 (PSLRA). The following considers whether the recent push to change public company reporting to the SEC from every three to six months creates risk for D&O insurers.

An SEC spokesperson has confirmed that “[a]t President Trump’s request, Chairman [Paul] Atkins and the SEC [are] prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies.” Of note – the SEC’s Spring 2025 Reg Flex Agenda states that: “[t]he Division is considering recommending that the Commission propose rule amendments to rationalize disclosure practices to facilitate material disclosure by companies and shareholders’ access to that information.”

With the SEC signaling an end to mandatory quarterly earnings reports may be in sight, the following briefly reviews what would need to happen at the SEC for that change to take place, including how the same proposal failed in 2018, as well as the potential impact biannual corporate filings may have on D&O exposure.    

Implementation

First, I will consider what would likely need to happen at the SEC to modify the current quarterly reporting requirement in the context of an identical 2018 initiative. This context may help anticipate whether public companies can prepare to scale back Form 10-Q filings in the near term and how quickly D&O underwriters may need to prepare for a risk shift.  

Either the Chair, Commissioners, or SEC staff may prepare a rule proposal to amend the existing requirements under the Securities Exchange Act of 1934 (particularly Section 13) and related regulations. In 2018, President Trump asked the SEC to study the possibility of moving from quarterly to semi-annual reporting for public companies.  In November 2018, the SEC signaled in its regulatory agenda that it would solicit input on quarterly reporting and earnings releases, and in December 2018, it issued a 31-page Request for Comment on the topic.

The SEC would also likely open a public comment period on changing reporting, during which issuers, investors, analysts, auditors, trade associations, and others can submit written feedback. Empirical studies, cost/benefit analyses, and international comparators (Europe’s semiannual reporting framework) may also be reviewed. Notably, in 2018, despite receiving comments and support from business leaders during the public comment period, the SEC did not change the rule mandating quarterly reporting.

In July 2019, the SEC held a roundtable on short-term/long-term management of public companies, the periodic reporting system, and regulatory requirements. The SEC’s efforts did not result in a rule proposal to change reporting frequency, but the topic remained on the SEC’s Reg Flex Agenda until the rulemaking plans were dropped in the June 2021 version.  However, 2025 is a different time, and given the Atkins SEC signaling prioritization of the rule proposal, the likelihood of a change in reporting timing appears more likely than in 2019.

Even so, the SEC may also consider whether shifting from quarterly to biannual reporting conflicts with existing law. Therefore, it may be months until a proposed rule is approved. And because public companies may need to adapt systems, internal reporting, audit, as well as governance, and stock exchanges may need to adjust listing rules, the SEC may prescribe a transition period for compliance.  If and when regulatory filings become biannual, however, there may be an immediate impact on D&O insurance exposure.

Implications

As D&O Diary readers are aware, quarterly 10-Qs can provide public insight into a company’s financial condition, operations, and, as has been the case for much of 2025, the impact of geopolitical factors, like tariffs.  If reporting frequency decreases to biannually, D&O-related risk factors may also change significantly in between filings, affecting the potential severity of loss and proving loss causation.

Information Lag and Shareholder Scrutiny

Lengthening the time between public filings may potentially lengthen the information gap between required public disclosures. This may lead to shareholder claims that adverse developments went undisclosed for longer, particularly if no 8-Ks are filed in the interim.  This may increase the severity of alleged securities violations once material information is disclosed.  A recent putative securities class action complaint filed against Super Micro Computer in the Northern District of California in August 2024 demonstrates the potential for immediate negative impact to a company’s share price resulting from alleged erroneous and delayed public filings.

Investors in Super Micro Computer, Inc. (SMCI) alleged that SMCI and its senior executives misled the market about its internal controls and failed to disclose material related-party transactions. These alleged omissions, combined with allegations of improper revenue recognition practices, came under scrutiny in August 2024 when Hindenburg Research published a report accusing SMCI of accounting manipulation and undisclosed dealings. MCI’s stock allegedly fell following the Hindenburg report and declined 22% when the company disclosed that it would delay filing its annual Form 10-K.

For the SMCI plaintiff shareholders, the company’s delayed SEC filing purportedly served as market confirmation of the Hindenburg report’s allegations, resulting in claims under Section 10(b) and Rule 10b-5. The SMCI case highlights a potential D&O underwriting concern when planned reports end up derailed by a short seller like Hindenburg.  And, if biannual disclosure obligations come under pressure due to unforeseen events, a longer delay between filings may magnify shareholder suspicion of securities fraud.

Causation and the PSLRA

As D&O Diary readers may recall, the PSLRA imposes heightened pleading standards, including a requirement that plaintiffs plead loss causation with particularity. Courts have emphasized the need for plaintiffs to link a corporate disclosure to the alleged economic loss. In a biannual reporting regime, that causal chain may become more contested: if six months of events accumulate before a company files its 10-Q, it may be challenging to parse intervening market factors from a delayed report as the reason for a subsequent stock drop.  This may result in motion practice over loss causation, requiring additional discovery and expenses incurred.

Conclusion

Whether the SEC ultimately moves from quarterly to biannual reporting appears more likely than not.  However, for D&O underwriters, fewer mandated disclosures may not necessarily mean less litigation risk, and may result in more scrutiny over disclosure timing, loss causation, and shareholder suspicion when negative developments surface.  Extending the reporting cadence to six months could magnify these exposures, and therefore, D&O carriers may want to monitor how the SEC’s latest initiative unfolds.

The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with the author’s company, colleagues, or clients. The information contained in this site is provided for informational purposes only and should not be construed as legal advice on any subject matter.

Ommid C. Farashahi
Melissa Y. Gandhi

By this point, I think all of us have seen stories about lawyers who have gotten in hot water because they relied on AI to come up with legal authority, only for the AI-generated citations turning out to be phony. In the following guest post, Ommid C. Farashahi and Melissa Y. Gandhi of the BatesCarey LLP law firm take a look at this recent phenomenon and consider the ethical and profesional implications. I would like to thank Ommid and Melissa for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the author’s article.

Continue Reading Guest Post: Courts Crack Down on AI Misuse in the Legal Profession
Sarah Abrams

In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a closer look at the civil and criminal litigation filed against casual dining company Fat Brands and considers the implication of the litigation for Sides A and B coverage under a D&O insurance policy. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.

Continue Reading Guest Post: Fat Chance

The Sarbanes-Oxley Act‘s legacy may be mixed in some important ways, but one of it more enduring aspects has been its requirement for publicly traded companies to have mechanisms to for employees report concerns anonymously and confidentially. Most companies now have ethics reporting hotlines – in fact, the SOX confidential reporting requirement has spawned an entire industry of third-party firms providing hotline services to public companies, according to a recent Wall Street Journal article. As the Journal article reports, these hotlines have in fact in some instance led to the uncovering of serious concerns, including even instance of accounting misreporting. The September 12, 2025, Journal article, which is entitled “Sex Scandals. Accounting Fraud. It’s All Showing Up on the Corporate Hotline,” can be found here.

Continue Reading An Important and Enduring SOX Legacy: Ethics Reporting Hotlines

In my recent roundup of the top current stories in the world of D&O, I noted the increasing importance of geopolitical issues as a source of D&O claims risk. Among the factors supporting this trend is the rising relevance of cross-border enforcement initiatives, which in many instances had led to D&O claims. In the latest sign of the importance of cross-border enforcement issues, the SEC has announced the formation of a cross-border task force to “identify and combat cross-border fraud harming U.S. investors.” The SEC’s September 5, 2025, press release about the task force can be found here.  A September 10, 2025, post on TheCorporateCounsel.net blog about the new task force’s formation can be found here.

Continue Reading SEC Forms Task Force to Combat Cross-Border Fraud
Sarah Abrams

In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at the new whistleblower program that the DOJ’s antitrust division recently announced in conjunction with the U.S. Postal Service, and considers the D&O liability and insurance implications. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.

Continue Reading Guest Post: Going Postal

It is frequently the case that securities class action lawsuits are accompanied by a parallel shareholder derivative lawsuit involving substantially similar allegations. But what happens to the derivative lawsuits when the related securities class action lawsuit is settled? An August 2025 study from Cornerstone Research analyzes the settlements of these parallel derivative lawsuits during the period 2019 through 2024. The Cornerstone Research report can be found here.

Continue Reading Settlement of Parallel Derivative Actions
Sarah Abrams

Through several different regulatory and legislative actions, including through Executive Orders and the passage of the GENIUS ACT, the current administration has created a favorable environment for cryptocurrency. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, examines the recently adopted legislation and regulatory actions concerning cryptocurrency and considers the D&O insurance underwriting implications. I would like to thank Sarah for allowing me to publish her article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.

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In August, Treasury Secretary Scott Besset confirmed that the United States’ Strategic Bitcoin Reserve (SBR), consists of $15 – $20 billion in coins.  Besset further stated that the Treasury Department is “committed to exploring budget-neutral pathways to acquire more Bitcoin to expand the reserve.” His position on continuing to accumulate Bitcoin aligns with President Trump’s March 2025 Executive Order (EO), which directs the U.S. Treasury to establish the SBR.  In addition to the Crypto EO and creation of the SBR, the first federal cryptocurrency legislation, the GENIUS Act, was signed into law in July. 

Also of note, as of Q2, public companies reportedly purchased around 131,000 Bitcoins. With Bitcoin trading around $115,000–$120,000 and rising, companies holding the asset may currently be boosting the value of their corporate treasuries. Even so, will D&O underwriters of companies acquiring Bitcoin face increased exposure as a result?  

While the Treasury increases SBR Bitcoin holdings and the GENIUS Act may create some cryptocurrency guardrails, the SEC requires companies to reporton Bitcoin ownership. In addition, reports of criminal activity related to cryptocurrencies, including Bitcoin, continue to make headlines. This may leave D&O underwriters and insured companies wondering whether Bitcoin is a good corporate investment or a liability. 

The following discusses Bitcoin and the GENIUS Act briefly, disclosure requirements for Bitcoin ownership in SEC filings, as well as recent crypto-related criminal activity, and potential D&O risk stemming therefrom. 

What is Bitcoin?

Bitcoin (BTC; ₿) is the first decentralized cryptocurrency. It began operating in 2009, and in 2021, El Salvador became the first country to adopt it as legal tender. As D&O Diary Readers may recall, Bitcoin is the native asset of its own blockchain, with each unit of value recorded on its distributed ledger. Its price is determined by supply and demand in open markets, meaning it is not a stablecoin. Bitcoin transactions are secured by cryptographic digital signatures and validated through the network’s proof-of-work consensus, which prevents double-spending, while private keys ensure only owners can authorize transfers.

Notably, Besset has indicated that the Treasury SBR’s current Bitcoin holdings were mostly derived from past seizures of criminal enterprises and that future Bitcoin additions will be confiscated through law enforcement actions. While the Treasury can seize Bitcoin from criminal bad actors, executives and corporate boards may purchase Bitcoin as part of a corporate investment strategy to diversify or hedge against inflation.  

It is important to note that, at this time, the GENIUS Act does not protect corporate Bitcoin holders, since its provisions apply only to stablecoins. While the Act creates federal oversight and consumer protections for payment stablecoins, it does not extend similar safeguards to Bitcoin or other non-pegged digital assets. 

Even so, the GENIUS Act may encourage broader crypto adoption in payments and settlement, indirectly boosting corporate comfort with digital assets (including Bitcoin).

The GENIUS Act

The GENIUS Act is the first federal cryptocurrency legislation enacted in the U.S. The Act establishes a legal framework for the issuance, sale, and redemption of stablecoins — digital assets pegged to a sovereign currency.  The Act further provides regulatory clarity for businesses and financial institutions using stablecoins in payments and financial infrastructure.  Under the law, stablecoin holders have the right to redeem tokens at face value. Because Bitcoin is non-pegged and its value is based on supply and demand, this type of redemption by companies holding Bitcoin as an investment may not be available if its value plummets.  

SEC Filings

Thus, corporations investing in Bitcoin may be required to file 10K and 10Qs with the SEC that report the risk tied to Bitcoin’s price volatility.  It is also important to note that, under U.S. GAAP, Bitcoin is treated as an intangible asset with an indefinite life (not cash, not a financial instrument). As of January 1, 2025, a new FASB standard (ASU 2023-08) requires certain crypto assets, including Bitcoin, to be measured at fair value, with unrealized gains or losses recognized in net income each reporting period.  Accordingly, there may be executive and regulatory exposure stemming from corporate reports on Bitcoin ownership and value in public filings. 

And, as a result, Bitcoin ownership may come under shareholder scrutiny, especially if its value craters. Bitcoin was valued as low as $76,000 in April of this year; however, its current market value is now up 58%. While that is a strong return, corporate treasuries that include crypto may be less versatile when liquidity is needed if Bitcoin’s value dips again.  Therefore, there may be increased shareholder demands on corporate boards when Bitcoin is disclosed as an investment strategy. 

Shareholders may also be concerned by rising reports of crypto-related cybercrime and physical attacks on large holders and their families.

Crypto Crime 

As of mid-August, U.S. officials have sanctioned more than a half-dozen crypto exchanges around the world for allegedly serving cybercriminals.  This includes Russian cryptocurrency exchange, Garantex, which, according to the Treasury Department, custodied and laundered large sums of crypto, including millions of dollars derived from Russia-linked ransomware attacks. U.S. and European law enforcement agencies have repeatedly accused the platform of being used by cybercriminals as well as gangs and designated terrorist groups.

The Garantex platform allegedly allowed people to circumvent sanctions on Russian banks by bringing rubles to the company’s offices in Moscow and St. Petersburg and getting cryptocurrency in return, which could then be exchanged for other fiat currencies.  Bitcoin was not necessarily identified as a cryptocurrency exchanged on the Garantex platform, however, the association with government-identified criminal actors may impair Bitcoin’s reputation.  

Another concerning trend tied to cryptocurrency is that theft of cryptocurrency increased in 2025, with total crypto losses, including Bitcoin, reaching nearly $2.8 billion in the first half of this year.  One disturbing development is the rise of so-called “wrench attacks”. In a wrench attack, criminals use physical violence or coercion against individuals to access their crypto holdings.  Two recent incidents, both in France, involved the daughter and grandson of a prominent cryptocurrency CEO who were attacked in broad daylight in Paris and the father of a crypto entrepreneur being abducted and held for ransom.  

While companies holding Bitcoin may have Kidnap and Ransom insurance, increasing the risk of kidnapping or violence against an executive with access to corporate Bitcoin private keys may also call into question a board and executive team’s duty of care and oversight. 

Conclusion

As Bitcoin’s popularity as a holding, both by the U.S. treasury and by companies, increases, D&O underwriters may want to consider whether existing coverage is sufficient for the follow-on risks.  Will the crypto coin’s volatility call into question executive financial management decisions?  And, will ties to criminal activity degrade shareholder sentiment when companies disclose Bitcoin acquisitions?  Time will tell, but in the meantime, D&O insurers may want to be aware of which companies’ treasuries now include Bitcoin.

The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This site is not affiliated with the author’s company, colleagues, or clients. The information contained in this article is provided for informational purposes only  and should not be construed as legal advice on any subject matter.