Deal Diary

As discussed in our prior publication (found here), the Securities and Exchange Commission (SEC) adopted amendments on December 14, 2022, regarding Rule 10b5-1 insider trading plans and related disclosures. On May 25, 2023, the SEC issued three new compliance and disclosure interpretations (C&DIs) relating to the Rule 10b5-1 amendments.

With threats of nation-states infiltrating supply chains and landmark laws being passed, cybersecurity and privacy are critical aspects of director oversight. Recent court decisions and speeches from the SEC have made it clear that directors are not able to delegate cybersecurity oversight: directors each have the responsibility to personally understand cybersecurity risk and ask appropriate questions. Directors must focus on internal controls to guard against cyber-threats (including accounting, cybersecurity and insider trading) and expand diligence of thirdparty suppliers. Integrating both privacy and security by design will be critical to minimizing ongoing risk of cybersecurity breaches and state and federal enforcement.

Corporate Culture

The corporate culture of a company starts at the top, with the board of directors, and directors should be attuned not only to the company’s business, but also to its people and values across the company. Ongoing and thoughtful efforts to understand the company’s culture and address any issues will help the board prepare for possible crises, reduce potential liability and facilitate appropriate responses internally and externally.

This week we highlight a report by the EY Center for Board Matters that analyzes how boards, executives, investors, regulators and other governance stakeholders are planning for and responding to cybersecurity threats. The observations conclude that the depth and nature of cybersecurity-related disclosures vary widely, suggesting there is opportunity for enhancement in how cybersecurity risks, cybersecurity risk management frameworks and board oversight are communicated.

Akin Gump litigation partner Peter Altman was quoted by Variety  for an article regarding insider trading concerns which arise when large gatherings of CEOs occur, specifically at annual conferences like the annual Allen & Co. media retreat. Altman said, “People try to get access to public company information all the time through meetings with management or calls to investor relations, but the concentration of power brokers heightens the possibility of improper exchanges of information taking place. That’s what’s potentially problematic.”

Bloomberg Law's Securities Regulation & Law Report has published the article “Big Data and the Risks of Insider Trading,” written by Peter Altman and Kelly Handschumacher, litigation partner and associate, respectively, at Akin Gump, and Jennifer Hustwitt, a vice president in the financial institutions group at Marsh & McLennan. The article looks at how investment advisors can prevent, or even mitigate, liability for insider trading in connection with the use of alternative data.

Akin Gump has issued an alert on SEC guidance regarding disclosure of material cybersecurity risks and incidents to investors, comprehensive policies and procedures related to cybersecurity risks and insider trading policies of public companies that should address and protect against misuse of nonpublic information related to cybersecurity risks.

SEC regulatory relief

We expect that the Trump administration and the Republican-led U.S. Congress will advance significant policy shifts and rule changes at the SEC that are designed to encourage companies toward public ownership and to facilitate capital formation in both public and private markets.