In a post by its Head of Examinations, Jim Reese, the Financial Industry Regulatory Authority, Inc. (“FINRA”) announced a series of meaningful changes to its examination program as part of its “FINRA Forward” initiative.  The changes are designed to make the exam process more transparent and efficient, and more closely tied to risk assessments.  These changes signal a shift toward a more collaborative, streamlined regulatory approach, which aims to identify and resolve compliance issues early, before they escalate into formal enforcement actions.

A More Transparent Process

FINRA has begun providing member firms with advance notice of the quarter in which their examination is expected to be announced, giving firms additional time to prepare and allocate internal resources.  FINRA has also published new guidance detailing how it assesses member firm risk and categorizes members, offering greater visibility into the factors that shape examination scope and frequency.

Risk-Informed Examinations

FINRA has recalibrated its examination schedules so that certain lower-risk firms will be examined every six years rather than every four, while remaining subject to ongoing risk monitoring that could trigger more frequent reviews if circumstances change.  FINRA has also refined its approach to initial examinations for newly approved firms by drawing more heavily on information gathered during the membership application process, enabling a more targeted first exam.

Notably, total external data requests fell 12% in 2025 compared to the prior year, and policy-driven initial trade blotter requests dropped by more than 50%, reflecting FINRA’s effort to leverage data it already has on hand rather than placing additional burdens on firms.

Expanding the Information Exchange

FINRA is making the examination itself more of a two-way exchange:  firms now have the option to receive preliminary findings in writing throughout the exam, rather than waiting for a consolidated report at the end. This allows firms to address concerns or supply additional context earlier in the process, which can influence the final disposition of findings.  At the conclusion of the exam, the firm’s risk monitoring analyst remains available as a resource to discuss remediation efforts and other actions a firm takes to address identified issues.

Changing How FINRA Works

FINRA’s efforts are reinforced by a broader internal reorganization that unifies risk monitoring, surveillance, examinations, investigations, and enforcement into a single Regulatory Operations reporting structure, positioning FINRA to reduce regulatory duplication and identify emerging issues more quickly.  When insights from FINRA’s work with one member firm spotlight issues relevant to others, FINRA aims to create a feedback loop by synthesizing exam intelligence and reporting findings more frequently across its membership—without disclosing proprietary information—to help firms spot and mitigate risks before they escalate.

Looking Ahead

FINRA has signaled that it plans to further streamline examinations through automation and the use of artificial intelligence capabilities, including tools to accelerate the review of Written Supervisory Procedures, while continuing to solicit member feedback to guide future improvements.

Read FINRA’s press release for additional information.

On July 24, 2026, the Securities and Exchange Commission (the “SEC”) approved the Financial Industry Regulatory Authority, Inc.’s (“FINRA”) proposed amendments to FINRA Rules 5110 and 5123, which were filed with the SEC in January 2026 as part of FINRA’s Forward initiative to modernize the capital formation process.

As discussed in our prior post from January 2026, FINRA Rule 5123 generally requires FINRA member firms to make certain filings in connection with their participation in private placements.  Among other things, FINRA Rule 5123 requires that, in the absence of an exemption from the filing requirement, a member firm participating in a private placement file private placement memoranda, term sheets and other offering documents as well as any retail communications that promote or recommend the private placement within 15 calendar days of the date of first sale. The rule provided for filing exemptions for private placements sold to certain institutional accredited investors.  The amendments now expand the filing exemptions for sales to two additional categories of accredited investors, which were added by the SEC’s 2020 amendments to the accredited investor definition.  These include (i) certain family offices with assets under management in excess of $5 million whose investment decisions are directed by a person with sufficient financial and business expertise and (ii) certain entities (not otherwise listed in SEC Rule 501) owning investments in excess of $5 million.  The SEC found that these categories of investors possess a level of sophistication and expertise similar to the institutional accredited investors to which private placements may be made that are exempt from filing under FINRA Rule 5123.

FINRA also made several amendments to FINRA Rule 5110, which is its Corporate Financing Rule, most of which are technical in nature.  These include replacing the “bona fide public market” valuation method for securities deemed underwriting compensation with a simpler approach based on closing market prices of the security traded on a U.S. registered national securities exchange or a “designated offshore securities market” as defined under SEC Rule 902(b) on the date of the acquisition.  The amendments add new exclusions from underwriting compensation that codify exemptive relief FINRA has previously granted on a case-by-case basis (for debt-for-equity exchanges, capital investments in direct participation programs and unlisted real estate investment trusts, and non-convertible preferred securities).  The amendments also clarify that tail fees are subject to the same requirements as termination fees.

The amendments reflect a continuing effort to streamline FINRA’s oversight of public offerings and private placements. The text of the order approving the amendments is available here.

On July 16, 2026, the U.S. Securities and Exchange Commission (the “SEC”) proposed new Regulation E-Delivery (“Reg E-Delivery”), a potential modernization of the default manner in which issuers, broker-dealers, investment advisers, and other market participants provide information to investors in our increasingly electronic world. In the words of SEC Chairman Paul Atkins, “[t]oday, the Commission took an important step toward allowing the financial services industry to harness technology for the benefit of everyday American investors. By proposing to permit electronic delivery to become the default method for issuers, market intermediaries, and others to communicate with investors, we are taking another stride toward a regulatory framework suitable for the modern era, a key pillar of my agenda. In an age of artificial intelligence and blockchain technology, a default to paper delivery should be a relic, not a standard.”

Today, many regulatory disclosures pursuant to the federal securities laws are still delivered in paper, unless the recipient affirmatively opts otherwise based on the “notice, access and delivery” framework that the SEC adopted over 30 years ago and the regulated entity and, as applicable, its service providers, have the operational and practical means to effect e-delivery (particularly where there are substantial numbers of recipients). However, the benefits of electronic information delivery are numerous—e-delivery is rapid, cost-efficient, secure and provides for information to be widely delivered with ease. Investors and others can access and parse information on their phones or laptops worldwide; in fact, a 2025 survey by the SEC’s Office of the Investor Advocate “found that the vast majority of U.S investors (nearly 80%) prefer some form of e-delivery for financial disclosure documents that do not include personal information, and also that a majority (approximately 63%) prefers some form of e-delivery even for documents that do include personal information.” Artificial intelligence and blockchain technologies only serve to enhance the benefits provided by e-delivery. In light of these technological steps forward, the SEC is proposing Reg E-Delivery as a comprehensive update to its current information delivery framework.

Continue reading this Legal Update.

On July 23, 2026, the Securities and Exchange Commission (“SEC”) announced that it will host a roundtable on September 17, 2026, to discuss paths toward 24-hour trading in U.S. equity markets. The roundtable will address preparations needed to support overnight trading, operational and resiliency considerations in a round-the-clock market, and the opportunities and challenges associated with expanding trading hours.

The roundtable reflects the SEC’s continued focus under Chairman Paul Atkins on modernizing the structure of U.S. equity markets and evaluating whether existing rules and market infrastructure can accommodate expanded trading availability. Market participants are expected to actively engage in the discussion given the operational, risk-management, and technology implications of moving toward continuous trading. Some U.S. retail brokerages currently offer trading of certain equity securities nearly 24 hours a day, 6 days a week via alternative trading systems (ATSs), and other major industry players, including the New York Stock Exchange and Nasdaq, have announced plans to enable near-24-hour trading, 5 days a week, subject to regulatory approval.

The event will be open to the public and held at the SEC’s headquarters in Washington, D.C., with a live stream available on SEC.gov and a recording to be posted afterward. The event announcement is linked here.

Webinar | August 6, 2026
1:00 p.m. – 2:00 p.m. EDT
Register here.

The institutional private placement market has experienced continued and rapid growth in recent years, with new market participants playing a more significant role. In this session, we will discuss how investment grade debt private placements differ from bank debt as well as from public debt. In addition, we will discuss various related debt instruments. We will address the following:

  • Section 4(a)(2) institutional private placements and market developments
  • Typical marketing documents and investors; model forms and settlement issues
  • Covenants and other terms
  • Comparison to bank loans, Rule 144A offerings, and public debt offerings
  • Global depositary notes and role of depositary bank
  • Settlement issues and other recent developments

On July 9, 2026, the Financial Industry Regulatory Authority, Inc. (“FINRA”) published Regulatory Notice 26-14, requesting comment on a proposal to modernize certain requirements applicable to retail communications under FINRA Rule 2210 (Communications with the Public) (the “Proposal”).  The Proposal represents one of the most significant modernization efforts relating to the review and supervision of broker-dealer communications in over a decade, undertaken as part of FINRA’s broader “FINRA Forward” initiative.  The Proposal addresses three key areas:

(1) Modernizing supervision and review of retail communications by replacing the current prescriptive principal pre-use approval requirement with risk-based standards for supervising retail communications; 
(2) Modifying and streamlining retail communication filing requirements; and 
(3) Modifying and streamlining the broker-dealer standard for communications containing recommendations.

Continue reading this Legal Update.

On June 18, 2026, the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) issued a joint request for public comment regarding potential updates to the definitions of “swap” and “security-based swap,” along with other interpretive issues arising under Title VII of the Dodd-Frank Act.  The agencies seek feedback on whether existing definitions finalized in 2012 (referred to as the product definitions) and jurisdictional boundaries still appropriately reflect modern market structures, emerging financial products, and evolving trading practices.   The initiative is intended to provide greater regulatory certainty while reducing ambiguity in areas in which SEC and CFTC oversight overlaps.

While this request for comment (RFC) comes largely on the heels of discussions relating to event contracts, it is quite broad.  In relation to event contracts, the SEC and CFTC ask for comment as to whether additional clarity is required when an event “directly affects” the financial statements, financial condition or financial obligations of an issuer and is therefore a security-based swap that is subject to the SEC’s jurisdiction.  The agencies also ask whether there are instances in which an event contract referencing one or more securities should be considered a “put, call, straddle, option, or privilege” on securities instead of a swap or security-based swap.

The RFC asks a number of questions concerning other products that have been the subject of recent commentary and controversy, including cash-settled perpetual contracts, including perpetual futures.  For example, the release seeks comments as to whether a cash-settled perpetual contract referencing an equity security could be treated as a security future rather than a security-based swap.

Finally, and of interest to readers of this blog, the RFC asks whether clarity is needed to distinguish traditional debt securities that have always been excluded from the definition of swap and security-based swap, such as notes or bonds or debentures, the performance of which is based on a reference asset, so structured products.  The RFC asks for input on how to treat innovative or structured products that may blur the lines between swaps and security-based swaps, including whether factors such as issuance under a Trust Indenture Act‑qualified indenture or the existence of a lender‑borrower relationship should be dispositive of their characterization as debt securities.  This is concerning.

Read the official press release here.  Comments are due on or before August 24, 2026.

On July 8, 2026, the Securities and Exchange Commission (the “SEC”) announced that its Small Business Capital Formation Advisory Committee (the “SBCFA”) will hold a public meeting on July 21, 2026 to explore ways to modernize public market access and encourage IPOs and small public company capital formation.

As discussed in our prior post from April 2026, the SBCFA Committee held a meeting on April 28, 2026 focused on encouraging more companies to go and stay public.  Building on ideas generated during that meeting, members will continue exploring ways to encourage more companies to go and stay public.  At the April meeting, the Committee heard from members on the state of the IPO market, considering the existing regulatory framework and how IPO activity and market shifts are impacting decisions by companies, particularly small-cap companies, to go public.  SEC Chair Paul Atkins has championed a “Make IPOs Great Again” initiative, pledging to reduce regulatory friction and simplify listing requirements to reverse the long-term decline in the number of U.S. public companies.  Central to that effort is a focus on smaller companies, with the Chair arguing that disclosure requirements should be calibrated to a company’s size and maturity.

The upcoming meeting will advance those themes further.  The Committee will consider ways to modernize the IPO process and potential regulatory reforms, including certain recently proposed SEC rulemakings – which have been discussed in our May 2026 posts regarding reforms to the registered offering framework, enhancements to filer accommodations and simplified filer status for reporting companies, and optional semiannual reporting framework for public companies – aimed at reducing regulatory friction and facilitating capital formation. To facilitate discussion and deepen the Committee’s understanding of the regulatory landscape, members will hear from SEC staff in the Division of Corporation Finance and other market participants.

This discussion comes at a particularly significant moment, as the SEC’s 2026 Regulatory Agenda, recently released under Chair Atkins, noted that “[e]very IPO is an invitation to workers and savers to participate in the prosperity of the next generation of American enterprise” and that “[w]hen fewer companies go public, fewer investors receive that invitation.”  The SBCFA Committee meeting is open to the public and streamed live on SEC.gov. See the full agenda for the meeting, and visit the committee webpage.

The U.S. Court of Appeals for the Second Circuit recently provided guidance regarding Section 16(b) short-swing profit liability for corporate issuers and institutional investors.  On July 7, 2026, the court affirmed the dismissal of an action brought by the post-bankruptcy successor to Bed Bath & Beyond (“BBB”), which sought to recover more than $310 million in alleged short-swing profits from an institutional investor.

The Second Circuit held that contractual beneficial ownership blockers were effective and enforceable.  Those blockers limited the investor’s ability to convert securities or exercise warrants to the extent doing so would cause it to exceed a 9.99% beneficial ownership threshold. As a result, the investor never became a greater-than-10% beneficial owner for purposes of Section 16(b) of the Securities Exchange Act of 1934.  The court also rejected the plaintiff’s arguments that the blockers were ineffective because they could theoretically be amended by mutual agreement and that unsettled securities trades temporarily increased the investor’s beneficial ownership.  The decision provides guidance for issuers and investors that routinely rely on beneficial ownership blockers in structured equity transactions.

Background

In early 2023, BBB entered into an equity financing agreement in which the investor acquired convertible preferred stock and warrants.  The transaction documents included customary beneficial ownership blockers prohibiting the investor from converting preferred stock or exercising warrants to the extent doing so would cause it to beneficially own more than 9.99% of BBB’s outstanding common stock.  Following BBB’s Chapter 11 filing, its litigation successor alleged that the investor became a greater-than-10% beneficial owner by repeatedly converting securities, selling the resulting common stock, and converting additional securities. The plaintiff sought disgorgement of more than $310 million in alleged short-swing profits under Section 16(b).

The Second Circuit’s Decision

The Second Circuit concluded that the investor never became a greater-than-10% beneficial owner because the contractual beneficial ownership blocker prevented it from converting its securities or exercising its warrants in a manner that would cause its beneficial ownership to exceed the 9.99% cap.  The court also noted that trading records showed the investor’s beneficial ownership remained below the contractual threshold throughout the relevant period.  Accordingly, the investor was not subject to Section 16(b) liability on the theory that it was a greater-than-10% beneficial owner.  The plaintiff argued that the blockers should be disregarded because the governing agreements could theoretically be amended by mutual agreement. The Second Circuit rejected that argument, holding that the possibility of a future amendment did not negate an existing contractual restriction.  Because the investor could not unilaterally waive or disregard the blocker, the court concluded that the ownership limitation remained effective during the relevant period.

The plaintiff also argued that the investor temporarily exceeded the 10% threshold because shares it had agreed to sell remained unsettled while newly converted shares were added to its holdings.  The Second Circuit rejected that theory, explaining that beneficial ownership depends on an investor’s voting power or investment power over securities.

Takeaways

The Second Circuit’s decision confirms that:

  • properly drafted and complied-with beneficial ownership blockers may effectively prevent an investor from becoming a greater-than-10% beneficial owner for purposes of Section 16(b);
  • the possibility that contractual provisions could later be amended by mutual agreement does not, by itself, render those provisions ineffective; and
  • once an investor enters into a binding sale transaction, it generally no longer has investment power over those shares for purposes of determining beneficial ownership, even if settlement has not yet occurred.

The decision also provides helpful authority supporting the effectiveness of properly drafted beneficial ownership blockers commonly used in PIPE transactions, registered direct offerings, convertible preferred financings, warrant issuances, and other equity transactions.

On July 8, 2026, the staff (the “Staff”) of the Division of Corporation Finance (the “Division”) of the Securities and Exchange Commission (the “SEC”) issued a no-action letter (the “No-Action Letter”) in response to an incoming letter submitted on behalf of UBS Group AG (the “Incoming Letter”), addressing the application of the U.S. Securities Act of 1933 (as amended, the “Securities Act”) to the exchange or conversion of certain debt securities subject to the Swiss bail-in framework. 

The Incoming Letter sought the Staff’s confirmation that the Staff would not recommend the SEC take enforcement action in the event that the Swiss Financial Market Supervisory Authority (“FINMA”), the Swiss resolution authority, ordered a conversion of UBS Group AG’s (“UBS”) bail-in debt securities into new equity securities of UBS, pursuant to Swiss bail-in legislation. 

Bail-in securities are a type of financial instrument that qualifies as regulatory capital and are issued by bank holding companies or banks.  Depending on the specific resolution scheme applicable to such securities, should the bank issuing such securities fail or become likely to fail, the prudential regulator or banking agency with resolution authority (in this case FINMA) may exercise its bail-in powers (in combination with other resolution tools) to write down or convert, directly or indirectly, such bank’s bail-in securities, and if needed, other unsecured liabilities of the failed institution, into equity or other securities (such process, a “Bail-In”).  Bail-Ins are intended to allow a resolution authority to recapitalize a failing financial institution without relying on taxpayer funds.  UBS cited an earlier no-action letter from April 2026 in response to the Bank of England’s application relating to the exchange of certain debt securities under a UK-bail scenario, which we covered in a prior blog post.

Similar to the April 2026 no-action letter, the Division stated in the present No-Action Letter, that such an exchange of securities constitutes an “offer” and “sale” of securities within the meaning of Section 2(a)(3) of the Securities Act, but the Division will not take enforcement action in reliance on the opinion of applicant’s counsel that the Securities Act Section 3(a)(9) exemption is available.

Swiss Bail-In Framework

Pursuant to the bank resolution and restructuring regime of Switzerland, FINMA may only order a Bail-In if it determines that the financial institution, in this case UBS, has reached the point of “Insolvenzgefahr” (non-viability) pursuant to Article 25(1) of the Swiss Banking Act. Once FINMA determines an issuer has reached “non-viability,” FINMA would be authorized to order the full write-down or conversion of such issuer’s outstanding securities, including such issuer’s additional Tier 1 debt securities and Tier 2 debt securities in accordance with the contractual terms of these securities.  Following this write-down or conversion, the conversion Order would require the subsequent full reduction and/or cancellation of the issuer’s outstanding equity securities.  FINMA cannot order a Bail-In unless the resolution: (1) is based on a prudent valuation of the bank’s assets and liabilities along with a prudent estimate of the restructuring requirements, (2) is deemed not to be economically worse for creditors than the immediate initiation of insolvency proceedings, (3) takes into account the priority of creditors’ interests over those of the owners and the ranking of creditors appropriately and (4) adequately considers the legal and economic interconnection between assets, liabilities and contractual relationships.  In addition, the Swiss Banking Act addresses the sequence in which a write down or debt-to-equity conversion would occur in the event of Bail-in.

The request for relief set forth in the Incoming Letter was premised upon a direct conversion of the Bail-In securities into new equity securities of UBS Group AG as contemplated by the Swiss Banking Act, without the use of interim instruments.  This process is distinct from the bail-in mechanism addressed in the Bank of England’s No-Action Letter, whereby holders of the bail-in securities would be granted contingent beneficial interests known as “PROPPs” instead of being directly converted into news equity securities of the post-resolution entity.  However, similar to the PROPPs, there would be no additional consideration paid by holders of bail-in securities in connection with a Bail-In.

Section 3(a)(9) Exemption Applies

Section 3(a)(9) exempts from registration “any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly by or indirectly for soliciting such exchange.”  UBS was of the opinion that the conditions for reliance on Section 3(a)(9) would be met in connection with the above-described Swiss Bail-In resolution mechanism.  The Staff concluded that it would not recommend enforcement action if UBS, upon reaching non-viability and in reliance on an opinion of counsel that the exemption provided in Section 3(a)(9) is available, was directed by FINMA to convert its bail-in securities directly into new equity securities of UBS. The Staff also noted that UBS would remain the issuer of the new equity securities issued upon such Bail-In conversion.  This new no-action letter provides greater clarity on the SEC’s position relating to the applicability of the Section 3(a)(9) exemption in the case of a bail-in of a Swiss financial institution, especially since the failure of Credit Suisse (a Swiss financial institution) had precipitated questions on the applicability of Section 3(a)(9).