Current Month (August 2025)
PCAOB Postpones Effective Date of New Quality Control Standard
By Thomas W. White, Retired Partner, WilmerHale
In 2024, the Public Company Accounting Oversight Board (“PCAOB”) adopted, and the Securities and Exchange Commission (“SEC”) approved, a comprehensive new quality control standard (QC 1000) for registered public accounting firms. As described in a prior note, QC 1000 and related amendments to other standards are designed to lead firms to significantly improve their QC systems. QC 1000 establishes an integrated, risk-based-based standard that mandates quality objectives and key processes for firms’ QC systems, with larger firms subject to additional requirements.
QC 1000 and related amendments were set to take effect on December 15, 2025. On August 28, 2025, the PCAOB announced that it would postpone the effective date for one year, until December 15, 2026. The PCAOB emphasized that it was not proposing any changes to the text of QC 1000 or other standards, rules or forms.
Explaining its action, the PCAOB stated that it had been informed that “some firms had encountered implementation challenges that may, as a practical matter, be insurmountable within the established time frame” and that it believed that an additional year was sufficient time for firms to overcome these challenges.
While this action does not have any substantive impact on QC 1000, it remains to be seen whether the PCAOB will reconsider all or parts of the standard at a future time. Notably, two Republican members of the SEC dissented from approval of QC 1000 in 2024, and SEC Chairman Paul Atkins has indicated that the SEC intends to replace the current members of the PCAOB.
SEC Creates Task Force to Tap AI for Enhanced Innovation and Efficiency Across the Agency
By Rani Doyle
On August 1, the SEC announced an AI task force led by Valerie Szczepanik, former Director of the SEC’s Strategic Hub for Innovation and Financial Technology and former Senior Advisor for Digital Assets and Innovation. An excerpt from the press release reads as follows:
The AI Task Force will empower staff across the SEC with AI-enabled tools and systems to responsibly augment the staff’s capacity, accelerate innovation, and enhance efficiency and accuracy,” said SEC Chairman Paul S. Atkins. “By ingraining innovation into our culture SEC-wide, we will further our mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
SEC’s Division of Corporation Finance issues Statement on Certain Liquid Staking Activities
By Rani Doyle
On August 5, the Division issued a statement setting forth its views that:
“Liquid Staking Activities” (as defined [in the statement]) in connection with Protocol Staking do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 (the “Securities Act”) or Section 3(a)(10) of the Securities Exchange Act of 1934 (the “Exchange Act”). Accordingly, it is the Division’s view that participants in Liquid Staking Activities do not need to register with the Commission transactions under the Securities Act, or fall within one of the Securities Act’s exemptions from registration in connection with these Liquid Staking Activities.
It also is the Division’s view that the offer and sale of Staking Receipt Tokens, in the manner and under the circumstances described in this statement, do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act, unless the deposited Covered Crypto Assets are part of or subject to an investment contract. Accordingly, Liquid Staking Providers involved in the process of minting, issuing and redeeming Staking Receipt Tokens, as described in this statement, as well as persons involved in secondary market offers and sales of Staking Receipt Tokens, do not need to register those transactions with the Commission under the Securities Act or fall within one of the Securities Act’s exemptions from registration, unless the deposited Covered Crypto Assets are part of or subject to an investment contract.
SEC’s Division of Corporation Finance Further Updates the Financial Reporting Manual and SEC Provides Reminder of September 15 EDGAR Next Compliance Deadline
By Rani Doyle
On August 28, the Division of Corporation Finance updated the Financial Reporting Manual. (See the summary here.) The SEC also announced a reminder on SEC EDGAR Next rules with tips for enrollment, in preparation for the September 15, 2025, compliance deadline.
Department of Justice Issues Declination and Unseals Indictment After FCPA Pause
By Rani Doyle
On August 7, the Department of Justice (“DOJ”) issued a declination letter to Liberty Mutual Insurance Company. On August 11, the DOJ also unsealed an indictment charging foreign nationals with conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”). These are the first FCPA actions since President Trump issued an executive order in February 2025 pausing FCPA enforcement. The new actions follow June 2025 guidelines for investigations and enforcement of the FCPA under the executive order and show a continued interest in voluntary disclosure and cooperation under the DOJ Criminal Division’s updated Corporate Enforcement and Voluntary Self-Disclosure Policy.
SEC Redefines Staff Position on Registered Closed-End Funds’ Exposure to Private Funds
By Karen Liu, Reid & Wise LLC
On August 15, 2025, the Division of Investment Management (“Division”) of the U.S. Securities and Exchange Commission (“SEC”) issued “Accounting and Disclosure Information 2025-16 – Registered Closed-End Funds of Private Funds” (“ADI 2025-16”), eliminating Division staff’s decades of restrictive position on registered closed-end funds that invest in private funds (“CE-FOPFs”) and providing clarifying disclosure guidance for CE-FOPFs.
Since 2002, Division staff has taken the position that CE-FOPFs investing 15 percent or more of their assets in private funds should restrict their offers to investors that satisfy the “accredited investor” standard under Regulation D of the Securities Act of 1933 (“1933 Act”) and impose a minimum initial investment requirement of $25,000. ADI 2025-16 eliminated this longstanding staff position by virtue of two reasons: (i) the SEC’s oversight of and the market’s operational practices around both registered funds and private fund advisers have evolved significantly since 2002; and (ii) investors in CE-FOPFs differ from direct investors in private funds in terms of regulatory protections because a CE-FOPF must be managed by a registered investment adviser, must have oversight from a board of directors, and must be subject to mandatory periodic disclosure obligations and more restrictive investment limitations (such as limits against excessive leverage, limits on overly complex capital structures, and prohibitions against certain conflicted transactions with affiliates).
The policy repositioning articulated in ADI 2025-16 follows SEC Chair Paul Atkins’s remarks at the SEC Speaks conference on May 19, 2025, and may be codified into law if the bipartisan Increasing Investor Opportunities Act (which was reported to the whole House on June 25, 2025) is enacted. This move also comes on the heels of the August 7, 2025, Executive Order on democratizing access to alternative assets for 401(k) investors and the Department of Labor’s August 12, 2025, reopening of alternative assets to 401(k) plans.
For CE‑FOPFs currently investing over 15 percent of their assets in private funds, if they now seek to remove “accredited investor” and/or investment minimum limitations from their registration statements, they should either (i) file amendments to their registration statements through rule 486(a)-(b) under the 1933 Act or (ii) file prospectus supplement updates through rule 424 under the 1933 Act, as appropriate. If the cumulative changes are material, the staff’s review will be necessary under rule 486(a). With respect to CE‑FOPFs currently limiting private fund exposure to 15 percent, if they now seek to remove the 15 percent limitation, they should go through a post‑effective amendment filing under rule 486(a) to reflect such material changes, subject to the staff’s review.
For better investor protection, ADI 2025-16 also provided clarifying guidance on CE-FOPFs’ registration statement disclosures, including:
- Disclosures should follow the SEC’s “plain English” rule, with clear, concise, and understandable language
- Registration statement must disclose all of the information required by Form N-2
- Registration statement should disclose material information specific to private funds that a CE-FOPF invests in, such as the following:
- due diligence practices conducted by the adviser when evaluating private fund investment opportunities (including investment, operational, legal, and, as applicable, tax considerations);
- various fee structures imposed by the underlying private funds (including performance‑related compensation) and how multiple layers of direct and indirect fees could affect the underlying private funds’ returns and the CE-FOPF’s performance (including the “netting risk”);
- the types of underlying private funds in which the CE-FOPF proposes to invest and the associated risks and considerations (e.g., if material, the private funds’ investment strategies, liquidity of their underlying investments, and risks related to volatility, speculation, and conflicts of interest);
- clarifying disclosures that private funds are not limited by the Investment Company Act of 1940 in how they invest their assets (g., leverage and transactions with affiliates), that private funds’ investments may impact the strategies, risks, and costs of and for the CE‑FOPF itself, and that the CE‑FOPF’s investors may have limited information about the underlying private funds’ holdings, liquidity, and valuation; and
- where material, risk disclosures such as the legal jurisdictions of the underlying private funds, how “liquidity terms” (e.g., minimum holding periods, limitations or suspensions of redemptions, “payment in kind” distributions) of private funds may impact CE-FOPF itself, and tax considerations that could impact the CE-FOPF’s pass-through status.
2025 Amendments to the Delaware General Corporation Law in a Nutshell
By Kyle A. Pinder, Morris Nichols Arsht & Tunnell
In 2025, the Delaware General Assembly adopted two tranches of amendments to Chapter 1 of Title 8 of the Delaware Code (the “DGCL”).
The first tranche to become effective (referred to by many as the “Balancing Amendments”) was intended to address perceived uncertainties and inefficiencies with respect to the approval of conflict transactions and the inspection of corporate books and records by stockholders.
Key provisions include amendments to DGCL Section 144 that:
- codify safe harbor procedures to mitigate conflicts in (i) interested director conflict transactions, (ii) going private transactions by a controller (i.e., Rule 13e-3 transactions), and (iii) other controller transactions;
- define the criteria for determining “disinterested directors”; and
- define the criteria for determining a “controlling stockholder” and a “control group.”
The second tranche, among other things, (i) clarified the types of claims that may be covered by certificate of incorporation- or bylaw-based forum selection provisions and (ii) extended the prohibition on certificate of incorporation- or bylaw-based fee-shifting provisions to cover this clarified universe of claims.
Please see my full memorandum here.
