Morris, Manning & Martin, LLP’s Securities & Corporate Governance Quarterly Newsletter is designed to update public and private company clients on recent developments in federal securities laws and corporate governance matters. For further information, please contact any member of the Morris, Manning & Martin, LLP Securities & Corporate Governance practice group or any of the contributors to this newsletter.
This edition of the quarterly newsletter addresses the following topics:
- Potential Changes to Securities and Exchange Commission (SEC) Executive Compensation Disclosure Framework
- U.S. House of Representatives Passes Bill to Expand Accredited Investor Definition
- Financial Industry Regulatory Authority, Inc. (FINRA) Rule Amendment Regarding Communicating Performance Projections
- Further Extension of Compliance Date for Form PF Amendments
- Formal Withdrawal of SEC Rule Proposals
Potential Changes to SEC Executive Compensation Disclosure Framework
On June 26, 2025, the SEC held a roundtable discussion on whether the current executive compensation disclosure framework for public companies can be improved. The roundtable, and certain of the commissioners’ public remarks, signal that the SEC may prioritize scaling back current executive compensation disclosure requirements. Commissioner Uyeda, in particular, stated that the SEC is overdue for a review of executive compensation disclosure rules, and implied that recent adoptions of executive compensation disclosure rules were aimed at addressing income and wealth inequality in the United States. According to Commissioner Uyeda, “it is inappropriate to use SEC regulations with the intent of addressing desired political or social outcomes with respect to income and wealth inequality in the United States. To the contrary, executive compensation disclosures should provide information material to an informed investment or voting decision.”
Two rules received particular criticism at the roundtable discussion:
- The requirement to disclose the ratio of chief executive officer compensation to median employee compensation (commonly referred to as the “CEO Pay Ratio” disclosure rule), adopted by the SEC in August 2015; and
- The requirement to disclose comprehensive information reflecting the relationship between executive compensation actually paid by a public company and the public company’s financial performance (commonly referred to as the “Pay Versus Performance” disclosure rule), adopted by the SEC in August 2022.
Commissioner Uyeda described certain aspects of the CEO Pay Ratio rule as having a “name and shame motivation” and Commissioner Peirce stated that feedback received on the Pay Versus Performance rule described it as a “regulatory tax on public companies without a corresponding benefit for investors.” Public companies should stay alert for possible changes to the CEO Pay Ratio and Pay Versus Performance rules or other aspects of the public company executive compensation disclosure framework.
U.S. House of Representatives Passes Bill to Expand Accredited Investor Definition
On June 23, 2025, the U.S. House of Representatives passed the Fair Investment Opportunities for Professional Experts Act by an overwhelming vote of 397 to 12. Included within the bill is an expansion of the definition of “accredited investor” in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended, to include individuals with certain licenses or, as determined by the SEC and FINRA, qualifying education or job experience. These new categories would enable individual investors to qualify as “accredited” beyond the current wealth and income thresholds (generally, $200,000 of annual income for individuals or $300,000 of joint annual income with a spouse or spousal equivalent, or a net worth in excess of $1,000,000). The bill also provides for these wealth and income thresholds, which have not been adjusted since the 1980’s, to be adjusted for inflation every five years.
It remains to be seen whether the U.S. Senate will pass the bill and whether it will be signed into law.
FINRA Rule Amendment Regarding Communicating Performance Projections
FINRA’s board of governors approved a proposed amendment to FINRA Rule 2210 that would allow FINRA members to communicate performance projections to investors under certain conditions. Currently, FINRA Rule 2210 prohibits communications from predicting or projecting performance, from implying that past performance will recur, or from making any exaggerated or unwarranted claim, opinion or forecast. Under the proposed amendment, FINRA members may communicate projections if they adopt comprehensive policies and procedures related to the projections, have a reasonable basis for the criteria and assumptions used in calculating the projections and provide certain specified information alongside the projections.
The SEC must approve the rule amendment before it becomes effective, and just last year, the SEC stayed the approval of a similar proposed amendment to FINRA Rule 2210 that would have allowed FINRA members to communicate performance projections to institutional investors and qualified purchasers. The prior amendment had been approved by the SEC’s Division of Trading and Markets on July 19, 2024, and the SEC stayed such approval just one week later, on July 26, 2024. The reasons for the SEC’s stay of the approval of the prior amendment are unclear, and it remains to be seen whether the SEC will approve this newly proposed amendment to FINRA Rule 2210.
Further Extension of Compliance Date for Form PF Amendments
On June 16, 2025, the SEC and the Commodity Futures Trading Commission (CFTC) further extended the compliance date for recent amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The compliance date was extended from June 12, 2025 to October 1, 2025. This is the second extension of the compliance date – the SEC and the CFTC had previously extended the compliance date from March 12, 2025 to June 12, 2025.
The amendments to Form PF, adopted on February 8, 2024, include new, detailed information disclosure requirements designed to provide greater insight into private funds’ operations and strategies, improve data quality and comparability, and reduce reporting errors. The amendments also include new requirements that large hedge fund advisers (advisers with at least $1.5 billion in hedge fund assets under management) provide separate reporting for each component fund of a master-feeder arrangement[1] or parallel fund structure[2], and that advisers identify trading vehicles[3] used by reporting funds and report them on an aggregate basis.
Readers should note that SEC Chairman Paul Atkins has expressed concerns over the recent Form PF amendments and questioned whether the government’s use of the enhanced data required by the amendments justifies the “massive burden” imposed on investment advisers. Given these concerns raised by Chairman Atkins, it should not come as a surprise if the compliance deadline for these amendments is further extended beyond October 1, 2025, or if the amendments themselves are revised or rescinded before October 1, 2025.
Formal Withdrawal of SEC Rule Proposals
On June 12, 2025, the SEC formally withdrew 14 rule proposals issued during former Chairman Gary Gensler’s tenure and indicated that any future action with respect to the subject areas of the rule proposals would require the issuance of new rule proposals. The withdrawn proposals included, among others, the following topics:
- Exclusion of public company shareholder proposals: This proposal would have amended the substantial implementation, duplication, and resubmission bases used by public companies to exclude shareholder proposals from proxy statements under Rule 14a-8 of the Securities Exchange Act of 1934.
- Cybersecurity risk management: This proposal would have required registered investment advisers and investment companies to adopt and implement written cybersecurity policies and procedures and confidentially report information to the SEC about certain cybersecurity incidents.
- Enhanced environmental, social, and governance (ESG) disclosures: This proposal would have required registered investment advisers and registered investment companies to provide additional information regarding their ESG investment practices.
- Regulation Best Execution: This proposal would have required broker-dealers to establish, maintain, and enforce written policies and procedures reasonably designed to comply with the best execution standard.
- Safeguarding advisory client assets: This proposed rule would have overhauled the custody rule under the Investment Advisers Act of 1940, including the expansion of asset coverage and requirements.
- Outsourcing by investment advisers: This proposed rule would have imposed monitoring and due diligence obligations on certain third-party service providers.
[1] Form PF defines a “master-feeder arrangement” as an arrangement in which one or more funds invest all or substantially all of their assets in a single private fund.
[2] Form PF defines a “parallel fund structure” as a structure in which one or more private funds pursues substantially the same investment objective and strategy and invests side by side in substantially the same positions as another private fund.
[3] Form PF defines a “trading vehicle” as a separate legal entity, wholly or partially owned by one or more reporting funds, that holds assets, incurs leverage, or conducts trading or other activities as part of a reporting fund’s investment activities but does not operate a business. Form PF defines a “reporting fund” as a private fund for which the investment adviser must report information on Form PF.
Legal disclaimer: This newsletter is intended to provide general information and should not be used or taken as legal advice. Readers should not act upon this information before seeking advice from counsel.
