With new leadership under the Trump administration, the Securities and Exchange Commission (“SEC”) is charting a course that promises significant changes in the regulation of securities disclosures and capital markets. In this alert, we discuss several important trends and developments that public companies should be aware of as the 2026 reporting season approaches. These include a shift in SEC policy, rulemaking and enforcement priorities, a new shareholder proposal process, likely upcoming changes to executive compensation disclosures, and newly applicable compliance items relating to Inline XBRL and EDGAR Next. We also address recent policy updates from proxy advisory firms and developments regarding the disclosure of executive security payments as perquisites.
A. Disclosure Requirements and Rulemakings
As companies look ahead to the 2026 reporting season, many of the disclosure topics that were top priorities under prior SEC Chairman Gary Gensler are receding into the background. The climate change and greenhouse gas emission disclosure rule, which gave rise to a range of internal control, disclosure mapping, and board oversight consequences, is effectively (although not technically) dead; however, public companies should continue to monitor the progress of California’s climate change disclosure regulations. Chairman Paul Atkins has signaled skepticism about the usefulness and necessity of the recently enacted cybersecurity incident reporting requirement under Item 1.05 of Form 8-K. This rule seems likely to receive less attention from the SEC Staff (“Staff”) and/or undergo revision. Similarly, the SEC’s previous goals to enact disclosure rules on board diversity and human capital management have been dropped from its agenda. As discussed in more detail below, the SEC under Chairman Atkins plans to review and potentially propose changes to the complex executive compensation disclosure regime. And on digital assets, the SEC’s prior resistance has shifted in a markedly different direction. As Chairman Atkins pushes for greater regulatory clarity about what digital assets are securities, the SEC appears poised to propose exemptions, safe harbors and other rules of the road relating to the issuance and trading in such digital asset securities.
B. Key Current SEC Priorities Under Chairman Atkins
(1) Re‑evaluating approach to disclosure requirements and issuer categories
Chairman Atkins wants the SEC’s disclosure agenda to move toward a clearer, financial materiality‑first framework, with an emphasis on information that is decision‑useful to investors.[1] The SEC’s ultimate goal is to reduce regulatory burdens and thereby make the U.S. capital markets more attractive, with one benefit being to encourage more IPOs and other capital markets transactions.
As a part of this re-evaluation, the SEC is reassessing how issuer categories are defined and applied across the disclosure regime, with an eye toward proportionality and cost‑benefit alignment. Areas under consideration include the thresholds and obligations for smaller reporting companies and emerging growth companies, the interplay between float‑based and revenue‑based tests, and whether scaled disclosures are effectively targeting the companies most in need of relief. Potential adjustments could refine eligibility tests and simplify transition rules when companies move between categories. Chairman Atkins has said that any adjustment would be aimed at preserving investor protections while better matching disclosure burdens to company size, complexity, and market impact.
Within this shift, the concept of semi‑annual reporting has also re‑entered the conversation. President Trump urged the SEC to revisit the current quarterly reporting regime, and Chairman Atkins echoed during an open SEC meeting on September 17, 2025 that this is “among the first steps of my goal.”
(2) Fraud–focused SEC enforcement
Chairman Atkins has criticized some Gensler-era enforcement priorities, such as those based on unregistered digital asset offerings and intermediaries, as well as financial entity recordkeeping requirements. Predictably, the overall rate of enforcement actions dropped significantly after the change in administrations in January 2025. Securities offering cases were the largest category of enforcement actions during 2025; the SEC initiated 33 stand-alone actions in 2025 relating to issuer disclosure and accounting, and auditors. These cases represented 11% of the actions in 2025, the same percentage as in 2024, though 49 cases were brought in 2024. The SEC continued to bring market manipulation and insider trading cases. All other enforcement categories saw varying levels of decreased activity throughout 2025. The amount of penalties sought against public companies also dropped significantly.
(3) Arbitration policy shift
Chairman Atkins has stated that he believes the threat of private securities litigation is a significant factor in a company’s decision to go public. On September 17, 2025, the SEC announced that the presence of a provision in a company’s governing documents requiring arbitration of investor claims arising under the federal securities laws would not affect its decision to accelerate the effectiveness of a registration statement. This represents a dramatic change in the SEC’s longstanding position, which was historically informed by the idea that the “anti-waiver” provision under Section 14 of the Securities Act of 1933 would prohibit issuer-investor mandatory arbitration provisions. This change opens the door to the adoption of mandatory arbitration provisions in a company’s governing documents. One potential upside of this development could be a decrease in expensive and time-consuming securities class action lawsuits. However, state corporate laws may still limit the availability of such provisions. Even if mandatory arbitration provisions are permissible under state law, companies will need to consider the practical implications that could flow from adopting these provisions. Companies will also need to consider potential negative reactions of retail shareholders and institutional investors, as well as negative vote recommendations of proxy advisors. For further information, see Covington’s alert addressing this topic here.
On November 17, 2025, the Staff issued a statement (the “Statement”) announcing a significant change to the Staff’s traditional role in the Exchange Act Rule 14a-8 shareholder proposal process. The Statement provides that, until at least September 30, 2026, the Staff will not respond to any Rule 14a-8 no-action letters submitted to the Staff, with one narrow exception. (As discussed below, the Staff will continue to consider requests for no-action letters that rely on Rule 14a-8(i)(1), for proposals not considered a “proper subject” under state law.) If a company determines that it may exclude a proposal, it must still provide its reasons for doing so to the SEC as required by Rule 14a-8(j). The notice under the new process will look similar to a no-action request under the prior process in many cases, although we expect that notices citing procedural bases for exclusion may be more streamlined. Further, if a company includes an unqualified representation in its notice that it has a reasonable basis to exclude the proposal, the Staff will respond by letter noting that it will not object to the company’s exclusion of the proposal based solely on the company’s representations. The Statement changes the Staff’s historic role of providing comfort to companies seeking to exclude proposals.
Stepping back, Chairman Atkins has voiced concerns about the shareholder proposal process and Rule 14a-8 and has signaled that further regulatory changes may be forthcoming. In this regard, on December 11, 2025, President Trump signed an executive order targeting proxy advisory firms that, among other actions, instructed the SEC Chairman to consider “revising or rescinding all rules, regulations, guidance, bulletins, and memoranda relating to shareholder proposals, including Rule 14a-8, that are inconsistent with the purpose of” the executive order.[2] Furthermore, Chairman Atkins has posed the question of whether shareholders have the right under Delaware law to make precatory (non-binding) proposals at shareholder meetings, and he has indicated that the Staff is likely to agree that non-binding proposals may be excluded under Rule 14a-8(i)(1) if the company obtains an opinion of counsel that a proposal is not a “proper subject” for shareholder action.
For additional discussion on the new shareholder proposal process, see the Covington client alert here.
A. The SEC’s Executive Compensation Roundtable
On June 26, 2025, the SEC convened a public roundtable focused on the current executive compensation disclosure regime. Chairman Atkins signaled that the SEC and Staff would undertake a retrospective review and potential revision of these rules. The roundtable was an invitation to the public to provide views to the SEC on how the executive compensation disclosure rules could be simplified. In particular, roundtable participants addressed whether disclosures required under Item 402 of Regulation S-K can be streamlined, what level of detail is material, and how investor engagement drives compensation decisions and disclosure. They also discussed rule requirements added by Congress through the Dodd‑Frank Act, including shareholder advisory votes on executive compensation (i.e., “say on pay,” “say on frequency” and “say on golden parachute”) and other recently adopted requirements on pay‑versus‑performance and clawback disclosures.
Roundtable participants also discussed ways to improve executive compensation disclosures. Many called for simpler rules, less boilerplate, and a new look at what counts as a perquisite, particularly with respect to executive security. Others, including institutional investors, said detailed disclosures help voting and investment decisions, and urged broader coverage to include more named executive officers and other influential employees. They also asked for uniform, machine-readable disclosures to enable comparisons and to track awards over time. Participants also noted the strong influence of proxy advisors: companies said they feel pressure to align pay programs and disclosures with advisor guidelines and worry about say-on-pay outcomes, while some institutional investors said proxy advisors provide a useful service by summarizing complex information.
We expect the SEC will consider the sentiments expressed at the roundtable and in subsequent public comments as it proceeds to propose revised executive compensation disclosure requirements.
B. Executive Security Perquisites
The assassination of the CEO of UnitedHealthcare in December 2024 thrust executive security concerns into the spotlight during 2025 and will continue to be a focus during the 2026 reporting season. Prior to this event, the number of companies disclosing executive security benefits had already been increasing, along with the median value of spending for executive security among the S&P 500. Many companies have now been reevaluating, and in some cases, enhancing, their executive security arrangements.
Increased executive security concerns have prompted a renewed debate regarding whether personal security provided to executives should be considered a perquisite, and therefore required to be disclosed as executive compensation. While many companies may view paying for the protection of an executive officer at home or during personal travel as integral to the performance of the executive’s duties, the SEC has historically viewed such payments as disclosable perquisites. (Payments for security provided during business travel and events are generally considered integral to the performance of the executive’s duties, and therefore not as likely to be disclosable as a perquisite.)
As noted above, the SEC is currently reevaluating executive compensation disclosure requirements, including how they pertain to perquisites, and it is quite possible that the SEC’s guidance on perquisites and its rules for their disclosure may be subject to change in the near future, particularly with respect to personal security services.
C. Option Timing Policy Disclosure
During the 2025 reporting season, most companies had to consider Regulation S-K Item 402(x) for the first time. Item 402(x) requires (i) annual narrative disclosure under Item 402(x)(1) regarding a company’s policies relating to the timing of grants of stock options, stock appreciation rights (“SARs”) and similar option-like instruments in relation to the release of material non-public information (“MNPI”). In addition, the rule calls for tabular disclosure under Item 402(x)(2) if these forms of equity compensation were granted shortly before or after the release of MNPI.
Item 402(x)(2) tabular disclosure is only required when a company grants options or SARs within a window designated by the rule, which is four business days before through one business day after the filing or furnishing of a Form 10-K, 10-Q or 8-K that discloses MNPI. In response to this disclosure requirement, many companies have become more focused on the timing of option and SAR awards relative to the release of MNPI. For example, many companies now stipulate that, as a policy, the grant date of any option or SAR must be outside the Item 402(x)(2) disclosure-triggering window. Other companies have disclosed that their boards of directors schedule compensation committee meetings for dates that would not trigger disclosure for awards granted at such meetings.
Companies should consider reviewing their existing equity granting policies and practices and some may wish to revise their policies to avoid the Item 402(x)(2) disclosure-triggering window as they head into their annual grant cycles and the 2026 reporting season.
D. XBRL Requirements for Form 11-K for Companies with Calendar-End Fiscal Years
Public companies should be aware that, beginning July 11, 2025, employee benefit plans filing annual reports pursuant to Section 15(d) of the Exchange Act on Form 11-K were required to provide all financial statements and schedules in such reports using Inline XBRL. As this compliance deadline fell after the 2025 filing deadline for plans that had a December 31, 2024 fiscal year end, Form 11-K reports for plans with a fiscal year ending December 31, 2025 will be the first time such plans will be subject to the new XBRL requirement.
A. ISS and Glass Lewis 2026 Benchmark Policy Updates
Both of the leading proxy advisory firms, Institutional Shareholder Services (“ISS”) and Glass Lewis, have updated their benchmark voting policies for the 2026 season. These updates come against a backdrop of enhanced regulatory scrutiny of proxy advisors. The updates for 2026 are relatively discrete, and include the following updates (in addition to certain other clarifying and other updates):
ISS – selected policy updates:
- For shareholder proposals addressing environmental and social (“E&S”) topics, ISS will now make voting recommendations on a case-by-case basis, instead of its previous policy of generally recommending “for” such proposals. E&S shareholder proposals are those that address climate change/greenhouse gas emissions, diversity, human rights, or political contributions.
- Evaluation of executive pay-for-performance will now be based on specified comparisons of company performance and CEO pay against a peer group over a five-year period, instead of a three-year period, and on a comparison of the multiple of CEO total pay relative to the peer group median over one- and three-year periods, instead of only the most recent fiscal year.
- The qualitative pay-for-performance assessment will now take into account, as a positive factor, time-based equity awards with vesting requirements that demonstrate a long-term focus. In addition, ISS noted that it will provide greater flexibility in assessing equity pay mix in response to some institutional investors’ preference for a majority (or all) of the equity pay mix to consist of time-based awards. This update marks a notable change from ISS’ prior policy, which strongly favored awards with performance-based vesting conditions.
- With respect to equity plan proposals, ISS will recommend a vote against a plan that lacks sufficient positive features under its plan features pillar, regardless of whether the plan has a passing score on ISS’ equity plan scorecard. In addition, when assessing plan features ISS will now consider whether there are cash-denominated award limits for non-employee directors.
Glass Lewis - selected policy updates:
- Enhancements to Glass Lewis’ proprietary pay-for-performance model will include a shift from assigning a single grade of “A” through “F” to a numerical scorecard approach using a scale of 0-100.
- There is a newly added discussion of Glass Lewis’ approach to mandatory arbitration provisions, which it generally views as a negative governance feature.
- Glass Lewis also noted that it is strongly opposed to the practice of bundling charter or bylaw amendments under single proposal because it prevents shareholders from reviewing each amendment on its own merit. In cases where multiple amendments are contained within the same proposal, Glass Lewis will recommend voting for the proposal only when it views the amendments to be in the best interests of shareholders. In this circumstance, a material concern regarding a single proposed amendment may result in Glass Lewis recommending that shareholder vote against the proposal.
- With respect to board diversity, Glass Lewis will continue applying the policy it announced in March 2025, whereby it will provide its clients with two recommendations – one that applies its benchmark policy regarding gender and underrepresented community diversity and one that does not. The benchmark policy remains unchanged, with Glass Lewis recommending against the chair of the nominating committee of boards in the Russell 3000 index that are not at least 30% gender diverse, or against all members of the nominating committee of a board that has no gender diverse directors. In addition, the benchmark policy provides that Glass Lewis will recommend a vote against the chair of the nominating committee of a board for a company in the Russell 1000 index that does not include a director from an underrepresented community.
B. EDGAR Next
As a reminder, companies and other filers are now required to submit filings under the federal securities laws using EDGAR Next, the SEC’s revamped electronic filing platform. Public companies should plan for EDGAR Next user and credential transitions when necessary, particularly when directors and officers retire or new directors and officers come on board. Advance planning is particularly important in the case of new directors or officers who have not previously been Section 16 filers or otherwise enrolled in EDGAR Next. Companies should ensure timely reassignment of account administrators and transfer or revocation of access, updates to contact information, and confirmation of delegation and filing authorities. For further information, see Covington’s alert addressing this topic here.
If you have any questions concerning the material discussed in this client alert, please contact the following members of our Securities and Capital Markets practice:
Back
