Securities Snapshot: 2nd Quarter 2025

While summer temperatures continue to sizzle, things cooled considerably at the SEC in the second quarter of 2025. In this Snapshot, we examine Chairman Paul Atkins' decision to scrap more than a dozen proposed rules and chart a new path for the agency. Still, the quarter was not without some heat: we also review the first AI-washing enforcement action brought under the new administration, updated guidance regarding Rule 10b5-1 plans and environmental disclosures, as well as looming changes to issuers' executive compensation disclosure obligations.

New Chairman Paul Atkins Takes the Helm at the SEC

After being confirmed by the U.S. Senate on April 9, 2025, Paul Atkins officially began his tenure as SEC Chairman with his swearing-in on April 21, 2025. As discussed in our previous Snapshot, Atkins—a longtime critic of regulatory overreach—is widely expected to oversee a significant philosophical shift in the agency's approach to rulemaking and enforcement.

Indeed, since taking the reins, Chair Atkins has already begun resetting the SEC's regulatory agenda. In early June, the SEC formally withdrew fourteen major rules spearheaded by former Chair Gary Gensler. Among these withdrawals were cybersecurity risk management and environmental, social, governance (ESG) disclosures pertaining to investment companies and investment advisers, as well as equity market regulations. Atkins also overhauled senior leadership, appointing new heads to oversee the SEC's Divisions of Investment Management and Trading and Markets, as well as naming a new chief accountant and communications chief.

These early actions mark a clear departure from the prior administration's regulatory priorities and suggest that Chair Atkins intends to move quickly—and decisively—in reorienting the SEC's agenda. With a reset rulemaking slate and new leadership team in place, the Commission appears poised to pursue a traditional enforcement approach focused on regulatory restraint and protecting retail investors.

SEC and DOJ Bring First AI-Washing Enforcement Actions Under Trump Administration

On April 9, 2025, the SEC and U.S. Department of Justice (DOJ) filed parallel civil and criminal actions against Albert Saniger, the former CEO of technology startup Nate, Inc., alleging he misled investors about the company's use of artificial intelligence (AI).

Saniger allegedly raised over $42 million from investors by falsely claiming Nate's mobile shopping application used AI, including machine learning and neural networks, to complete transactions when, in reality, nearly all purchases were manually processed by overseas workers. The DOJ charged Saniger with securities fraud under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder while the SEC also alleged separate Securities Act violations.

While companies have faced increased regulatory scrutiny over AI-related claims in recent years, these cases are particularly notable as they are the first AI-washing enforcement actions brought under the new Trump administration. Acting U.S. Attorney for the Southern District of New York Matthew Podolsky framed the case as part of a broader push by the federal government to protect investors while promoting the development of legitimate AI innovation.

These actions serve as a key reminder that transparency in AI-related representations to investors continues to be a priority for the SEC. Issuers should be careful to avoid "AI-washing" and closely evaluate any claims, representations, or disclosures made about their AI capabilities and use of AI in their operations to ensure they are accurate and substantiated.

SEC Updates Guidance on Rule 10b5-1 Plans

On April 25, 2025, the staff of the SEC's Division of Corporation Finance updated its Compliance and Disclosure Interpretations ("C&DIs") relating to Rule 10b5-1 trading plans, the majority of which align with amendments to Rule 10b5-1 adopted by the SEC in 2022. In addition to issuing two new C&DIs, the staff revised twenty existing questions and withdrew three others.

The new Rule 10b5-1 C&DIs are as follows:

New C&DI 120.32 clarifies how transactions made pursuant to a 401(k) plan that allows both employer and employee contributions to be invested through a self-directed "brokerage window" are treated for purposes of claiming an affirmative defense under Rule 10b5-1(c)(1). The staff explains that because the counterparty to the self-directed "brokerage window" transaction will be an open market participant, the instructions for such "brokerage window" must satisfy all conditions of Rule 10b5-1(c)(1), including those applicable to purchases and sales of the issuer's securities on the open market.

New C&DI 120.33 interprets the phrase "necessary to satisfy tax withholding obligations" as used in Rule 10b5-1(c)(1)(ii)(D)(3), which provides an exception to the general requirement that an individual may not claim the Rule 10b5-1 affirmative defense if the individual has multiple Rule 10b5-1 trading plans for open market transactions. The exception applies only to eligible sell-to-cover transactions, which are contracts or plans that authorize the agent to sell only such securities as are "necessary to satisfy tax withholding obligations" arising from the vesting of a compensation award. The staff makes clear that "necessary to satisfy tax withholding obligations" refers to tax withholding payments that are calculated in good faith to satisfy the employee's or director's expected effective tax obligation solely with respect to the vesting transaction, consistent with applicable tax law and accounting rules.

Ninth Circuit Offers Warning for SEC Comment Letter Responses

On June 10, 2025, the U.S. Court of Appeals for the Ninth Circuit issued a noteworthy opinion regarding a company's response—or lack thereof—to SEC comment letters. In Pino v. Cardone Capital, LLC, the court emphasized that a company's failure to object to an SEC comment may imply knowledge that the disclosure was misleading, potentially supporting a claim under Section 12(a)(2) of the Securities Act. For more details about the decision and potential language to include in comment letter responses, see our client alert here.

SEC Hosts Roundtable on Executive Compensation

On June 26, 2025, the SEC convened a roundtable discussion on executive compensation disclosure requirements that indicated significant changes to the reporting framework may be on the horizon. The roundtable featured three panels comprised of representatives of public companies, financial institutions, institutional investors, law firms, and other compensation advisors.

In his opening remarks, SEC Chair Paul Atkins characterized existing executive compensation disclosure requirements as a "Frankenstein patchwork of rules," noting the 1992 amendments to Item 402 of Regulation S-K—intended to produce "clear, concise, and understandable" compensation disclosures—have yielded anything but. Atkins emphasized the need for more straightforward, plain English disclosures that align with the Commission's core objectives—investor protection, market efficiency, and capital formation.

Commissioners Mark Uyeda and Hester Peirce echoed Atkins' concerns—pointing to the escalating complexity and cost to comply with disclosure obligations, including the CEO pay ratio, pay-versus-performance metrics, clawback rules, and perquisite reporting. Peirce described prior rulemakers as having "lost sight of the forest for the trees" and making executive compensation disclosure "increasing unwieldy" and "decreasingly useful." Similarly, Uyeda cautioned against using disclosure requirements to drive political or social outcome, urging instead for a more focused framework that provides information material to informed investment or voting decisions.

The panelists highlighted several areas ripe for reform by the SEC:

• Length & Complexity of the CD&A: panelists widely agreed that the Compensation Discussion & Analysis section—required in proxy statements since 2006—have become excessively long and difficult to complete. Roland Schustereder, who oversees executive compensation at ExxonMobil Corp., pushed the agency to allow issuers to make "shorter, simpler" disclosures to investors—noting existing disclosure obligations can take up to "300 hours" to prepare, as opposed to the 15 hours estimated when the CD&A rules were enacted. Likewise, a representative from a compensation advisory firm suggested disclosures in the CD&A should be limited to an issuer's CEO and Chief Financial Officer instead of various other executives.
• Inconsistent Time Frames: several panelists pointed out that various components of the compensation table in the CD&A reference different time periods and therefore cannot be totaled. As an example, an executive's base pay is received in the present, but the value of any options the executive receives cannot be determined until a later date. As a result, panelists described total compensation figures as misleading or even "meaningless" and advocated for clearer disclosures tracking the lifecycle of equity awards, from grant through vesting.
• Unintended Consequences of Perquisite Reporting: a number of panelists criticized the SEC's approach to perquisite disclosures, particularly the guidance requiring security-related expenses for executives to be reported as perks. One panelist lamented the disclosure obligations as "salacious" and "ready for Instagram," noting they often generate negative publicity by portraying reasonable security measures—such as the CEO's use of a corporate aircraft or company housing—as excessive and irresponsible. Moreover, panelists questioned whether these disclosures meaningfully benefit investors given their high compliance costs, coupled with the relatively small share of compensation attributed to perquisites.

In light of Chair Atkins' statements, as well as the commentary from Commissioners Uyeda and Peirce, the SEC seems likely to undertake a comprehensive review of the current executive compensation disclosure framework. Indeed, Atkins invited public comments and signaled that significant rulemaking proposals may be next.

SEC Updates Guidance on Environmental Disclosures Under Item 103 of Regulation S-K

On June 30, 2025, the Division of Corporation Finance issued updated C&DIs pertaining to environmental legal proceedings under Item 103 of Regulation S-K.

Item 103(c)(3) of Regulation S-K requires disclosure of administrative or judicial proceedings arising under any Federal, State or local provisions that pertain to the protection of the environment, including where such proceeding involves certain monetary sanctions. The C&DIs clarify that costs anticipated under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) are generally not considered "sanctions" for purposes of Item 103(c)(3)(iii). Additionally, prior guidance was withdrawn that had suggested that environmental proceedings brought by foreign governments could fall under "local provisions" for purposes of Item 103(c)(3). Public companies are now no longer required to disclose environmental legal actions initiated by foreign governments under Item 103. The C&DIs also make other technical updates aligning disclosure guidance with the 2020 modernization of Regulation S-K.

The full list of Regulation S-K C&DIs is available here.