SEC Actions in Review: What Officers and Directors Should Know for 2025
Jan 28, 2025 - natlawreview.com
The article reviews recent SEC enforcement actions and highlights areas of focus for public company officers and directors in 2025. Key areas include director independence, where a director was penalized for failing to disclose a personal relationship affecting his independence status; cybersecurity, with settlements against companies for misleading disclosures about cyber risks; insider "shadow" trading, involving trading based on confidential information about another company; and internal investigations, emphasizing the importance of prompt action and self-reporting when misconduct is discovered. The SEC also addressed executive compensation, penalizing a company for not disclosing perks provided to its CEO, and beneficial ownership and insider transaction reports, charging individuals and companies for filing delinquencies. Additionally, the SEC continued its crackdown on "AI-washing," penalizing companies for misleading claims about AI integration.
The article notes a decrease in SEC enforcement actions in 2024, with expectations of continued reduced activity due to the new administration's focus on deregulation and government efficiency. Despite this, the SEC's actions serve as a reminder for officers and directors to maintain strong compliance and reporting practices to preserve shareholder trust and corporate integrity.
Key takeaways:
Directors must ensure accurate disclosures in D&O questionnaires to avoid violations of proxy rules and maintain director independence.
Companies must provide accurate and detailed cybersecurity disclosures to avoid SEC enforcement actions and ensure compliance with cybersecurity disclosure rules.
Officers and directors should avoid insider "shadow" trading to prevent costly legal battles and potential criminal prosecution.
Prompt internal investigations and self-reporting can mitigate regulatory and legal exposure, while failure to act can lead to increased liability for officers and directors.
