Current Month (January 2026)
SEC Staff Issues 2026 FAQs on Marketing Rule Compliance
By Karen Liu, Reid & Wise LLC
On January 15, 2026, the staff of Division of Investment Management (the “Staff”) under the U.S. Securities and Exchange Commission (the “SEC”) released two additional Frequently Asked Questions (the “2026 FAQs”) relating to the amended rule 206(4)-1 under the Investment Advisers Act of 1940 (the “Marketing Rule”).
The 2026 FAQs addressed the Staff’s views about the following two questions.
One question is about whether an investment adviser would violate the general prohibitions of Rule 206(4)-1(a) by advertising the net performance of a portfolio that reflects the deduction of the actual fees charged to the portfolio, when the fees to be charged are anticipated to be higher than the actual fees. The Staff clarified that footnote 590 of the Marketing Rule adopting release focuses on differences between actual fees charged historically and the anticipated fees to be charged. However, the Staff’s view is that:
- Advisers may use various means to illustrate the effect of differences between actual fees and anticipated fees on performance, such as through relevant disclosures.
- Whether the use of actual fees violates the general prohibitions depends on all of the facts and circumstances of a specific advertisement.
The other question is about whether an investment adviser can compensate a person for a testimonial or endorsement when such person was subject to disqualification final orders issued by a self-regulatory organization (“SRO”), such as FINRA or the New York Stock Exchange. The Staff clarified that the Staff would not recommend enforcement action to the SEC if an investment adviser compensates a person for a testimonial or endorsement who the adviser knows, or in the exercise of reasonable care should know, was subject to the entry of a final order by an SRO of the type described in section 203(e)(9) within ten years prior to the person disseminating an endorsement or testimonial, if all the following conditions are met:
- The sole reason the person is an ineligible person (as defined in the Marketing Rule) is the SRO’s final order;
- the SRO did not expel or suspend the person from membership, bar or suspend the person from association with other members, or prohibit the person from acting in any capacity;
- the person is in compliance with the terms of the SRO’s final order, including, but not limited to, paying disgorgement, prejudgment interest, civil or administrative penalties, and fines; and
- for a period of ten years following the date of such final order, any advertisement containing the testimonial or endorsement discloses the fact that the person providing the testimonial or endorsement is subject to an SRO order, and includes the order itself or a link to the order, if available.
By Alan J. Wilson, WilmerHale
On January 7, 2026, the White House issued an Executive Order, Prioritizing the Warfighter in Defense Contracting. The Executive Order focuses on defense contractors that are underperforming on existing government contracts and sets forth restrictions on such contractors’ ability to pay dividends and repurchase stock.
The Secretary of War is tasked with identifying such underperforming defense contractors within thirty days of the Executive Order and on a continuing basis thereafter, and with taking steps to ensure future contracts contain provisions implementing the Executive Order. In addition to dividends and share repurchases, those provisions will also address “executive incentive compensation.” In this regard, the Executive Order takes issue with short-term financial metrics, such as free cash flow or earnings per share driven by stock buybacks, and instead wants such compensation to be linked to on-time delivery, increased production, and all necessary facilitation of investments and operating improvements required to rapidly expand United States stockpiles and capabilities.
It remains to be seen how these terms get reflected in future government contracts, which may require, among other changes, new 10-K and proxy statement disclosures for public company defense contractors.
SEC Commissioner Mark Uyeda Delivers Remarks on the Public Company Disclosure Framework at the 53rd Annual Securities Regulation Institute
By Noah B. Levin, WilmerHale
SEC Commissioner Mark Uyeda delivered remarks outlining his vision for a scaled back disclosure framework aimed at reducing burdens on public companies through three central themes: reworking and simplifying Regulation S-K and other disclosure improvements, calibrating disclosure to support smaller companies, and re-establishing a focus on materiality.
Reworking and Simplifying Regulation S-K and Other Disclosure Improvements
Commissioner Uyeda urged revisiting several Regulation S‑K items, including raising the Item 404(a) $120,000 reporting threshold or adopting a materiality-based standard; eliminating Item 408(b)’s insider trading policy disclosure; and reconsidering Item 701’s three‑year lookback for unregistered sales. He also suggested moving mine‑safety disclosures from Form 10‑Q to Form 8‑K or Form SD. See more details regarding the SEC’s review of Regulation S-K here for the SEC’s request for comment.
Calibrating Disclosure to Support Smaller Companies
Noting the reduced disclosure requirements and associated compliance savings associated with qualifying as an Emerging Growth Company (“EGC”) or Smaller Reporting Company (“SRC”), Commissioner Uyeda explained that expanding EGC and SRC eligibility could lessen the regulatory burdens faced by smaller public companies without undermining investor protection. Extending the eligibility of EGC status may confer further benefits to both companies and the markets, Commissioner Uyeda said. Expanding the availability of Form S-3 is another opportunity Commissioner Uyeda discussed, noting that doing so could “offer[] a faster and less costly registration process” for smaller entities.
Re-establishing a Focus on Materiality
Commissioner Uyeda closed by emphasizing his belief that the SEC must return to its focus on financial materiality in its regulatory regime. He expressed concern that regulatory efforts over the last few years have incorporated social or environmental considerations without clear grounding in statutory authority. Commissioner Uyeda argued that the SEC should remain neutral on such issues and avoid advancing specific political or philosophical objectives through its rulemaking.
SEC Division of Investment Management Director Brian Daly Delivers Remarks on Proxy Voting by Registered Investment Advisers
By Noah B. Levin, WilmerHale
Brian Daly, Director of the SEC’s Division of Investment Management, delivered remarks to the New York City Bar Association discussing the use of proxy advisers by investment advisers as well as the use of artificial intelligence to inform proxy voting decisions by proxy advisers. Daly questioned the widespread use of proxy advisers by investment advisers, as well as the propriety of investment advisers nearly always voting in line with the default recommendation made by proxy advisers on nonroutine matters. While acknowledging that “there is nothing inherently wrong with an investment adviser using a proxy advisor,” he encouraged investment advisers to “(re)confirm that they are comfortable with their authority to vote” on the matter at issue given fund’s purpose and client objectives.
Daly also noted that the SEC will undertake efforts to respond to President Trump’s Executive Order on “Protecting American Investors from Foreign-Owned and Politically Motivated Proxy Advisors,” including the Executive Order’s direction to the SEC Chairman to consider:
- whether proxy advisers should be required to register as investment advisers;
- whether they should provide greater transparency about their recommendations, methodologies, and conflicts of interest, especially related to DEI and ESG;
- when an adviser’s reliance on proxy recommendations might result in the formation of a “group” under Section 13(d); and
- whether the use of proxy advisers to support nonpecuniary considerations is consistent with an adviser’s fiduciary duties.
Daly closed his speech with a “plug” for AI but emphasized that investment advisers should still review the outputs produced by AI tools and consider how the use of AI tools is consistent with their fiduciary duties.
SEC Staff Issues Guidance on the Application of Federal Securities Laws to Tokenized Securities
By Liz Walsh and Joshea Mark, Mayer Brown
On January 28, 2026, the Divisions of Corporation Finance, Investment Management, and Trading and Markets (collectively, the “Staff”) of the SEC issued another in a series of statements providing guidance on the application of the federal securities laws to various types and aspects of cryptocurrency, in particular, certain taxonomies related to “tokenized securities.” In this statement, the Staff emphasized that the form of an instrument, or whether it is “tokenized,” does not affect its essential character, or, in other words, whether the instrument is a “security,” a “security-based swap,” or a “swap.” While potentially helpful to market participants, the current statement is consistent with past related Staff guidance on the subject.
A link to our full note on the statements is here.
SEC Staff Updates C&DIs
By Rani Doyle
On January 23, the SEC’s Division of Corporation Finance issued revised Compliance & Disclosure Interpretations (“C&DIs”) that provide immediate practical relief for companies in these areas:
- Curbing “Vote-No” Publicity: In a change of policy, the Staff will now object to the voluntary filing of “Notices of Exempt Solicitation” (Form PX14A6G) by shareholders owning less than $5 million in stock.
- Broker Search Flexibility: Companies can now conduct broker searches fewer than twenty business days before a record date if they reasonably believe materials will be disseminated on time.
- Spin-Off Disclosures: New guidance clarifies that historical executive compensation (Item 402) for a “spinco” is not required if the entity did not operate as a standalone business or if there is no continuity of management. This new relief is one way that the SEC is working to make IPOs easier.
- Lock-Up Agreements: Guidance was aligned across various transaction types (Rule 145(a) and exchange offers), clarifying when target company insiders can sign lock-up agreements before a registration statement is filed without it being deemed an “illegal offer.”
SEC Leadership Announcements
By Spencer Shih
On January 2, 2026, SEC Chairman Paul Atkins, Commissioner Hester Peirce, and Commissioner Mark Uyeda published a joint statement announcing Commissioner Caroline Crenshaw’s departure from the SEC. Crenshaw served as a Commissioner since August 2020, and although her term officially ended in June 2024, SEC commissioners are permitted to stay in their role for an additional eighteen months. With Crenshaw’s departure, the remaining three SEC commissioners are members of the Republican Party. As the Securities and Exchange Act of 1934 requires that no more than three SEC commissioners be of the same political party as the president, the two remaining commissioner seats must be filled with members of the Democratic Party. At this time, there are no apparent plans to fill these seats.
On January 15, 2026, the SEC announced that J. Russell “Rusty” McGranahan will serve as the SEC’s General Counsel and will oversee the legal advice provided to the Office of the Chairman, Commissioners, and agency staff. McGranahan is an experienced securities and M&A attorney with a career spanning thirty years, starting in private practice at White & Case LLP, and Skadden, Arps, Slate, Meagher & Flom LLP before becoming Managing Director, M&A Counsel and Corporate Secretary at BlackRock, then General Counsel of Focus Financial Partners, and General Counsel of the General Services Administration. Acting General Counsel Jeffrey Finnell will remain at the SEC as Deputy General Counsel.
In addition, the SEC announced on January 20, 2026, that Keith Cassidy will serve as the Director of the Division of Examinations. Cassidy is a veteran in the Division of Examinations previously serving as its Deputy Director, Acting Co-Director, and National Associate Director of the Technology Controls Program. He is also the SEC’s senior staff representative to the Financial and Banking Information Infrastructure Committee—the federal body charged with improving communication among financial regulators.
Finally, on January 20, 2026, the SEC announced those who will serve as senior staff in the Division of Corporation Finance (“DCF”), including the return of Christina Thomas who will serve as the Deputy Director of the Division of Corporation Finance and Chief Advisor on Disclosure, Policy, and Rulemaking. Thomas is another SEC veteran, beginning her career with the DCF serving in the Office of Healthcare and Insurance. She also served in the SEC’s Shareholder Proposal Task Force, in the Office of Mergers and Acquisitions, and as Counsel to SEC Commissioner Elad L. Roisman. Thomas’s service as Deputy Director will be effective February 2026.
SEC Approves Slimmed-Down 2026 PCAOB Budget
By Thomas W. White, Retired Partner, WilmerHale
On January 22, the Securities and Exchange Commission approved the Public Company Accounting Oversight Board’s 2026 budget and the related accounting support fee. The budget, totaling $362.1 million, reflects a 9.4 percent decrease from the PCAOB’s prior year budget. Notably, the budget also includes a 52 percent and 42 percent reduction in the PCAOB chairperson’s and other board members’ compensation, respectively. The accounting support fee, which is assessed on public companies and broker-dealers to fund the PCAOB’s and Financial Accounting Standards Board’s operations, was reduced by 18.4 percent.
In a statement, SEC Chairman Paul Atkins emphasized the “importance [of the budget] as an initial step in refocusing the PCAOB on its core mission.” He signaled that the SEC intends to engage in “diligent oversight” of the PCAOB. While recognizing “the importance of driving improvements in audit quality,” he emphasized that SEC oversight “is a crucial check on the considerable authority that the Board holds over audit firms and the risks of potentially excessive burdens.” He also stated, “The decrease in this year’s budget does not detract from the significance of the PCAOB’s mission, which remains crucial; rather, it underscores that fiscal discipline and regulatory effectiveness complement each other.” Atkins identified as a key PCAOB priority in 2026 the development of “a comprehensive strategic plan that will get the PCAOB back to basics: focusing on integrity and objectivity of the profession, reducing unnecessarily complex regulations, and re-centering this important institution on its core statutory responsibilities.”
SEC Proposes Amendments to the Small Entities Definitions
By Spencer Shih
On January 7, 2026, the SEC proposed amendments to the definition of a small entity under the Investment Company Act of 1940 and the Investment Advisers Act of 1940 for the purpose of the Regulatory Flexibility Act.
Specifically, the SEC proposed to amend Investment Company Act Rule 0-10 to (1) increase the net asset threshold for investment companies considered small entities from the current $50 million threshold to $10 billion, and (2) aggregate investment company net assets by referring to entities that are considered a “family of investment companies” as that term is used in Form N-CEN in order to promote consistency in SEC rules. The SEC based its proposed Rule 0-10 amendment on data reported on Form N-CEN showing that investment companies held approximately $41.6 trillion in net assets among 13,630 funds, but only 0.6 percent of investment companies are considered small entities.
The SEC also proposed to amend the Investment Advisers Act Rule 0-7 to increase the Regulated Assets Under Management (“RAUM”) threshold for which investment advisers will be considered small entities from $25 million to $1 billion. Rule 0-7’s amendment is based on Form ADV data showing that under the current definition, only 451 of the total 15,909 SEC RIAs are considered small entities. In both rules, the SEC reasoned that the elevated thresholds will capture a more meaningful population of investment companies and investment advisers that may face greater challenges with regulatory compliance. Likewise, the proposed increase in thresholds will allow the Commission to more effectively conduct regulatory flexibility analyses and minimize the significant economic effects on small entities in rulemakings. The proposal also allows the SEC to adjust these thresholds every ten years based on inflation.
The proposal was posted to the Federal Register on January 12, 2026, with a sixty day comment period ending on March 13, 2026.
