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Cooley Maintains Top Rankings in Global M&A and Private Equity

Wed, 01 Jul 2026 14:01:53 Z

Cooley’s global mergers and acquisitions and private equity practices were again recognized for top ranking positions in Q2 2026 league tables from Bloomberg.* Despite the unpredictable market, Cooley continues to dominate in public and private deals around the world.

Top rankings by deal count include:

#1 for US and global life sciences M&A
#1 for US and global tech M&A
#3 for US and global M&A
#1 for US mid-market M&A
#2 for global mid-market M&A
#1 for US and global private equity deals

In 2026, Cooley handled transactions across a range of industries while also maintaining its top position in technology and life sciences. The firm’s market-leading transactions include:

Since 2021, Cooley’s world-class transactional team has worked on 1,600+ M&A deals for an aggregate value of more than $750 billion – guiding top public and private companies, financial advisors and private equity sponsors in some of the market’s largest and most complex transactions. The firm’s M&A and PE groups include 180+ practitioners in major business and technology centers worldwide, representing all categories of participants in transactions.

* The Bloomberg platform data has not been published by Bloomberg.

Small State, Big Bite: What Sets Vermont’s New Privacy Law Apart

Tue, 30 Jun 2026 20:32:00 Z

Vermont became the 23rd state to enact a comprehensive consumer privacy law with the Vermont Data Privacy and Online Surveillance Act (VDPOSA), which was signed into law on June 16, 2026. At a high level, the VDPOSA takes the now-familiar US state law approach of a controller/processor framework with consumer rights. But it also includes a number of more expansive and distinctive provisions – such as low applicability thresholds for sensitive data and stand-alone provisions for consumer health data – that put it alongside Connecticut at the more aggressive end of the state consumer privacy law spectrum. As a result, despite Vermont’s small size, companies may need to reevaluate and update their multistate privacy compliance programs to account for these new requirements from the Green Mountain State.

Below, we describe key features of the VDPOSA and what companies should do to evaluate and update their compliance status before the law takes effect on January 1, 2028.

Low applicability thresholds

The VDPOSA’s general applicability thresholds encompass companies that:

Control or process personal data for at least 35,000 Vermont residents.
Control or process sensitive data for at least 3,000 Vermont residents.
Offer for sale in trade or commerce personal data of at least 3,000 Vermont residents.

The regular personal data threshold of 35,000 residents is not particularly low relative to Vermont’s population. However, the VDPOSA’s thresholds for sensitive data and sales of personal data are more aggressive than similar laws in most other states. Vermont does not go as far as Connecticut, whose similar thresholds are triggered by processing any amount of sensitive data or selling any amount of personal data, but its thresholds of 3,000 are still quite low. As a result, they could easily ensnare companies that are handling sensitive data or selling personal data at any sort of scale, particularly given the law’s broad definitions of “sensitive data” and “sale.”

Consumer health data

The VDPOSA also includes consumer health data protections that only a few other states – such as Connecticut via its consumer privacy law, Washington via its stand-alone My Health My Data Act and Nevada’s similar law – have enacted laws to protect. Companies that handle any amount of consumer health data must meet the law’s provisions related to such data, regardless of whether they meet the general VDPOSA thresholds discussed above.

The law’s requirements for consumer health data include requiring an affirmative opt-in consent before selling, or offering to sell, consumer health data and prohibiting geo-fencing within 1,850 feet of any healthcare facility (for the purpose of identifying, tracking, collecting data from or sending any notification to consumers regarding their health data). The VDPOSA also requires a company’s employees and contractors to be subject to a contractual or statutory duty of confidentiality before accessing consumer health data. Companies processing consumer health data must ensure that they comply with these requirements, which may also require updating existing applicable contracts to include a contractual duty of confidentiality.

Due to the VDPOSA’s broad definition of consumer health data, and the relevant obligations being triggered if a company handles any amount of consumer health data, companies could easily become subject to these requirements, even if they do not think of themselves as a healthcare-related business.

Expansion of sensitive data and additional obligations

As referenced above, the VDPOSA’s definition of sensitive data is, like Connecticut’s, one of the broadest among the 23 state consumer privacy laws. For example, Vermont includes financial account numbers with login credentials and certain government-issued identification numbers as sensitive data. Vermont also – similar to California, Colorado and Connecticut – treats neural data as a type of sensitive data, albeit limiting it only to data generated by the central nervous system, instead of both the central and peripheral nervous systems. Vermont also follows recent privacy laws’ trend of explicitly including nonbinary or transgender status as sensitive data.

In addition to the VDPOSA being triggered by a company’s control or processing of sensitive data of only 3,000 Vermont residents, handling such sensitive data triggers heightened obligations, including a requirement to obtain affirmative opt-in consent from consumers before processing their sensitive data. Additionally, Vermont requires companies to only process data that is necessary in relation to the purpose they disclose to consumers when they collect their data, and to obtain opt-in consent from consumers before selling any sensitive data.

Companies should assess their sensitive data collection and disclosure practices to ensure that their handling of data elements treated as sensitive data in Vermont complies with the VDPOSA.

Transparency about AI training

Reflecting recent regulatory and legislative concerns about AI, Vermont, like Connecticut, imposes a transparency obligation on companies regarding large language models (LLMs). Companies must include, in their privacy notice, a statement disclosing whether they collect, use or sell personal data for the purpose of training LLMs. For the many companies that leverage personal data in training their AI models, or sell personal data to train LLMs, this obligation will likely require updates to their current privacy disclosures and could generate additional consumer friction.

Broadening the right to access

Vermont has followed the lead of Connecticut and Minnesota in expanding a consumer’s right to access information about a company’s handling of their personal data. Under the VDPOSA, a consumer can obtain a list of third parties to which the company has sold the particular consumer’s personal data – or, if the company does not maintain this list, it must instead provide the consumer with a list of all third parties to which the company sells personal data of consumers generally. Even if companies take the latter, less granular approach that is not specific to the particular consumer making the access request, for many companies preparing to honor such requests is likely to require nontrivial back-end data mapping and other compliance work.

Derived data

Data derived from other information about a consumer is commonly understood to be personal data. However, the VDPOSA goes a step further by including derived data as a stand-alone defined term and explicitly including it as a type of personal data.

Enforcement and cure period

The VDPOSA does not contain a private right of action, so like most other state consumer privacy laws, it will be enforced exclusively by the state attorney general. Similar to some other state laws, Vermont also includes a 60-day cure period for a limited time following the law’s initial rollout – between January 1, 2028, and June 30, 2029 – to help businesses ease into compliance with the VDPOSA.

Interestingly, Vermont’s legislators also included a statement that if additional resources are not provided to the Office of the Attorney General to enforce the VDPOSA, then the General Assembly may consider adding a private right of action. This statement is unique among state consumer privacy laws, and the addition of a private right of action would represent a seismic shift in enforcement and potential exposure for companies. However, it appears unlikely that such a private right of action will make it into law in Vermont, as it would undoubtedly face vociferous opposition from industry.

What should companies do?

Due to Vermont’s relatively aggressive and distinctive provisions for certain types of personal data and activities, companies should work closely with privacy counsel to assess potential exposure under the VDPOSA, as well as similar provisions under Connecticut’s amended consumer privacy law. Relevant steps should include:

Assess whether you are in scope of the VDPOSA. Vermont’s relatively low and distinctive thresholds for certain activities – such as selling personal data or handling sensitive data or consumer health data – will bring many companies within scope of the law. Companies should carefully assess whether they are engaging in such activities, particularly given the broad ways that terms like “sensitive data,” “consumer health data” and “sale” are defined under the VDPOSA.
Revisit your sensitive data and consumer health data practices and obligations. Vermont includes many additional data elements as sensitive data and expands companies’ obligations for handling of sensitive data. It also has separate obligations that trigger if a company handles any amount of consumer health data (which is also defined as a type of sensitive data). These obligations related to specific data types may require additional compliance efforts.
Update privacy notices. Vermont requires companies to disclose in their privacy notice whether any personal data is collected, used or sold for training LLMs. Companies should also review their privacy notice for other updates needed to address the VDPOSA, such as whether their disclosures about their handling of sensitive data are accurate under the VDPOSA’s broad definition of that term.
Track data flows for sales of personal data. Under the VDPOSA, consumers have the right to obtain a list of all third parties to which their personal data is sold, so companies should conduct internal data mapping and similar exercises to ensure that they can fulfill this obligation. Companies also need to understand their personal data sales to assess whether they meet the VDPOSA’s applicability thresholds, one of which triggers if a company sells personal data of at least 3,000 Vermont residents.

Summer Doldrums – or Time to Think About 2027 Executive Compensation Programs?

Tue, 30 Jun 2026 13:23:31 Z

‘Let’s go surfin’ now
Everybody’s learnin’ how
Come on and “comp safari” with me!’

School is out, and vacations are in full force. At the risk of throwing cold water on hot summer fun, one question you nonetheless should be asking yourself now as a professional responsible for executive compensation is, in the fall, what will you wish you had done last summer? Some more surfing? Of course. But that still leaves enough time to get ahead of the compensation curve so that, when November rolls around, you’re well clear of where you need to be (and perhaps even feeling a bit smug) instead of wishing there were just a couple more weeks to prepare.

And so, what does that type of summer reading list look like? The most logical first step probably is to look at your compensation committee meeting checklist and identify those items that would benefit from a head start, even (and perhaps especially) those items that are not fully ripe for some time, which could include things like the following:

Evaluate how in-flight 2026 compensation programs are faring, and, as a result, whether there may be reason to give early thought to changes for the 2027 programs.
Evaluate whether the existing programs are resulting in any unanticipated risks due to changes in economic and geopolitical circumstances since grant.
Evaluate whether new-hire practices remain generally appropriate to avoid undue scrambling at the time of hire.
Evaluate the adequacy of share reserves given dilution projections so that you can start marshaling support for an increase.
Consider whether any additional clawback protections may be appropriate considering your circumstances.
Evaluate the adequacy of compensation governance procedures generally and whether changes should be put in place for the coming compensation season.
Give thought to whether the annual proxy disclosure could benefit from a fundamental refresh, which is a notoriously time-consuming exercise and ill-fitted to a pivot late in the year.
Make sure any annual stockholder outreach is on track and preferably ahead of pace, whether driven by reason of say-on-pay results or otherwise.

Of course, if you don’t already have a compensation committee meeting checklist, one thing that should be near the very top of your summer list is to develop one. And, for companies that do have a checklist, another item for consideration is whether any changes in content or timing are appropriate.

One of the best ways to do that is to find time for an informal meeting with the compensation committee chair to get their views on what is and is not working and what might be best handled differently. Having that meeting when there actually is time for quiet reflection will be most effective and likely also greatly appreciated by the chair.

That also might give rise to discussion about the need for collateral actions that could be scheduled for the fall, such as committee member education sessions about, for example, the status of the proposed executive compensation disclosure rule changes, shifts in market practices and any other noteworthy trends.

In a similar and complementary vein, a reach-out to your compensation consultant (if you have one) to get their views on the foregoing and any other items they see as important to the coming compensation season will better position you to address those matters when the time comes.

Finally, similar considerations to all of the foregoing apply where a compensation committee has been delegated responsibilities that often are lodged with other board committees, such as succession planning and human capital issues generally.

* * *

Sorry to bum you out when all you want to do is surf and then surf some more, but it’s just a word to the wise: A little time found and spent now likely will save you a lot of time later and result in a much smoother process when time is short and you are wishing it were still the dog days of summer.

Cooley’s compensation and benefits group is ready to help you craft an efficient review of the type contemplated here so that you still have plenty of time to rejoice in those summer doldrums. For our friends attending the 2026 Society for Corporate Governance National Conference in Nashville from July 7 to 10, please reach out – we’d love to connect with you!

Cooley Co-Chair Featured in The Economist on Chinese Clean Energy Asset Divestments

Mon, 29 Jun 2026 15:57:52 Z

Mona Dajani, partner and co-chair of Cooley’s infrastructure, energy and real estate practice, was quoted in The Economist discussing how Chinese clean energy companies are forming joint ventures with US partners as part of efforts to comply with the One Big Beautiful Bill Act.

Read the article (subscription required)

What Employers Should Know About Washington’s New Ban on Noncompete Agreements

Mon, 29 Jun 2026 07:00:00 Z

On March 23, 2026, the Evergreen State became the latest state to enact a near wholesale ban on all employment noncompete agreements, effective June 30, 2027. The new law has significant implications for employers – voiding existing agreements retroactively, broadening the definition of what constitutes a now banned noncompete (including certain repayment agreements, such as sign-on or retention bonus agreements) and narrowing permissible nonsolicitation agreements. Below is a summary of the key changes, what remains permissible and steps employers should take to prepare.

The recent history and current landscape of Washington’s noncompete law

Washington’s crackdown on noncompetes began in 2020, when the state imposed restrictions – including a minimum compensation threshold for entering into a noncompete (equal to $126,858.83 as of January 1, 2026); an 18-month noncompete duration limit; a “garden leave” provision requiring employers to pay base salary during enforceable post-layoff periods; a prohibition on adjudication outside Washington or application of choice-of-law principles or substantive law of any jurisdiction other than the state of Washington; and moonlighting and anti-poaching provisions.

Initially, the restrictions applied only to traditional noncompetes and not to:

Confidentiality agreements.
Agreements not to solicit an employee to leave an employer.
Agreements not to solicit a current or former customer of an employer to cease or reduce the extent to which it is doing business with the employer.
Certain restrictions in connection with the sale of a business.

In 2024, the state again expanded its restrictions on noncompete agreements, broadening the definition of noncompetes to include agreements that directly or indirectly prohibit accepting or transacting business with a potential customer, clarifying that the customer nonsolicitation exception applies only to current customers. Further, the amended noncompete law narrowed the sale-of-business exception and required employers to provide notice of a noncompete “no later than the time of the initial oral or written acceptance of the offer.”

Washington’s new near-total ban

In enacting HB 1155, the legislature found that earlier reforms “did not go far enough,” citing that noncompetition covenants “restrict workers’ mobility, impede efforts to correct inequities, and significantly suppress workers’ wages across all sectors.” Washington joins several other states that have banned noncompetes, including California, Minnesota, North Dakota and Oklahoma.

Scope of the prohibition

The new ban voids nearly all noncompetes regardless of an employee’s salary or when an employee entered into the noncompete agreement. Similar to California’s law on noncompetes, Washington’s amended noncompete law defines a noncompete broadly as “every written or oral covenant, agreement, or contract that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business of any kind.” As of June 30, 2027, employers are prohibited from entering into, attempting to enter into, enforcing, attempting to enforce or threatening to enforce a noncompete. Employers will also be prohibited from representing that an employee or contractor is subject to a prohibited noncompete covenant (to such employee, contractor or any third party).

Repayment agreements included in prohibition

Following the recent trend on restricting certain repayment agreements (e.g., New York, California), Washington also joins the bandwagon by expanding the definition of a noncompete to also include any agreement that “threatens, demands, requires, or otherwise effectuates that an individual return, repay, or forfeit any right, benefit, or compensation as a consequence of the individual engaging in a lawful profession, trade, or business of any kind.” As a result of this expanded definition, agreements requiring repayment of retention bonuses, advanced payments or similar benefits upon departure may constitute prohibited noncompetes. Employers should review any such repayment agreement or provision to determine whether they fall within this expanded definition.

The law applies retroactively: All existing noncompete agreements, including repayment agreements, are void and unenforceable as of the effective date, regardless of when they were signed. However, legal proceedings filed before the effective date remain governed by the prior version of the law.

Notice requirement

Similar to California’s AB 1076 playbook, which required employers to notify current and former employees that noncompete clauses in their agreements were void, HB 1155 imposes its own notice requirement. By October 1, 2027, employers must make “reasonable efforts” to provide written notice to all current and former employees and contractors with active noncompetes that their agreements are void and unenforceable. The legislative history of HB 1155 does not clarify what constitutes a “reasonable effort” to provide written notice. However, to err on the conservative side, employers may consider providing both physical mail and email notice to current and former employees that any active noncompete clauses in their agreements are void and unenforceable.

Permissible covenants

The following provisions are excluded from the noncompete ban:

Nonsolicitation agreements: Nonsolicitation agreements remain enforceable in limited circumstances. Nonsolicitation of current employees is permissible and includes agreements prohibiting solicitation “of any employee of the employer to leave the employer.” Further, current or prospective customer nonsolicitation provisions are permissible only if they:

Are limited to preventing an employee from shifting business away from the employer where the employee established or substantially developed a direct relationship with the customer or prospective customer “through the employee’s work for the employer.”
Do not exceed 18 months following employment.

Notably, unlike the current law, which prohibits all prospective customer nonsolicitation agreements, HB 1155 appears to now permit them, provided that they meet the foregoing requirements. Importantly, any agreement that directly or indirectly prohibits a worker from accepting or transacting business with a customer is treated as a noncompete – not a nonsolicitation agreement – and is therefore banned.

Confidentiality and trade secret agreements: Agreements that protect confidential information, trade secrets or inventions are not affected by the ban.
Sale of business: Noncompetes entered into in connection with the purchase or sale of the goodwill of a business remain enforceable, but only if the person signing the agreement holds an ownership interest of 1% or more in the business.
Franchise agreements: A noncompete entered into by a franchisee in connection with a franchise sale that complies with applicable franchise law is still permitted.
Educational expense repayment: Employers may still require repayment of out-of-pocket educational expenses, provided the agreement:

Expires within 18 months of the employee’s start date.
Limits repayment to a pro rata portion of the remaining time in that 18-month period.
Releases the employee from the repayment obligation if the employee separates for “good cause,” as defined in the state’s unemployment benefit statute.

Further, the noncompete ban does not affect Washington’s existing moonlighting limitations under RCW 49.62.070, which remain unchanged. Under that provision, employers cannot restrict, restrain or prohibit employees earning less than twice the applicable state minimum wage (or, less than $34.26 an hour as of 2026) from working for another employer, working as an independent contractor or being self-employed. In addition, employers may continue to impose moonlighting restrictions on employees earning at or above that threshold.

Penalties for noncompliance

As before, persons “aggrieved” by a violation of the law have a private right of action. Further, the Washington attorney general may bring enforcement actions on behalf of affected workers. If a court or arbitrator finds a violation, the employer must pay the greater of the worker’s actual damages or a statutory penalty of $5,000, plus reasonable attorneys’ fees, expenses and costs. Notably, liability is triggered even when an employer merely attempts to enforce a noncompete or suggests that one still applies.

Next steps for employers

Because employers must provide written notice to all employees and contractors subject to an active noncompete by October 1, 2027 (regardless of when it was signed), employers should consider updating their practices before the June 30, 2027, effective date.

Employers can take the following steps to prepare for compliance:

Audit all existing agreements. Review all employment and contractor agreements, offer letters and related documents to identify provisions that may qualify as a noncompete under the law’s expanded definition. Beyond just noncompete and certain customer nonsolicitation agreements, this includes stay-or-pay agreements, training repayment agreement provisions (TRAPs) and other repayment obligations that could be construed as prohibited noncompetes.
Plan for mandatory worker notices. By October 1, 2027, employers must make reasonable efforts to notify current and former workers still within the term of a noncompete that those provisions are void. Employers should begin compiling a list of affected individuals, verifying contact information and identifying what “reasonable efforts” they will take to ensure compliance with this notice requirement. Note that this requirement also covers employees or contractors with repayment agreements that qualify as noncompetes under the law.
Evaluate and strengthen alternative protections. As noted, confidentiality and trade secrets agreements are not affected by the ban. Employers should assess whether such agreements, along with narrowly tailored nonsolicitation agreements, provide sufficient protection for the company’s legitimate business interests under the new law. Where insufficient, consult with counsel to strengthen these provisions and/or identify additional lawful strategies to safeguard the company’s interests.
Update templates and policies. Revise all standard employment agreement templates, confidential information and invention assignment agreement templates, restrictive covenant agreement templates, offer letter templates, contractor agreements and repayment agreements to remove or restructure any provisions that will be void under the new law.
Train HR and management. The law prohibits employers from representing to a worker that they are subject to a noncompete or attempting to enter into one. Employers should therefore ensure that HR personnel, managers and recruiters understand these broad prohibitions, as even an informal suggestion of enforceability could expose the company to liability.
Consider enforcement of existing noncompetes/repayment agreements. As noted above, the amended noncompete statute will not apply to legal proceedings commenced before June 30, 2027. Therefore, as such date approaches, employers may consider whether it may be prudent to commence litigation to enforce noncompete agreements (which, as emphasized above, also include repayment agreements) and to otherwise address breaches of any such agreements that have occurred before June 30, 2027.

If you have any questions about these laws or how to comply, please contact your Cooley employment lawyer or one of the lawyers listed below.

Litigator of the Week Runners-Up and Shout-Outs

Fri, 26 Jun 2026 20:20:58 Z

A Cooley team earned a shout out on The American Lawyer’s Litigator of the Week Runners-Up and Shout-Outs list for securing an appellate victory that eliminated a fraud lawsuit against identity verification and fraud prevention client Socure Inc. The New York Appellate Division, First Department overturned a trial court’s decision that allowed a former Socure employee to pursue claims seeking hundreds of millions of dollars after alleging that his shares were fraudulently diluted and that the company misrepresented its value before buying out his remaining equity in 2018. The Court also awarded attorneys' fees and costs to Socure.

The Cooley team was led by partners Tim Cook and Ephraim McDowell, and associates Anna Mohan, Connie Wang, Katelyn Kang and Mikhaila Fogel.

Read the article (subscription required)

AI Chatbot’s Medical Claims Draw Regulatory Scrutiny

Fri, 26 Jun 2026 17:46:00 Z

On May 1, 2026, the Pennsylvania State Board of Medicine filed a complaint in the Commonwealth Court of Pennsylvania against Character Technologies, the corporate entity operating the Character.AI generative artificial intelligence platform.¹ The complaint raises immediate questions about state licensing board enforcement, but the regulatory picture it reveals extends further – to US Food and Drug Administration (FDA) oversight and an accelerating wave of state legislation targeting AI in healthcare. Character Technologies also faces a separate lawsuit brought by the Kentucky attorney general, which alleges that the company preys on children and leads them to self-harm.²

Background

The platform and the investigation

Character.AI is a generative AI platform with 20 million+ monthly users that allows users to create chatbot characters with specific personalities. A Pennsylvania Professional Conduct Investigator created an account, searched “psychiatry” and interacted with a character named “Emilie” described as a “Doctor of psychiatry.” Note that the character had approximately 45,500 user interactions as of mid-April, during which “Emilie” claimed to have medical credentials, offered to conduct a psychiatric assessment and represented that it held a valid Pennsylvania medical license, providing a fabricated license number.

Character Technologies does not hold a license to practice medicine in Pennsylvania.

The commonwealth’s case

Pennsylvania asserts that Character Technologies engaged in the unauthorized practice of medicine and surgery.³ The crux of the state’s allegations is that Character Technologies permitted its chatbot to hold itself out as a licensed psychiatrist by claiming a Pennsylvania license, using the title “psychiatrist” and providing a fabricated license number.

Character.AI contests the suit, reasoning that its user-created characters are fictional and intended for entertainment and roleplaying. The company points out that the platform includes in-chat disclaimers stating that characters are not real people and all statements should be treated as fiction, along with additional disclaimers warning users not to rely on characters for professional advice.⁴

Legal issues

State licensing

In Pennsylvania, medicine and surgery is defined as “[t]he art and science of which the objectives are the cure of diseases and the preservation of the health of man, including the practice of the healing art with or without drugs, except healing by spiritual means or prayer.”⁵ Medical doctors, including psychiatrists, as with most distinct healthcare professions (e.g., nurses, physician assistants, etc.), are licensed at the state level.

Further, Pennsylvania, like other states, prohibits the unauthorized practice of medicine, which includes:

Practicing medicine.
Purporting to practice medicine.
Holding forth as authorized to practice medicine through use of a title.
Otherwise holding forth as authorized to practice medicine.⁶

Given the breadth of these statutory prohibitions, the bar for demonstrating the unauthorized practice of medicine appears low. For example, a platform need not deliver clinical care in the traditional sense to run afoul of the statute; merely holding itself forth as authorized to practice medicine, whether through the use of a title, the assertion of credentials or other representations of licensure, may be sufficient. In this case, the complaint expressly alleges that the “Emilie” character represented that it was a medical doctor, claimed to have attended medical school at Imperial College London and to have been practicing psychiatry for seven years, asserted that it was licensed to practice medicine in Pennsylvania, and provided a fabricated Pennsylvania license number. Each of these allegations, standing alone or in combination, may be used as evidence that the chatbot held itself out as authorized to practice medicine.

‘Intended use’ and FDA’s medical device regulatory framework

The Character.AI matter also raises significant questions under federal law – specifically, whether a chatbot that performs diagnostic or treatment-related functions could be classified as a medical device⁷ subject to FDA oversight. Platform operators and their counsel should not assume that the absence of FDA enforcement to date reflects a settled regulatory position; to the contrary, the agency’s existing statutory and regulatory framework is more than sufficient to reach AI chatbot platforms with these types of functions, and the Pennsylvania complaint may accelerate federal attention to this space.

Under the Federal Food, Drug, and Cosmetic Act (FDCA), a product qualifies as a “device” if it is “intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease” or is “intended to affect the structure or any function of the body” – provided that, unlike a drug, it does not achieve its primary intended purposes through chemical action within or on the body and does not depend on being metabolized to achieve such purposes.⁸ Critically, FDA does not simply accept a company’s characterization of what its product is intended to do. Under 21 CFR § 801.4, a product’s “intended use” can be established by, among other things, its design, the circumstances surrounding its distribution, website claims, advertising, and oral and written statements. FDA evaluates the totality of the circumstances – how a product is actually used, what it actually communicates and what the objective evidence shows about the manufacturer’s intent.

Importantly, FDA regulates Software as a Medical Device (SaMD) in the same manner as other products, unless the software is subject to one of the statutory carve-outs from the 21st Century Cures Act, such as software intended for general wellness purposes.⁹ Thus, software that is intended for use in the diagnosis or treatment of a disease or condition is subject to regulation as a medical device under the FDCA.

While the FDCA may already provide a basis for reaching chatbot operators, enforcement to date has largely been driven by state attorneys general rather than FDA. That gap likely reflects issues of timing and resource constraints rather than any meaningful limitation in federal authority. In the current environment, states like Pennsylvania also appear more willing to devote their limited resources to enforcement in this space. For platform operators, that combination of latent federal authority and active state-level activity means the question is not whether regulatory scrutiny is coming, but how to be ready as it continues to evolve.

The best defense is a good offense

So, what can platform operators do now to get ahead of the regulatory curve? First, they can start with a regulatory risk assessment to map the landscape of applicable state laws across all jurisdictions in which the platform operates before deploying health AI features.

Based on that assessment, platforms can strengthen their regulatory position by calibrating their compliance practices either to the highest applicable state standards or to emerging national frameworks. The Federation of State Medical Boards, for example, announced in May 2026 the formation of a new workgroup charged with developing recommendations and model guidelines for state medical boards on the regulation of AI tools used in the practice of medicine. At the federal level, and as discussed further below, the Trump administration has also signaled its desire to establish a uniform federal framework for AI.¹⁰

Platform operators should also define and implement clear boundaries around what their AI systems can do in all healthcare contexts. This does not mean shutting down all health-related conversations, but it does mean drawing a line between providing educational information or a general wellness function and conduct or messaging that may appear to be providing clinical advice requiring a professional license, which is a distinction that matters equally under state unauthorized practice statutes and the FDA’s device classification framework. A chatbot offering generic stress-management tips will be analyzed differently than one that asks about symptoms, offers a diagnosis or recommends a treatment course. Those boundaries should be enforced through content moderation systems and model-level constraints, not through user-facing disclaimers alone, given that a company’s disclaimers may actually be used to demonstrate knowledge of the law and do not change a product’s status as a device under the FDCA.¹¹> Platforms that build these guardrails in before a regulator comes knocking will be in a far stronger position than those that wait and react.

Will the Character.AI case open the floodgates?

It is too early to say whether the Character.AI lawsuit will open the floodgates for state enforcement actions, but the conditions are there. State licensing boards now have a live case that hands them a roadmap for going after AI platforms whose responses stray into regulated territory. And they are not the only ones: A growing number of state legislatures have moved to regulate AI systems directly (e.g., California, Texas and Illinois), and more will follow.

These developments suggest a regulatory landscape that may become both broader and more varied over time – though federal pressure on state AI regulation is mounting. On December 11, 2025, President Donald Trump signed an executive order directing federal agencies to establish “a minimally burdensome national policy framework for AI.” While the order does not preempt existing state AI laws, it identifies several mechanisms for challenging state AI laws inconsistent with that policy, including Department of Justice litigation, Commerce Department review of “onerous” state laws, and a White House mandate to prepare a legislative recommendation establishing a uniform federal framework that would preempt state laws conflicting with the administration’s policy of sustaining and enhancing US global AI dominance through a minimally burdensome national framework.¹²

For now, state AI compliance obligations remain in effect. The scope of these regulations varies considerably from state to state, ranging from disclosure requirements mandating that users be informed they are interacting with an AI agent to data privacy obligations, advertising restrictions and other consumer protection measures. Of particular relevance to the issues raised by the Character.AI matter, Delaware recently enacted legislation that expressly prohibits a “nonhuman entity,” including an “agent powered by artificial intelligence,” from using professional titles or abbreviations associated with licensed healthcare professions, including, but not limited to, “advanced practice registered nurse,” “registered nurse,” “doctor” and similar designations.¹³ The Delaware law further prohibits the licensure of a nonhuman entity to practice medicine, nursing or related healthcare professions, and bars any such entity from engaging in the practice of medicine within the state. Legislation of this nature may reflect a growing desire among state legislatures to expressly address this practice in an attempt to rein in AI platforms that offer medical advice without state oversight – though their durability will depend on whether federal legal challenges to these laws materialize and succeed, or whether Congress moves to preempt them through a federal AI framework.

What makes the Pennsylvania case especially notable is how it started – not with a purpose-built health app, but with a single chatbot on a general-purpose platform that a state investigator found by searching “psychiatry.” The takeaway: Regulators are looking at what the AI actually says, and if those responses look like the practice of a licensed profession or the function of a regulated device, disclaimers may not be enough. That said, enforcement is not the only model. Some states have signaled a preference for regulatory partnership over litigation. Utah, for example, has entered into a regulatory mitigation agreement with mental health chat app ElizaChat, under a framework created by Utah law¹⁴ that allows companies to operate under agreed terms in exchange for regulatory flexibility. Whether other states follow Utah’s lead remains to be seen, but the gap between a regulatory partnership and an enforcement action may come down to whether the platform drew the lines itself before a regulator had to – or, where a regulator has already drawn them, whether the platform engaged constructively with those boundaries rather than ignoring them.

Notes

The Pennsylvania State Board of Medicine operates under the Pennsylvania Department of State, Bureau of Professional and Occupational Affairs.
Commonwealth of Kentucky ex rel. Coleman v. Character Technologies, Inc., No. 26-CI-00029 (Ky. Franklin Cir. Ct. filed Jan. 8, 2026).
In violation of Sections 422.10 and 422.38 of the Medical Practice Act.
Cailey Gleeson, “Pennsylvania Sues Character.ai Over AI Chatbot Allegedly Presenting Itself as Licensed Medical Professional,” Fierce Healthcare, May 7, 2026.
63 Pa. Stat. Ann. § 422.2.
63 Pa. Stat. Ann. § 422.10.
21 USC § 321(h)(1).
Id.
21 USC § 360j(o). See also, Cooley, “FDA Opens Aperture for Wearables in Latest General Wellness Guidance,” January 20, 2026.
“Ensuring a National Policy Framework for Artificial Intelligence,” Exec. Order No. 14365, 90 FR 58499, December 11, 2025).
See, e.g., United States v. 789 Cases of Latex Surgeons’ Gloves, 799 F. Supp. 1275, 1285 (D.P.R. 1992) (“Whether a product’s intended use makes it a device depends, in part, on the manufacturer’s objective intent in promoting and selling the product. All of the circumstances surrounding the promotion and sale of the product constitute the ‘intent.’ It is not enough for the manufacturer to merely say that he or she did not ‘intend’ to sell a particular product as a device.”).
“Ensuring a National Policy Framework for Artificial Intelligence,” Exec. Order No. 14365, 90 FR 58499, December 11, 2025. See also, Cooley, “Showdown: New Executive Order Puts Federal Government and States on a Collision Course Over AI Regulation,” December 12, 2025.
Del. H.B. 191, 153d Gen. Assemb. (2026).
UT Code § 13-72-302.

SGMICRO Announces HK$4.6 Billion IPO

Fri, 26 Jun 2026 15:07:58 Z

Beijing – June 26, 2026 – Cooley advised SG Micro Corp (SGMICRO; HKEX Stock Code: 3661; SZSE Stock Code: 300661), a leading analog integrated circuit company in China, on its HK$4.6 billion initial public offering (IPO). SGMICRO offered 54,001,200 global H shares (subject to the over-allotment option) priced at HK$85.20 per share. The company’s shares began trading on the Hong Kong Stock Exchange on June 26, 2026, under stock code 3661.

CICC and Huatai International acted as joint sponsors, overall coordinators, joint global coordinators, joint bookrunners and joint lead managers for the offering.

Lawyers Yilin Xu, Ethan Jin, Mengchao Wu and Dichun Duan led the Cooley team advising SGMICRO.

LINGYI iTECH Announces HK$8.26 Billion IPO

Fri, 26 Jun 2026 14:16:48 Z

Hong Kong – June 26, 2026 – Cooley advised LINGYI iTECH (GUANGDONG) COMPANY (LINGYI iTECH), a leading high-precision intelligent manufacturing platform for electronic devices, on its HK$8.26 billion (US$ 1.06 billion) initial public offering (IPO). LINGYI iTECH offered 811,811,880 global H shares priced at HK$10.18 per share. The company’s shares began trading on the Hong Kong Stock Exchange on June 26, 2026, under stock code 1688. Lingyi iTECH is a publicly listed company on the Shenzhen Stock Exchange (stock code 002600) seeking a dual listing in Hong Kong. It also ranks as the fourth largest Hong Kong IPO to date in 2026*.

Guotai Junan acted as sole sponsor, sole sponsor-overall coordinator, overall coordinator, joint global coordinator, joint bookrunner and joint lead manager for the offering. CLSA, J.P. Morgan and Citi acted as overall coordinators, joint global coordinators, joint bookrunners and joint lead managers. Futu Securities International and Tiger Brokers (in alphabetical order) acted as joint bookrunners and joint lead managers.

Lawyers Michael Yu, Will Cai, Kaiting Yang, Dichun Duan, Shangyun Ren and international legal project manager Yifeng Wang, Jimmy Zhao and Alan He led the Cooley team advising LINGYI iTECH.

* Data source: Bloomberg

Cooley Honoured with Two Women in Business Law Awards

Fri, 26 Jun 2026 14:06:12 Z

London – June 26, 2026 – Cooley received two honours at the Women in Business Law (WIBL), Europe, the Middle East and Africa Awards.

In the first award, Cooley was announced as Law Firm of the Year for Gender Diversity Support (Global).

Additionally, London partner Claire Temple was recognized as Product Liability Lawyer of the Year for EMEA. The WIBL Awards recognize lawyers for their contributions to the practice of business law along with firms that demonstrate a strong commitment to advancing diversity and inclusion across the region.

Three Cooley lawyers were also shortlisted for individual recognitions, respectively, as Lawyer of the Year for their client counsel in life sciences, mergers & acquisitions, and environmental, social, and governance frameworks.

The honours were announced at a gala dinner in London on 25 June.

A Big Law CEO and Top GC Agree: AI Is Forcing a New Firm Model

Thu, 25 Jun 2026 20:55:22 Z

Rachel Proffitt, Cooley partner and CEO, was quoted in Bloomberg Law’s “Big Law Business” column about how artificial intelligence (AI) is changing the Big Law business model and the emergence of AI-native law firms, emphasizing Cooley’s approach to address this shift. Proffitt’s Fortune commentary was also referenced.

Read the article

Golden State Warriors and Iren Announce Landmark Partnership

Thu, 25 Jun 2026 20:53:00 Z

Washington, DC, – June 25, 2026 – Cooley advised IREN Limited (NASDAQ: IREN), a vertically integrated artificial intelligence cloud provider, on its landmark multi-year global partnership with Golden State that will include the IREN badge on all Golden State Warriors jerseys beginning with the 2026-27 season as part of a broad partnership spanning the Warriors, Golden State Valkyries, Santa Cruz Warriors and Chase Center.

As part of the partnership, Golden State and IREN will collaborate on a series of initiatives focused on expanding access to educational opportunities, advancing AI and STEAM literacy, and creating lasting community impact in the Bay Area.

Lawyers Adam Chase, Christopher Kimball and Ryan Bowers led the Cooley team advising IREN.

Remix Therapeutics Announces Merger Agreement With Passage Bio, Concurrent $100 Million Private Placement

Thu, 25 Jun 2026 20:29:00 Z

New York – June 25, 2026 – Cooley advised Goldman Sachs & Co. LLC, Jefferies and Evercore ISI as the placement agents to Remix Therapeutics, a clinical-stage biotechnology company developing small molecule therapies to modulate RNA processing and address the underlying drivers of disease, in connection with an approximately $100 million private placement concurrent with its merger with Passage Bio. The syndicate of investors is led by Decheng Capital, with participation from Lynx1 Capital Management, Forge Life Science Partners, existing investors and other leading investment management firms. Upon completion of the transaction, the combined company plans to operate under the name Remix Therapeutics, Inc. and expects to trade on Nasdaq under the ticker symbol RMTX.

Partners Richard Segal, Denny Won and Evan Leitner led the Cooley team advising the placement agents. The team also included Xander Lee, Jennifer Shanley, Natasha Leskovsek, Carol Laherty and Marcelo Pomeranz.

Cooley Named Tech Industry Litigation Department of the Year

Thu, 25 Jun 2026 20:05:00 Z

Palo Alto – June 25, 2026 – Cooley was named Tech Industry Litigation Department of the Year by The Recorder at the legal news publication’s 2026 California Legal Awards ceremony in Los Angeles. Cooley was among 12 finalists for the award.

View the full list of winners (subscription required)

SEER Robotics Announces HK$1.07 Billion IPO

Wed, 24 Jun 2026 19:52:00 Z

Beijing – June 24, 2026 – Cooley advised Shanghai Seer Intelligence Technology (SEER Robotics), a globally leading platform-based embodied intelligent robotics company, on its HK$1.07 billion initial public offering (IPO). Seer Robotics offered 10,497,300 H shares (subject to over-allotment option) priced at HK$101.60 per share. The company’s shares began trading on the Hong Kong Stock Exchange on June 24, 2026, under stock code 06106.

CICC acted as the sole sponsor, sponsor-overall coordinator, overall coordinators, joint global coordinators, joint bookrunners and joint lead managers for the offering. CMBI acted as overall coordinators, joint global coordinators, joint bookrunners and joint lead managers. Soochow Securities (Hong Kong) acted as joint global coordinator, joint bookrunner and joint lead manager. BOCI, FUTU Securities International, Tiger Brokers, Zheshang International and ABCI acted as joint bookrunners and joint lead managers.

Lawyers Ethan Jin, Yilin Xu, Mengchao Wu and Dichun Duan led the Cooley team advising SEER Robotics.

GPTZero to be Acquired by Superhuman

Wed, 24 Jun 2026 18:38:51 Z

Cooley advised GPTZero, a leading AI content detector with a comprehensive authenticity suite, on its agreement to be acquired by Superhuman, the productivity platform bringing AI to wherever people work.

The transaction was announced publicly in the following press release, which can be viewed here.

Izzy Lubarsky, Stephane Levy and Natalie Vernon led the Cooley team advising GPTZero.

Stephanie Gentile, Bill Corcoran, Nyron Persaud, Len Jacoby, Kristen Mathews, Megan Browdie, Chris Kimball, Gerard O’Shea, Karen Tsai, Sangitha Palaniappa, Dillon Holdsworth, Nancy Kyei, Patrick Sharma, Paula Fleckenstein, Joy Chow, Christopher Suhler, Mari Dugas, Jennifer Ok and Sharon Davidov provided invaluable support.

Cooley represented GPTZero from inception and through its fundraising events.

First Street Acquired by MSCI

Wed, 24 Jun 2026 18:17:05 Z

Cooley advised First Street, a leading provider of physics-based climate risk data and analytics for every property in the world, on its agreement to be acquired by MSCI for $120 million in cash at closing, with the potential for additional cash payments during the first two years following closing if certain revenue thresholds are achieved.

The transaction was announced publicly in the following press release, which can be viewed here.

Kevin Cooper, Roy Moran, Asal Yusunov, and Ama Zaniker-Gomez led the Cooley team advising First Street.

Christopher Andrews, Ryan Bowers, Megan Browdie, Joy Chow, Sharon Connaughton, Tom Connors, Paula Fleckenstein, Stephanie Gentile, Todd Gluth, Claire Goldhawk, Kristen Mathews, Carly Mitchell, Allison Nostdahl, Nyron Persaud, Gregg Rader, and Lois Yoo provided invaluable support.

Cooley previously advised First Street on its $46 million Series A financing in 2024.

Runpod Raises $100 Million

Wed, 24 Jun 2026 16:00:00 Z

Washington, DC – June 24, 2026 – Cooley advised Runpod, the artificial intelligence developer cloud, on its $100 million growth investment led by Summit Partners, valuing the company at $1 billion. The new capital will fund continued investment in the full lifecycle AI development platform that developers depend on to take AI from first experiment to production.

Lawyers Brooke Nussbaum, Arjan Ganji, Camille Awono, Jonathan Rivinus, Nyron Persaud, Paula Fleckenstein, Megan Browdie, Nicollette Kirby and Sharon Connaughton led the Cooley team advising Runpod.

Cooley previously advised Runpod on its $20 million seed funding round in November 2023.

Menlo Ventures Raises $3 Billion for AI

Tue, 23 Jun 2026 20:26:33 Z

San Francisco – June 23, 2026 – Cooley advised Menlo Ventures, a leading early-stage venture capital firm investing at the forefront of artificial intelligence (AI), on its $3 billion raise in new capital to back promising AI companies at every stage. Menlo Ventures XVII, the firm’s flagship venture fund, invests in seed and Series A rounds, while Menlo Inflection IV provides growth capital to companies scaling rapidly at Series B and beyond.

Partners John Dado and William Newsom led the Cooley team advising Menlo.

Cooley’s relationship with Menlo Ventures began in the mid-1990s and the firm has represented Menlo Ventures on the formation of multiple generations of venture funds, including its close of $1.35 billion in new capital in November 2023.

Cooley Launches Cooley GO Lab, Powered by Legora, for Y Combinator Startups

Tue, 23 Jun 2026 17:48:00 Z

San Francisco, CA – June 23, 2026 – Cooley, in collaboration with Legora and Y Combinator, today announced the launch of Cooley GO Lab, an AI-powered workspace designed to help startups in real time as they build. It will debut exclusively with Y Combinator’s summer 2026 cohort.

Startups today are operating in a more complex environment – shaped by AI-driven disruption, a tighter venture funding environment and increasing regulatory scrutiny – making early decisions more consequential than ever. Built on Legora Portal, a white‑labeled workspace for AI‑powered workflows and legal knowledge, Cooley GO Lab provides startups with information and context to support timely and more informed decision‑making.

The platform reflects a new model for extending legal knowledge through AI – embedding trusted and focused insight directly into company‑building workflows. Cooley GO Lab offers an early example of how Legora’s technology empowers firms to deliver that model at scale.

“We’re entering a new era in how legal insights are delivered and applied,” said Matthew Bartus, partner and global co-chair of Cooley’s emerging companies and venture capital practice group. “Having built our firm alongside many of the world’s most innovative companies, we understand how quickly they move and what they need to scale. Cooley GO Lab reflects that experience, as our lawyers continue to directly shape and refine the underlying content. Combined with Legora’s advanced AI and Y Combinator’s unmatched network, we’re creating a new way to support the next generation of companies.”

Informed by the experience of Cooley lawyers and decades of advising high‑growth companies, Cooley GO Lab leverages real‑world legal patterns across formation, equity and governance. The platform integrates Cooley GO’s curated, startup specific content with practitioner‑informed knowledge, helping startups evaluate documents against market practice and move forward with greater clarity.

Cooley GO Lab is designed for speed and ease of use, with current features including:

AI workflows powered by Cooley experience and insight that analyze documents, such as nondisclosure and contractor agreements, against market prevalent terms and highlight key considerations for review.
A shared AI workspace where companies can upload their corporate files and ask the AI agent questions about their specific documents.
A Cooley GO knowledge base that allows startups to query Cooley GO content and access standard startup forms and templates. [1]

The collaboration marks a full-circle moment for Legora. The company itself was founded through Y Combinator, where co-founder and CEO Max Junestrand built the earliest version of Legora.

“Seeing Cooley use Legora Portal to bring world-class AI workflows and legal information directly to YC startups is exactly what Portal was built for – letting firms deliver their best thinking at scale, to the people who need it most,” said Junestrand.

Y Combinator, which backed Legora at its founding, sees the tool as a direct response to what startups face today.

“Early-stage YC startups are growing faster than ever and need legal information earlier than they used to. At the same time, as AI becomes part of every industry, regulatory complexity for startups is increasing. Cooley GO Lab, powered by Legora, gives companies a faster, more intuitive way to become familiar with the legal landscape,” said Gustaf Alströmer, General Partner at Y Combinator.

[1] While Cooley GO Lab does not provide legal advice or create an attorney-client relationship between its users and Cooley, it arms startups with world-class information and workflows powered by best-in-class AI.

A New AIM: Key Proposed Reforms Impacting Innovative High-Growth Companies

Tue, 23 Jun 2026 15:38:21 Z

The London Stock Exchange (LSE) has set out significant proposed reforms to the AIM Rules for Companies (AIM Rules), with the important aim of refocusing and repositioning AIM compared to the Main Market and other international markets.

For innovative high-growth companies – particularly those in the technology and life sciences sectors, which make up a significant part of AIM’s growth-company ecosystem – several of the proposed changes are directly relevant. Below, we highlight the developments we consider most significant and share our perspective on each.

Shaping the future of AIM

The proposals – recently published in AIM Notice 62 and building on the broadly positive market reception to the LSE’s November 2025 Feedback Statement – are designed to modernise AIM, reduce unnecessary admission burdens and give founder-led, innovative and growing companies greater flexibility to operate when listed on AIM. A consultation on the proposals is open until 2 July 2026.

Running through all of these proposals is AIM’s explicit “buyer beware” market model. For the first time, the LSE is proposing to include this characterisation in the introduction to the AIM Rules themselves – making clear that AIM is a market for growth companies that carry a higher risk profile than the LSE Main Market, and that investors must form their own view of the merits and risks of any AIM investment. A proposed reduced regulatory burden for companies is, in other words, matched by an unambiguous statement of investor responsibility.

The working capital statement is going – a meaningful change for pre-revenue companies

Under the current AIM Rules, directors are required to include in the admission document a clean working capital statement confirming that the company has sufficient working capital for the next 12 months following admission. That requirement is supported by a working capital report prepared by a firm of accountants. The working capital diligence exercise can be costly and time-consuming, and the end result – the working capital report – is a private document not available to end investors, only covering a 12-to-18-month horizon.

In practice, this has been a pain point we frequently encounter for early-stage companies considering AIM. For tech and life sciences businesses – particularly those that are pre-profitability, reliant on milestone-linked financing or building out commercial infrastructure post-approval – making the unqualified positive statement that the current rules require has often been extremely difficult.

The LSE is proposing to replace the working capital statement with a requirement to clearly disclose the company’s capital resources, financial obligations and anticipated fundraising needs over the 12 months following admission. The shift – from a binary statement to a qualitative, disclosure-based framework – is more proportionate and better reflects how sophisticated investors in these sectors assess financial risk. It is also more honest. Early-stage companies should be able to tell their story clearly, including the fact that they expect to return to market for further capital, without that disclosure being treated as a disqualifying factor.

One practical issue remains worth flagging. Auditors must still be satisfied as to going concern status when signing off on a company’s annual accounts – and for early-stage companies with limited cash runway or uncertain funding outlooks, obtaining that sign-off can be a challenging process. If this process results in the accounts being published after the six-month deadline required by AIM Rule 19, this will trigger a suspension of the AIM listing, an outcome that the removal of the requirement for the working capital statement in the Admission Document does not prevent. Early and ongoing dialogue with auditors on going concern status therefore remains as important as ever, despite the other benefits of the proposed reform package.

UK GAAP is now accepted – a significant cost saving at admission

AIM companies incorporated in the UK may now use UK generally accepted accounting principles (GAAP) (FRS 102) rather than International Financial Reporting Standards (IFRS). Other local GAAPs may also be permitted where IFRS equivalency can be demonstrated. This change has already been applied in practice following the Feedback Statement and is now being formally incorporated into the AIM Rules.

For many UK tech and life sciences companies – particularly those whose sector peers also report under UK GAAP – this removes a significant and often costly accounting conversion exercise at the point of admission. It is worth noting, however, that companies with longer-term ambitions to step up to the LSE’s Main Market or list on US markets (including Nasdaq) as foreign private issuers will ultimately need to report in IFRS or US GAAP. Forward planning on accounting standards, and on the timing of upgrades to internal financial controls and reporting processes, remains important.

The Capital Access Window – managing fundraisings more effectively

For AIM companies – and particularly for life sciences businesses that regularly return to market for follow-on capital – one of the persistent practical challenges has been managing a fundraising process without inadvertently creating price volatility or information leakage. The dispersed investor bases that are common among AIM-listed life sciences companies compound the problem: Coordinating an approach to retail investors alongside institutional investors, while a live share price moves, has been a real execution risk.

The proposed Capital Access Window addresses this directly. AIM companies undertaking an equity fundraise will be able to voluntarily request a temporary trading suspension, creating a controlled window in which to approach investors – including retail investors – without the pressure of a live market. This builds on the framework introduced by the UK’s Public Offers and Admissions to Trading Regulations 2024 which permit greater retail investor participation in secondary offers on AIM (and the Main Market) without a prospectus.

The LSE has confirmed that requests for a Capital Access Window will be considered on a case-by-case basis, without a prescribed duration. That flexibility is the right approach; it reflects the reality that the needs of a seasoned life sciences issuer undertaking its fifth follow-on financing will differ from one accessing the market for the first time post-admission. Engaging early with your legal advisors, your Nominated Adviser and the LSE’s AIM team as a fundraising takes shape will be essential to making effective use of this mechanism.

Founder-friendly structures – dual-class shares and remuneration flexibility

Two of the proposed changes are particularly targeted at the founder-led companies that are central to AIM’s growth-company ecosystem.

First, special voting shares will be permitted at admission, enabling founders to retain control while accessing public capital markets. This mirrors the dual-class share structures that have been available on the Main Market substantively since 2025 and brings AIM into line with several of its international competitors. It removes what has been a structural barrier for ambitious founder-led businesses that have considered – and in some cases ruled out – an AIM admission.

Second, Nominated Advisers will no longer be required to provide a fair and reasonable opinion on nonstandard director remuneration arrangements where they are satisfied that reasonable commercial protections are in place. Where there is uncertainty, it can be resolved by putting the matter to a shareholder vote – a mechanism that aims to strike a balance between founder-friendly flexibility and investor protection. For tech and life sciences companies, where competitive remuneration packages are essential to attracting and retaining specialist talent, this is a practical and welcome change.

Governance – five areas and an issuer-specific approach

AIM companies will no longer be required to adopt and “comply or explain” against a specific corporate governance code. Instead, they will be expected to provide disclosure across five areas that investors have identified as consistently important: board composition; directors’ roles and responsibilities; remuneration and performance; risk and controls framework; and approach to investor relations.

This is a meaningful shift, in line with the proposed move toward greater investor responsibility and the aim of effective regulation. Many innovative growth companies have governance structures that are well-designed for their stage of development and investor base but do not map neatly onto any recognised code. The obligation to “explain” departures from a prescribed template has, in practice, often generated boilerplate disclosure – even if comparative benchmarking was a commendable aim. Requiring disclosure against five investor-prioritised areas, while leaving companies free to design governance arrangements appropriate to their circumstances, is arguably a more intelligent approach and has the potential to deliver more meaningful governance reporting. For investors, while there may be a little more work to do to understand, substantively and comparatively, the governance arrangements of each company, the hope would be that improved quality of governance disclosures will not make this burdensome.

The LSE is also proposing to give AIM companies the ability to disclose engagement with proxy advisors and a voluntary “right of reply” to third-party commentary, speculation or criticism – including on social media and investor bulletin boards. The LSE has been clear that misleading and sometimes abusive content posted anonymously about AIM companies and their directors on bulletin boards has been damaging to market confidence. AIM companies will now have the ability to respond formally and “on the record”.

Acquisitions – reduced friction for ‘buy-and-build’ strategies

Two changes reduce the regulatory friction associated with acquisition activity. The threshold for a transaction to constitute a “substantial transaction” – triggering shareholder disclosure requirements under AIM Rule 12 – is proposed to increase from 10% to 25% of class test thresholds, aligning AIM with the Main Market.

More significantly, an acquisition will no longer automatically be classified as a reverse takeover simply because it exceeds 100% in the class tests. What will matter is whether the acquisition results in a fundamental change to the company’s business, board or voting control. Under the previous approach, major acquisitions could trigger a full reverse takeover process – including a suspension of trading, a new admission document, a working capital report and updated financial statements – solely because of their size, regardless of whether they were genuinely transformative or fundamental to the company’s business. Many issuers and advisors will be aware of instances in which the old regime could apply disproportionate requirements for acquisitive companies, and the effort to correct this is notable.

For AIM companies pursuing buy-and-build strategies – a growth model that is particularly common among tech businesses assembling complementary capability stacks – these proposed changes have the potential to meaningfully reduce both cost and execution risk.

Other changes worth noting

AIM Notice 62 also proposes a new Express Market route to replace the current AIM Designated Market admission route. The new route is designed to give a broader range of international companies – those listed on markets operating to International Organization of Securities Commissions (IOSCO) standards – a streamlined path to AIM admission. There is also a new dual-market applicant route for companies seeking simultaneous admission to an Express Market and AIM, reducing the documentation burden for those transactions.

A separate consultation (AIM Notice 63) covers proposed changes to the AIM Rules for Nominated Advisers, including a reorientation of the Nominated Adviser role toward public corporate finance expertise rather than compliance monitoring – a shift that is likely to be welcomed by AIM companies and their advisors alike.

Conclusions

Taken together, the proposals in AIM Notice 62 represent the most substantive recalibration of AIM’s regulatory framework in years – and, for innovative and growing companies, the proposals appear to be, largely, in the right direction. The shift from binary compliance requirements to proportionate, disclosure-based frameworks; the removal of structural barriers to founder control; and the practical improvements to how fundraisings and acquisitions are managed, all show thoughtful consideration of the role of AIM in the changed public markets landscape, as well as promise in understanding AIM’s core constituency of companies and investors and their needs. The consultation closes on 2 July 2026.

If you would like to discuss how the proposals affect your specific situation, please reach out to the Cooley capital markets team.

From Maple to Mind Taps: New Vermont Law Puts Neurotech on Notice

Tue, 23 Jun 2026 07:00:00 Z

Vermont, a state famous for tapping maple trees, is now tapping into something far more complex: the human brain. With the enactment of S.71, the Vermont Data Privacy and Online Surveillance Act, the Green Mountain State has become the fifth state in the nation (after California, Colorado, Connecticut and Montana) to classify “neural data” as “sensitive data” subject to the most stringent privacy protections under state law. For the rapidly expanding consumer neurotech industry – from EEG-enabled meditation headbands and neurofeedback wearables to emerging brain-computer interfaces – the law imposes consent requirements, purpose limitations and assessment obligations that impact how companies collect, use and monetize the data generated by measuring the activity of the human brain. Crucially, the law contains no revenue threshold, meaning even early-stage startups processing neural data from as few as 3,000 consumers will find themselves subject to its full reach. However, the law contains exceptions for HIPAA protected health information, healthcare components of HIPAA covered entities and HIPAA business associates. Neurotech companies who make their products available to patients through the healthcare system might enjoy one of these exceptions.

What is neural data under the act?

The act defines “neural data” as “any information that is generated by measuring the activity of an individual’s central nervous system.” This broad definition is technology-neutral and captures data from a range of consumer neurotechnology devices and applications, including electroencephalography (EEG) headsets, neurofeedback devices and emerging brain-computer interface technologies. At the same time, Vermont’s definition is narrow relative to the other four states except Connecticut, because the definition references the central nervous system but not the peripheral nervous system.

The act classifies neural data as a category of “sensitive data,” placing it alongside other specially protected categories that include biometric data, genetic data, precise geolocation data, consumer health data, data revealing racial or ethnic origin, religious beliefs, sexual orientation, citizenship or immigration status, and data concerning mental or physical health conditions. This classification subjects neural data to the act’s most restrictive requirements for collection, processing and sale.

Who does the law apply to? A low bar for emerging companies

The act’s applicability thresholds are notable for what they do not require: revenue. Unlike some state privacy laws that apply only to businesses meeting certain revenue benchmarks, Vermont’s law is triggered by data volume alone. A company falls within the act’s scope if, during the preceding calendar year, it meets any one of three independent thresholds:

Controlled or processed the personal data of not fewer than 35,000 consumers (excluding data processed solely for completing a payment transaction).
Controlled or processed the sensitive data (such as neural data) of not fewer than 3,000 consumers (excluding data processed solely for completing a payment transaction).
Offered for sale in trade or commerce the personal data of not fewer than 3,000 consumers.

Because neural data is classified as sensitive data, the second threshold is the critical one for the neurotech industry. A pre-revenue wearable neurotech startup that has distributed devices to 3,000 consumers and collects neural data from those users would be subject to the full weight of the act’s obligations – regardless of the company’s size, stage, revenue or financial resources. This means that new and emerging companies in the business-to-consumer neurotech space cannot assume the law does not apply to them simply because they are small or have limited revenue. This makes the new Vermont law similar to the Connecticut law passed around the same time last year, which applies to any business that processes sensitive personal data regardless of revenue or volume of data.

Consent is required – but it is not a blank check

Under the act, a company may not process sensitive data, including neural data, “unless the consumer has provided consent and unless the processing is reasonably necessary in relation to the purposes for which the sensitive data are collected.”

This two-part test imposes a meaningful constraint that goes well beyond a simple notice-and-consent model. Even where a consumer has affirmatively consented to the collection of neural data – for example, in connection with a meditation, focus-training or cognitive wellness application – the company may only use that data for purposes that are “reasonably necessary” in relation to the specific purposes for which it was originally collected.

The “consent” required by the act is itself defined with precision. “Consent” means “a clear affirmative act signifying a consumer’s freely given, specific, informed, and unambiguous agreement to allow the processing of personal data relating to the consumer.” Consent does not include acceptance of general or broad terms of use, hovering over or closing content, or agreement obtained through the use of dark patterns.

The practical implication is significant. A neurotech company that collects neural data to provide a brain wellness or cognitive performance service cannot repurpose that same data for unrelated secondary uses – such as generating advertising insights, training third-party AI models, licensing data to pharmaceutical researchers or developing entirely new product lines – even if it has obtained the consumer’s consent to collect the data in the first instance, unless the additional uses meet the “reasonably necessary” standard. The “reasonably necessary” standard effectively prevents consent from operating as a blank check for unlimited downstream processing. A company may still de-identify data and use de-identified data for secondary purposes, but to do so it would need to effectively de-identify the data in a way that satisfies the law’s de-identification standards.

This limitation has the potential to directly disrupt the business models of consumer neurotech companies that rely on secondary data monetization as a revenue stream. Companies that have built financial projections around the ability to leverage neural data beyond their primary service offering – for example, by licensing aggregated neural response patterns to advertisers or by using neural engagement data to optimize third-party content – will need to reassess those assumptions in light of the act’s purpose-limitation framework.

Perhaps the most consequential open question under the act – and the question that every neurotech business will be grappling with – is where, exactly, the line falls on the “reasonably necessary” standard. Consider a neurotech company that collects neural data to power a focus-training application. If that company uses the neural data it collects to train its own AI models to improve the accuracy and performance of that same focus-training product, is that use “reasonably necessary in relation to the purposes for which the sensitive data are collected?” There is a credible argument that it is: Improving the core product the consumer signed up for through machine learning could be viewed as integral to the very service for which the data was collected. But the act does not explicitly address this question, and the answer may ultimately depend on how broadly or narrowly the attorney general and the courts interpret the required nexus between AI training and the consumer-facing service.

A far more difficult question arises when a company attempts to expand the boundaries of “reasonably necessary” by defining its collection purposes broadly at the outset. Could a neurotech company inform consumers at the point of collection that one of the purposes for which it is collecting their neural data is to license it to third parties, use it for targeted advertising or train external AI models – and then argue that these uses are “reasonably necessary in relation to the purposes for which the sensitive data are collected” because they were disclosed as purposes from the very beginning? Neurotech companies exploring this strategy should proceed with the advice of experienced privacy counsel.

No sale of neural data without consent

The act separately prohibits the sale of sensitive data, including neural data, unless the consumer has provided consent. This prohibition applies independently of, and in addition to, the consent required for processing data. For neural data, any transfer to a third party in exchange for monetary or other valuable consideration requires its own affirmative consumer consent.

The act defines “sale of personal data” as “the exchange of a consumer’s personal data by the company with a third party for monetary or other valuable consideration.” Certain disclosures are excluded from the definition of a sale, including disclosures to a processor acting on the company’s behalf, disclosures to affiliates, disclosures directed by the consumer and transfers in connection with a merger or acquisition. However, the core commercial sale of neural data to third parties for their independent use will require consent.

Mandatory data protection assessments

The act requires companies to “conduct and document a data protection assessment” for each processing activity that presents “a heightened risk of harm to a consumer.” The processing of sensitive data, which expressly includes neural data, is specifically enumerated as one such heightened risk activity.

Each assessment must identify and weigh the benefits that may flow from the processing – to the company, consumer, other stakeholders and the public – against the potential risks to the rights of the consumer, as mitigated by safeguards the company can employ. The company must also factor in the use of deidentified data, the reasonable expectations of consumers and the context of the processing relationship.

For neurotech companies, this means that before processing neural data, they must prepare a formal, documented assessment analyzing the risks and benefits of each neural data processing activity. These assessments are not merely internal paperwork; the attorney general may require a company to disclose any data protection assessment relevant to an investigation, and the attorney general may evaluate the assessment for compliance with the act. While the assessments are confidential and exempt from public records disclosure, companies should prepare them with the understanding that they may be reviewed by enforcement authorities.

The data protection assessment requirements apply to processing activities created or generated after January 1, 2028, and are not retroactive.

Enforcement and timeline

The act takes effect on January 1, 2028. A violation of the act is deemed a violation of the Vermont Consumer Protection Act, enforceable by the attorney general. Notably, the act does not create a private right of action for consumers, although it leaves open the possibility for the legislature to add one if the attorney general is not given adequate funding and resources to enforce the law.

During a transitional period from January 1, 2028, through June 30, 2029, the attorney general must issue a notice of violation 60 days before initiating an enforcement action, provided the attorney general determines that a cure is possible. A controller or processor of data that receives such a notice has 60 days to cure the violation. After June 30, 2029, the attorney general is no longer required to provide a cure opportunity before bringing an enforcement action.

The General Assembly has also directed that the attorney general provide, and update as necessary, guidance to companies for compliance with the act.

The ‘other’ Vermont neural rights law

The Vermont Legislature separately enacted H.814, titled “An act relating to neurological rights and the use of artificial intelligence technology in health and human services,” which was adopted on May 18, 2026 – roughly a month before S.71. Despite its ambitious original billing, H.814 lost its teeth during the amendment process. As introduced, the bill proposed to create enforceable privacy standards for neural data and prohibit electronic devices from bypassing an individual’s conscious decision-making without consent. By the time it was adopted, however, all of those operative provisions had been stripped out.

What remains is an aspirational statement “recognizing” that individuals have rights to mental and neural data privacy, freedom of thought and protection from neurotechnological interventions – but without any enforcement mechanism, compliance obligations, consent requirements or penalties for businesses. The bill’s only operative substance is a directive to Vermont’s Artificial Intelligence Advisory Council to study the issues and report back to the legislature by January 15, 2027, with recommendations for future protections and proposed definitions. In short, H.814 is a study bill, not a regulatory one. It creates no new obligations for neurotech companies and requires no action. S.71, discussed above, is the law that demands attention and compliance planning.

Key takeaways for neurotech companies

Assess whether you are in scope. Any company that processes neural data from 3,000 or more Vermont consumers in a calendar year is subject to the act, regardless of revenue, company size or stage of development.
Obtain proper consent. Consent for processing neural data must be a clear affirmative act that is freely given, specific, informed and unambiguous. Buried terms-of-use provisions or dark-pattern-driven consent flows will not satisfy the act’s requirements.
Audit your data uses against the purpose-limitation standard. Even with valid consent, neural data may only be processed for purposes reasonably necessary in relation to the purposes for which it was collected. Secondary monetization strategies – advertising insights, third-party AI training, data licensing – that are untethered to the primary service must be risk tolerant.
Prepare for the sale consent requirement. Any sale of neural data to third parties for monetary or other valuable consideration requires separate consumer consent.
Conduct and document data protection assessments. Before processing neural data, prepare a formal assessment weighing the benefits against potential risks to consumers. These assessments may be reviewed by the attorney general in the context of an investigation.
Reevaluate business models built on secondary neural data monetization. The act’s purpose-limitation framework may foreclose revenue streams that depend on repurposing neural data beyond the service for which it was originally collected. Companies should assess their data practices and adjust their business strategies well in advance of the January 1, 2028, effective date.

Update on California’s VC Diversity Reporting Law: DFPI Comment Period and Legal Challenge

Tue, 23 Jun 2026 07:00:00 Z

Two notable developments have recently emerged under California’s Fair Investment Practices by Venture Capital Companies Law (FIPVCC). While neither such development requires action by covered entities, as the 2026 compliance deadlines for FIPVCC remain suspended, both developments are worth monitoring closely. First, on May 26, 2026, the California Department of Financial Protection and Innovation (DFPI) opened a public comment period, closing July 17, 2026, seeking input on the law’s interpretation and implementation. Second, on May 28, 2026, a Colorado-based venture capital firm filed a lawsuit alleging that the law is unconstitutional and seeking an injunction blocking enforcement of the law against the plaintiffs.

DFPI opens comment period with deadline of July 17, 2026

Following its March 2026 suspension of the FIPVCC, the DFPI on May 26, 2026, issued an invitation for comments on the law’s registration, survey and reporting requirements. In issuing this invitation, the DFPI is soliciting feedback prior to publication of a formal Notice of Proposed Rulemaking. Such feedback will shape how the law is ultimately interpreted and implemented.

The DFPI is seeking stakeholder input on a range of open questions, including:

Who qualifies as a “covered entity” (and what counts as a “significant presence” in California).
Whether covered entities that made no venture capital investments in the prior calendar year should still be required to register with the DFPI.
Whether covered entities’ reporting should be limited to new, first-time investments in the relevant calendar year or whether follow-on investments should also be included.
Whether consolidated reporting by a controlling entity is permitted, and under what conditions.
The scope of the survey distribution obligation and related privacy considerations.
What information covered entities should be required to report, including which formulas to use in making certain calculations.
Fees requirements, including whether there are factors the DFPI should consider in determining the fee charged per report.
Records retention requirements, including what records must be kept and how to best protect the privacy and anonymization of the founding team member’s demographic data.
Any additional matters related to the FIPVCC that the DFPI should consider when proposing regulations.

Comments are due July 17, 2026, and may be submitted electronically. The DFPI notes that for comments recommending rules, “commentors are encouraged to propose specific rule language and provide an estimate, with justification, of the potential economic impact on business and individuals that would be affected by the language.” Further, the agency notes that all comments should include information about “economic impacts, metrics, or quantitative analysis to support comments.”

The DFPI’s solicitation for comments is a meaningful opportunity to influence the regulations that will govern FIPVCC compliance in the future. Several of the DFPI’s open questions on key interpretive issues were noted in Cooley’s March 2026 letter to the agency.

Legal challenge filed

On May 28, 2026, venture capital firm 1517 Fund (through its management company and four associated funds) filed a complaint in the US District Court for the Eastern District of California (1517 Management Company, LLC, et al. v. Mohseni, No. 2:26-cv-01957) challenging the FIPVCC on constitutional grounds. The complaint asserts four claims:

Violation of the First Amendment, on the basis that the law compels speech and imposes a content-based restriction by requiring use of a state-prescribed form.
Violation of the equal protection clause, on the basis that the law “requires venture capital companies to consider race” and exerts pressure on the plaintiffs to alter their investment decisions to favor founders of particular races.
Violation of the dormant commerce clause, on the basis that the law purports to regulate transactions occurring outside California and involving persons having no connection with California.
Violation of the due process clause, on the same extraterritorial grounds.

Notably, plaintiffs seek a declaration that the FIPVCC, on its face and as applied, to the plaintiffs, is unconstitutional and seek a permanent injunction against its enforcement only as to the plaintiffs. Though any injunctive relief would thus be limited to the plaintiffs to this lawsuit, any merits-based ruling by the court (including a declaration or other order finding that the FIPVCC is unconstitutional) may have significant implications for the law’s future viability.

Next steps

Notwithstanding ongoing litigation, the DFPI appears to be pressing ahead with rulemaking, and the outcome of that process will shape compliance obligations if the law survives legal scrutiny.

Cooley is monitoring developments and is available to assist clients navigating this evolving landscape. Please reach out to us if you would like to discuss submitting comments to the DFPI or would like to assess your organization’s obligations under FIPVCC.

Big Law AI Makes a Big Splash, But Real Transformation Happens Below the Surface

Mon, 22 Jun 2026 15:19:59 Z

Cooley chief innovation officer David Wang was quoted in Law.com about how Big Law uses artificial intelligence (AI) and his views on AI investments and strategy.

Read the article

CRED Receives Significant Investment From Meta

Mon, 22 Jun 2026 15:14:30 Z

Cooley advised CRED, an Indian fintech startup, on its $900 million investment from Meta at a $4.5 billion post-money valuation. The investment gives Meta a roughly 20% stake in CRED, with plans to appoint its founder, Kunal Shah, the new leader of WhatsApp.

The transaction was announced publicly in the following press release, which can be viewed here.

Rishab Kumar and Grigor Lynch led the Cooley team advising CRED.

Aaron Pomeroy, Meghana Bhimarao, Zi Ye, and Brandon Lefebvre provided invaluable support.

Antengene Announces Exclusive License Agreement With MPM BioImpact-Established K2 Therapeutics

Sun, 21 Jun 2026 14:53:00 Z

Shanghai – June 21, 2026 – Cooley advised K2 Therapeutics, a biotech company established by MPM BioImpact, on its exclusive license agreement with Antengene Corporation Limited for ATG-106, a preclinical CDH6 x CD3 bispecific T cell engager (TCE) in development for solid tumors. Antengene also announced that it has entered into an option agreement to grant K2 Therapeutics the option to obtain exclusive global rights to develop and commercialize an undisclosed preclinical bispecific TCE candidate. Across both agreements, K2 Therapeutics’ rights extend globally, excluding Greater China.

Under the license agreement, Antengene is entitled to upfront and near-term considerations of approximately $20 million, consisting of cash and a minority equity stake in a newly established asset company and subsidiary of K2 Therapeutics, subject to the satisfaction of certain near-term conditions. Antengene is also eligible to receive developmental, regulatory and sales milestone payments of up to $960.5 million related to ATG-106, plus tiered royalties on future net sales.

Under the option agreement, upon exercise of the option, Antengene is entitled to receive upfront and near-term considerations of approximately $20 million, consisting of an option exercise fee, near-term payment and upfront payment, as well as a minority equity stake in the related asset company. Antengene would also be eligible to receive developmental, regulatory and sales milestone payments of up to $960.5 million related to the undisclosed TCE program, plus tiered royalties on future net sales.

Lawyers Yiming Liu, Bin Wang, Zack Gong and Ivy Wang led the Cooley transaction team advising K2 Therapeutics.

Cooley previously advised K2 Therapeutics on its exclusive license agreement with Adcoris Biopharma in April 2026.

EEOC Issues New National Enforcement Plan

Thu, 18 Jun 2026 22:56:00 Z

On June 4, 2026, Equal Employment Opportunity Commission (EEOC) Chair Andrea Lucas signed a directive rescinding the agency’s Biden-era Strategic Enforcement Plan for Fiscal Years 2024 – 2028 and replacing it with a new National Enforcement Plan for Fiscal Years 2025 – 2029 (NEP). The NEP took effect immediately and guides the agency’s work across outreach, public education, technical assistance, enforcement and litigation. It reflects a marked shift in substantive enforcement priorities.

Lucas identified the following enforcement areas as “Chair priorities”: remedying race and sex discrimination related to diversity, equity and inclusion (DEI) efforts; protecting American workers from anti-American national origin discrimination; defending women’s rights to single-sex spaces at work and workers’ rights to express the “binary nature of sex”; and protecting workers’ religious liberty rights to receive accommodations and be free from religious discrimination, harassment and related retaliation. She described the NEP as reaffirming the agency’s “unwavering commitment to merit-based, evenhanded enforcement of our nation’s civil rights laws.”

Key priorities

The new NEP identifies several categories of substantive priorities, including the following:

Disparate treatment prioritized over disparate impact

Consistent with executive order 14281, which declared a federal policy to eliminate the use of disparate impact liability “in all contexts to the maximum degree possible,” the NEP explicitly deprioritizes disparate impact theory despite acknowledging its codification in Title VII. While the NEP acknowledges that Congress amended Title VII in 1991 to address disparate impact liability, it characterizes disparate treatment (intentional discrimination) as “inherently … more egregious” than disparate impact, and states that the agency will not commence, develop or continue to pursue disparate impact litigation. Consistent with following EO 14281, the NEP also states that as “an executive branch agency,” the EEOC will “use its discretion in its deployment of its enforcement authority to advance the Administration’s policy objectives and comply with relevant Executive Orders.”

DEI programs

The NEP targets employment policies, programs or practices framed as DEI, or “similar euphemisms,” particularly those adopted by “large corporations, prominent universities, and other elite institutions.” Examples cited in the NEP include race- or sex-based quotas (including aspirational goals “that are proxies for quotas or otherwise encourage or incentivize race- and sex-based decision making, in any employment action”); diverse slate policies; requirements that candidates submit diversity statements; employee race or sex data shared with managers, the public, or non-human resources or non-legal personnel; and executive compensation or bonuses tied to race- or sex-based demographic or diversity goals.

Promoting the development of law

The NEP also prioritizes development of anti-discrimination law, with particular focus on the application and scope of recent US Supreme Court decisions and unresolved issues of statutory interpretation. Priority areas include:

The application of Title VII to DEI programs following the Supreme Court’s decisions in Ames v. Ohio Department of Youth Services, Muldrow v. St. Louis and Students for Fair Admissions, Inc. v. President and Fellows of Harvard College.
The “some harm” standard under Muldrow.
Religious accommodation obligations under Groff v. DeJoy.
The scope of Bostock v. Clayton County regarding single-sex spaces, the right to express the binary nature of sex and religious accommodations for sincerely held
The scope of liability under the Pregnant Workers Fairness Act.

The NEP also states that the agency will prioritize cases involving circuit conflicts on NEP priority issues or cases presenting an opportunity for Supreme Court resolution.

Other priorities

In addition to the above priorities, the NEP states that the agency will target the following:

Matters on an individual, class or systemic basis that raise issues presenting a substantial likelihood of broader enforcement significance beyond the parties to the dispute (including cases involving repeated or overt discrimination).
Cases protecting “vulnerable workers,” including teenage workers, persons with limited literacy or education, individuals employed in low-wage jobs, sexual assault survivors, and workers with developmental or intellectual disabilities.
Cases involving the integrity or effectiveness of the agency’s enforcement process, including cases where persons are retaliated against for participating in EEOC proceedings or a respondent’s defense is rooted in a challenge to EEOC policy documents.

Considerations for employers

The priorities in the NEP track the administration’s federal employment policy direction over the past 18 months. Employers should pay particular attention to the types of DEI initiatives and other employment practices the NEP identifies as targets. The agency also notes that it will collaborate with the Department of Justice, Department of Labor and Department of Education, as well as state and local agencies, through coordinated investigations, litigation, information sharing and other cooperative enforcement efforts, extending the practical reach of NEP enforcement.

In light of the NEP, employers should consider the following steps:

Audit programs and policies. Review all existing DEI initiatives, hiring programs, mentorship and fellowship opportunities, and compensation structures to ensure equal access for all, regardless of protected characteristics.
Review job postings and recruiting materials. Ensure that job advertisements do not use language that could discourage or encourage applicants on the basis of a protected characteristic. For example, the NEP specifically flags as “overt discrimination” job ads that, based on protected characteristics such as race or national origin, exclude or discourage certain individuals from applying, or encourage certain individuals to apply. This includes terms that function as race-based proxies (e.g., “diverse candidates”) or national origin proxies (e.g., “guest worker visa holders” or “PERM applicants”).
Assess immigration and visa-related hiring practices. Programs that preference guest worker visa holders or Program Electronic Review Management (PERM) applicants may result in national origin discrimination claims or liability. Recent EEOC enforcement actions have targeted alleged anti-American bias and preferences for foreign workers.
Exercise caution when navigating religious accommodation requests. Employers should confirm that their accommodation requests and interactive processes are well-documented, consistently applied and defensible under the Groff standard and in light of heightened EEOC scrutiny.

LabGenius Therapeutics and LG Chem Enter a Research Collaboration, Option and License Agreement

Thu, 18 Jun 2026 21:12:35 Z

London – June 18, 2026 – Cooley advised LabGenius Therapeutics, a drug discovery company combining machine learning (ML) and high-throughput experimentation to optimize therapeutic antibodies, on its multi-year research collaboration, option and licensing agreement with LG Chem. The collaboration aims to identify next-generation multispecific antibodies designed to overcome the key limitations of existing immunotherapies, including on-target, off-tumor toxicities.

LabGenius will receive an undisclosed upfront payment and potential early milestones, plus, if the option is exercised, potential triple-digit million clinical, regulatory and commercial milestones, along with royalties on net sales.

Lawyers Frances Stocks Allen and Alexandra Paterson led the Cooley team advising LabGenius.

XDOF Emerges From Stealth With $70 Million Raise

Wed, 17 Jun 2026 20:56:00 Z

New York – June 17, 2026 – Cooley advised XDOF, the infrastructure partner for the world's most ambitious robotics builders, on its Series A funding round, as the company emerged from stealth with $70 million in fundraising to build core infrastructure for robot foundation models.

Lawyers Stephane Levy and Michael Bruno led the Cooley team advising XDOF, with support from Dillon Martinson and Karen Tsai.

UK Tax and LLCs: An End to Double Taxation?

Wed, 17 Jun 2026 16:00:00 Z

In welcome news, on 10 June 2026, the UK government signalled its intention to resolve a frequently encountered problem for UK taxpayers holding interests in cross-border structures: the tax mismatch – and consequent high effective tax rates – that can arise for UK members of limited liability companies (LLCs).

The UK tax authority (HMRC) published a consultation document (ConDoc) setting out the government’s proposals.

The ‘tax mismatch’ explained

The underlying issue concerns the UK tax classification of LLCs. The ConDoc focuses on US LLCs, but all LLCs are in scope.

LLCs are a type of corporate entity commonly used to hold investments and businesses, combining operational flexibility with limited liability. Whilst LLCs are popular in the US and many other jurisdictions, UK corporate law does not allow the creation of UK LLCs.

Under US tax rules, a US LLC is treated as “transparent” for US tax purposes (either as a partnership or as a disregarded entity if it has only one member), unless a “check-the-box” election has been made to treat it as “opaque” (as a corporation). In principle, therefore, an individual UK member of a (transparent) US LLC is subject to US tax on that member’s proportion of the income and gains of the LLC, taxed at applicable US tax rates.

The tax mismatch arises because it is current HMRC practice to treat almost all US LLCs as opaque for UK tax purposes. Consequently, a UK member of a US LLC is treated for UK tax purposes not as receiving a proportion of the income and gains of the LLC, but instead as receiving a distribution from the LLC, as and when its income and gains are treated as distributed by the LLC. In the UK, distributions are generally taxed at income tax rates of up to 39.35%.

HMRC’s position is that, except in limited circumstances, the US tax cannot be credited against the UK tax (including under the UK/US treaty) because credit for tax can only be given in respect of the same profits, income or gains – and LLC profits, income and gains, on the one hand, and dividends, on the other, are inherently different.

This purely technical mismatch can result in double taxation for UK individual members of an LLC – indeed, the ConDoc notes that effective tax rates can exceed 75%.

Proposed reforms

The ConDoc states that the UK government is minded to introduce legislation that would, going forward, automatically treat LLCs that are fiscally transparent in their home country as transparent for UK tax purposes. In theory, this should eliminate (or at least substantially reduce) the risk of double taxation. The ConDoc does, however, also seek views on two alternative proposals, being a deduction regime (reducing UK taxable receipts to the amount net of non-UK tax already paid) or a credit regime (effectively the status quo but with credit for non-UK tax on underlying profits given against UK tax on distributions).

Some important issues have not yet been addressed. In particular, the proposed reforms are stated to apply only to UK individuals, with UK corporates expressly carved out of scope (the current mismatch is typically less of a problem for UK corporates, because of a UK tax exemption for dividends received by companies, but LLCs can cause other complications for UK companies, including around the application of grouping tests). Transparent treatment would also not apply to LLCs that are themselves subject to UK taxation, either as resident in the UK or through a UK permanent establishment – leaving the door open to the risk of high effective tax rates for UK individuals in some scenarios. There are also likely to be complications around any transition into the new rules. Even after the mismatch between transparent and opaque treatment has been resolved, problems could still arise as a result of a different type of mismatch, between the timing and calculation of profits and gains arising to the LLC under separate UK and US tax rules.

Concluding thoughts and next steps

If implemented, the proposal to treat many US LLCs as transparent on an automatic basis could be a neat solution to what has long been a thorny issue for UK taxpayers and their advisors. It should also make it more attractive for LLC-holding US citizens to relocate to the UK.

The announcement also supports wider shifts in UK tax policy aimed at making the UK tax system more user-friendly for US-facing business structures and transactions. Another relatively recent example is the publication by HMRC of guidance indicating its view that UK tax deferral (under section 135 of the Taxation of Chargeable Gains Act 1992) may be achieved in US merger transactions, which historically has been far from clear.

The consultation runs until 31 July 2026. Individuals potentially impacted by the government’s proposal should continue to monitor for updates, including the publication of any draft legislation.

What Can You Tell Payors Preapproval? FDA Clarifies Safe Harbors

Wed, 17 Jun 2026 14:48:44 Z

On June 3, 2026, the US Food and Drug Administration (FDA) issued new draft guidance titled, “Drug and Device Manufacturer Communications With Payors, Formulary Committees,and Similar Entities — Questions and Answers” (2026 draft guidance). Once finalized, the 2026 draft guidance will replace the 2018 final guidance of the same title. FDA is accepting public comments through August 3, 2026.

The 2026 draft guidance implements statutory changes introduced by the Pre-approval Information Exchange (PIE) Act (Section 3630 of the Consolidated Appropriations Act, 2023), which added Section 502(gg) to the Federal Food, Drug, and Cosmetic Act (FDCA). While the guidance does not represent a wholesale overhaul to how FDA considers preapproval payor communications, several updates carry meaningful compliance implications for both drug and device manufacturers seeking to communicate with certain third parties about unapproved products or uses.

Background

Under both the 2018 guidance and long-standing FDA policy, manufacturers have been permitted to communicate certain information about unapproved products and unapproved uses of approved or cleared products to payors, formulary committees and similar entities – such as healthcare economic information (HCEI) – in advance of FDA approval or clearance. The 2018 guidance established a nonbinding framework under which FDA “did not intend to object” to such communications when conducted within specified parameters. The PIE Act added an explicit statutory safe harbor to that framework, and the 2026 draft guidance implements and elaborates on that statutory structure.

Like the 2018 guidance, and consistent with the relevant statutory language, the 2026 draft guidance applies only to communications with payors, formulary committees and similar entities with knowledge and expertise in healthcare economic analysis. Communications directed at other audiences, such as healthcare providers or consumers, regarding unapproved medical products or unapproved uses of approved or cleared medical products “are beyond the scope of this guidance.” FDA acknowledges the role that these payor communications can play in coverage and reimbursement assessments and determinations, “recogniz[ing] that in some situations, payors need to plan for and make coverage and reimbursement decisions for medical products and uses far in advance of the effective date of such decisions.” The agency further recognizes “the value of payors receiving truthful and not misleading information about unapproved medical products and unapproved uses of approved/cleared medical products, as described in [Section 502(gg) of the FDCA], in order to inform their decision-making.”

Key updates in the 2026 draft guidance

Incorporation of the statutory safe harbor under Section 502(gg)

The PIE Act created a statutory safe harbor under Section 502(gg) of the FDCA, providing that a drug or device shall not be deemed “misbranded” solely on the basis of qualifying payor communications. The 2026 draft guidance incorporates this statutory language, replacing the 2018 guidance’s prior nonbinding “does not intend to object” policy with the binding statutory conditions. To qualify for the safe harbor, communications must:

Fall within the enumerated “product information” types – including product descriptions, anticipated approval or clearance timelines, pricing information, patient utilization projections and factual presentations of study results that do not characterize safety or effectiveness.
Be truthful and not misleading.
Include required disclosures regarding the product’s unapproved or uncleared status, stage of development, study design limitations, current approved labeling (if applicable) and any material updates to previously communicated information.
Not include representations that the product has been approved or cleared, or that its safety and effectiveness has been established.

Medical devices now expressly on equal footing with drugs

One of the more significant structural changes under the PIE Act, also incorporated into the 2026 draft guidance, is the full integration of medical devices (in addition to drugs) into the statutory framework. The PIE Act amended Section 502(a) of the FDCA to explicitly extend the HCEI provisions to medical devices. Under the 2018 guidance, devices were addressed only through a nonbinding “generally applicable” FDA policy – meaning device manufacturers lacked a statutory hook when engaging in these communications. Consistent with the PIE Act, the 2026 draft guidance expressly applies to both drugs and devices. More specifically, it consolidates drugs and devices under a single unified framework and removes the prior separate device section entirely. Device manufacturers can now point to a formal statutory safe harbor when participating in preapproval/clearance HCEI communications with payors.

Mandatory follow-up communications

Perhaps the most operationally significant change reflected in the PIE Act and incorporated into the 2026 draft guidance is the elevation of the follow-up obligation from a nonbinding recommendation to a statutory requirement. Under the PIE Act and the 2026 draft guidance, manufacturers must provide updated information to payors if previously communicated information becomes materially outdated – for example, due to failure to meet a primary endpoint, a clinical hold or a determination that an application is not ready for approval.

This change creates a meaningful compliance infrastructure challenge. Many manufacturers – especially those working through their first product approval – may not have a systematic process to track which payors or formulary committees received which preapproval communications, making it difficult to reliably trigger follow-up obligations when information becomes outdated. Manufacturers should assess whether their existing policies and procedures are adequate to meet this statutory requirement.

Greater disclosure about clinical development

FDA reaffirms its policy of not objecting to payor communications about unapproved uses of approved or cleared products, even where such uses are not actively under investigation, provided the communication is consistent with Section 502(gg). However, the 2026 draft guidance picks up on key language in Section 502(gg) that is not present with the Section 502(a) HCEI language – the requirement to disclose “[i]nformation related to the stage of product development” (e.g., the status of any study or studies in which the product or new use is being investigated and how that relates to the overall development plan, whether a marketing application for the product or new use has been submitted to FDA, or when such a submission is planned), as well as material aspects of any such study designs, methodologies and limitations.

This disclosure obligation appeared in a single Q&A response in the 2018 guidance but is now a statutory requirement under the PIE Act. Sponsors must now consider whether and when they are ready to share this type of information with payors, formulary committees and/or similar entities to remain within the Section 502(gg) safe harbor. Doing so will necessarily require sponsors to assess how to protect confidential commercial information while still making the disclosures needed to qualify for the statutory safe harbor.

Implications for sponsors

Although the 2026 draft guidance does not represent a dramatic departure from the previous FDA guidance about HCEI practice, the elevation of key conditions to statutory requirements means that existing payor communication frameworks, templates and policies should be reviewed and updated as appropriate. In particular, companies should consider the following action items:

Review disclosure language. Assess whether current disclosure language in payor-facing materials satisfies the Section 502(gg)(1)(A) statutory requirements, which are now binding rather than advisory.
Align device communications with the unified statutory standard. Device manufacturers should review their payor communication programs in light of the updated statutory framework that expressly applies to devices.
Build or update follow-up communication-tracking processes. Sponsors should evaluate whether they have sufficient infrastructure to identify which payors received which preapproval communications, and to trigger mandatory follow-up when material information changes. Existing policies should be reviewed – and, where needed, a separate policy covering payor and formulary committee interactions should be developed.
Reinforce MLR review for HCEI materials. To ensure that communications satisfy the disclosure requirements and all other conditions under Section 502(gg), sponsors should route HCEI materials through a Medical, Legal and Regulatory (MLR) review or similar formal review process to confirm that the materials are accurate, nonmisleading and appropriately contextualized within the overall medical product development plan.

Comment deadline: August 3, 2026

FDA is soliciting public comments on the 2026 draft guidance through August 3, 2026. Companies that engage in preapproval/clearance payor communications – particularly those with comments on the mandatory follow-up obligation, the disclosure of medical product development information or device-specific implementation questions – may wish to consider submitting comments.

If you have questions about the 2026 draft guidance, how it affects your existing payor communication program or whether to submit comments, please contact your Cooley relationship attorney or any member of Cooley’s life sciences and healthcare regulatory practice group.

Hikma v. Amarin: What the Supreme Court’s Decision Means for Pleading Induced Infringement

Wed, 17 Jun 2026 07:00:00 Z

On June 4, 2026, the US Supreme Court unanimously decided Hikma Pharmaceuticals USA Inc. v. Amarin Pharma, Inc., holding that induced patent infringement under § 271(b) requires a plaintiff to plausibly allege affirmative steps to encourage infringement, and that “passive” statements that recipients merely could read as instructions to infringe were not sufficient. In doing so, the Supreme Court explicitly rejected the US Court of Appeals for the Federal Circuit’s approach that focused on “whether the relevant statements could be read by medical providers as instructions to infringe.”¹ While finding that Amarin’s complaint did not sufficiently allege affirmative steps to encourage infringement, the Supreme Court left open the possibility that induced infringement can be implicit. Hikma involved induced infringement in the “skinny-label” context, but the Supreme Court’s analysis could apply to induced infringement more broadly.

The Hatch-Waxman skinny-label pathway

The Hatch-Waxman Act allows generic manufacturers to seek US Food and Drug Administration (FDA) approval through an abbreviated new drug application (ANDA) that piggybacks on the brand manufacturer's clinical data, avoiding the costly and time-consuming studies required for a pioneer drug. A generic manufacturer whose product would infringe a patented method of use has three main options: wait until the patent expires to enter the market, file a paragraph IV certification asserting the patent is invalid or will not be infringed (which constitutes an act of infringement and triggers litigation), or submit a “skinny label” that removes (i.e., “carves out”) the patented use and only includes unpatented methods of use and file a so-called section viii statement informing FDA of the carve-out. Even if a generic manufacturer pursues a skinny label, the branded company may still sue for induced infringement if the generic takes affirmative steps to encourage use of its product for the patented method of use, including for failing to successfully carve out the patented use from the skinny label. Cases like GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., 7 F.4th 1320, 1323 (Fed. Cir. 2021) and AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, 1060 (Fed. Cir. 2010) make this clear.

Amarin’s complaint and the proceedings below

Amarin markets Vascepa (icosapent ethyl), which FDA approved in 2012 for severe hypertriglyceridemia (SH Indication).² At that time, Vascepa was not yet approved for cardiovascular uses, and its original label included a statement that its effect “on cardiovascular mortality and morbidity in patients with severe hypertriglyceridemia has not been determined” (CV Limitation of Use).³ In 2016, Hikma submitted an ANDA for its generic icosapent ethyl for the SH Indication.⁴

In 2019, FDA approved Vascepa for a second use, reducing cardiovascular risk in patients who already take statins (CV Indication).⁵ At that time, Amarin removed the CV Limitation of Use from Vascepa’s label and obtained two method-of-use patents covering the CV Indication and listed those patents in the Orange Book.⁶

In response to the new patents, Hikma supplemented its ANDA with a section viii statement that it was seeking a skinny label for only the SH Indication and not the CV Indication. Hikma also removed the CV Limitation of Use from its label.⁷ In 2020, after Amarin’s SH patents were found invalid, FDA approved Hikma’s ANDA with a skinny label limited to the SH Indication, assigning Hikma’s generic an “AB” rating indicating therapeutic equivalence to Vascepa when used according to its labeling.⁸ Amarin alleged that because Hikma’s generic is therapeutically equivalent to Vascepa, it is routinely dispensed in place of Vascepa under generic substitution laws, including for the patented CV use, despite the carve-out on Hikma’s label.

Amarin sued in the US District Court for the District of Delaware, alleging Hikma actively induced infringement of its CV Indication patents based on the totality of Hikma’s statements across several documents.⁹ Specifically, Amarin made allegations based upon:

The Hikma label’s omission of the CV Limitation of Use, while retaining information about a clinical study in which some patients were taking statins.¹⁰
A Hikma patient information leaflet that warned about possible side effects for “people who have heart (cardiovascular) disease,” which is the target population for the CV Indication, noting that “[m]edicines are sometimes prescribed for purposes other than those listed in a Patient Information leaflet.”¹¹
Hikma’s website that described its icosapent ethyl drug as “AB” rated and listed its therapeutic category as “hypertriglyceridemia,” a category that includes, but is broader than, the approved SH Indication.¹²
Pre-launch press releases that described Hikma’s product as “generic Vascepa” without disclosing that the approved use was limited to the SH Indication, and that featured Vascepa’s sales figures attributable to both indications.¹³

Hikma moved to dismiss the complaint for failure to state a claim, and the district court granted the motion. The Federal Circuit reversed, finding it “at least plausible that a physician could read” Hikma’s label, website and press releases “as an instruction or encouragement to prescribe [Hikma’s generic] for any of the approved uses of icosapent ethyl.”¹⁴

The legal framework for pleading induced infringement

The Supreme Court’s analysis begins with the “well-established” Iqbal-Twombly standard for pleading that “asks for more than a sheer possibility that a defendant has acted unlawfully.”¹⁵ A complaint that “pleads facts that are merely consistent with a defendant’s liability” “stops short of the line between possibility and plausibility of entitlement to relief.”¹⁶ Therefore, to “nudge a claim ‘across the line from conceivable to plausible,’” the “plaintiff must plead facts that ‘allo[w] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,’” and “rule out ‘obvious alternative explanation[s]’ for the defendant’s conduct.”¹⁷

The three elements of inducement are: (1) direct infringement by a third party; (2) knowledge that “the induced acts constitute patent infringement;” and (3) “active steps … to encourage direct infringement.”¹⁸ The question before the Supreme Court was limited to whether Amarin had satisfied the pleading standard for the third element.

The ‘active steps’ requirement

The Supreme Court held that a plausible inducement claim must include “active steps” to encourage infringement and, by contrast, that “ordinary acts incident to product distribution” are not enough.”¹⁹ The Supreme Court explained that active steps require “statements or actions directed to promoting infringement” and cited with approval previous inducement cases that required “‘the taking of affirmative,’ as opposed to passive, ‘steps to bring about the desired result’ of patent infringement” or “purposeful, culpable expression and conduct.”²⁰

Nor can allegations of inducement “be based only on ‘vague’ language ‘combined with speculation about how others may act.’”²¹ The Supreme Court drew a line between the insufficiency of alleging “a plausible chain of events” that merely “could lead a healthcare provider … to prescribe or dispense” the generic drug in an infringing manner,²² and statements “designed to stimulate others to commit violations.”²³ The Supreme Court noted that “statements designed to stimulate others form a narrower category than statements that could stimulate others.”²⁴ The Supreme Court explicitly “reject[ed]” the Federal Circuit’s “recent approach … which has increasingly trained its focus on whether the relevant statements could be read by medical providers as instructions to infringe.”²⁵

Importantly, the Supreme Court rejected Hikma’s argument that active inducement must always be “express.”²⁶ “But implicit or explicit, the necessary inducement must be ‘clear’ to the relevant audience and ‘affirmative.’”²⁷

Applying the standard: Three reasons Amarin’s complaint failed

The Supreme Court reasoned that the statements Amarin relied on fell into three categories.

Category 1: Obvious alternative explanation

The Supreme Court determined that some of Hikma’s statements had an “obvious alternative explanation” besides inducing infringement.²⁸ The Supreme Court pointed out that Hikma’s label omitted the CV Limitation of Use and retained clinical study information about patients taking statins because the duty-of-sameness statute, 21 USC §355(j)(2)(A)(v), required it to mirror Vascepa’s label except for the carved-out indication.²⁹ The Supreme Court concluded Hikma’s press releases describing its product as “generic Vascepa” reflected “normal industry practice” of “truthfully describ[ing]” a generic drug as “equivalent” to the brand-name comparator.³⁰ The Supreme Court reasoned that finding statements “complying with the law or with standard industry practice” to also be “affirmative steps to encourage infringement” would “put generic manufacturers between a rock and a hard place.”³¹

Category 2: Mere omissions and inactions

The Supreme Court also found that “mere omissions, inactions, or nonfeasance” did not amount to “affirmative ‘statements or actions.’”³² Therefore, the Supreme Court determined Hikma’s omission of the CV Limitation of Use from its label and silence about the SH-only approval in its press releases were not enough to plausibly allege liability. The Supreme Court reasoned that it must “look for affirmative ‘statements or actions’ precisely to avoid ‘trenching on regular commerce,’” and doing otherwise could make “ordinary merchants … liable for any misuse of their goods and services, no matter how attenuated their relationship with the wrongdoer.’”³³

Category 3: Vague statements combined with speculation

The Supreme Court found the remaining statements Amarin invoked to support inducement liability were too vague to constitute plausible active steps.³⁴ The patient leaflet’s cardiovascular side effect warning and off-label use disclaimer were considered “implausibly roundabout ways to induce” infringement.³⁵ The Hikma website’s reference to its product as a treatment for “hypertriglyceridemia,” as opposed to “severe hypertriglyceridemia,” was considered merely a description of the category of drugs, “akin to describing a drug for leukemia as a “cancer drug.’”³⁶ The Supreme Court concluded the Hikma website’s clarification that its generic is “indicated for fewer than all approved indications” of Vascepa negated any inference of deliberate promotion.³⁷ And the Supreme Court considered Hikma’s press release sales figures as “the vaguest of ‘vague’ statements” that would require multiple, speculative steps to occur for those statements to result in infringement – a chain of events that is “possible” but not “plausible.”³⁸

Practical implications

For brand-name patent owners, the decision sets the bar for pleading induced infringement but does not close the door to finding infringement where a generic uses a skinny label. The Supreme Court did not foreclose inducement claims in skinny-label cases based on a totality-of-circumstances theory and confirmed that implicit encouragement can suffice. However, the totality of statements must plausibly reflect affirmative steps by the defendant to encourage infringing use. Allegations that depend on assuming a subjective, inferential leap by the healthcare provider are more likely to be found “possible” but not “plausible.” Statements or conduct directed at the patented use that cannot be explained by regulatory obligation or industry practice are likely to provide more plausible allegations of active inducement.

Brand-name patent owners should also consider patent strategies that are not susceptible to indication carve-outs – for example, by patenting safety and efficacy information that relates to all approved indications. This can include dose adjustments based on patient characteristics, such as renal, hepatic or metabolizer status, and dose adjustments to address interactions with other drugs. Because this information is required to appear in a generic label, it will provide clearer evidence of induced infringement.

For generic manufacturers, Hikma demonstrates that companies that pursue the skinny-label pathway, mirror the brand label as required by statute and describe their products using standard industry terminology may be better positioned to avoid induced infringement liability.

Conclusion

Hikma v. Amarin is a significant decision for pleading induced patent infringement claims. Patentees should heed the Supreme Court’s emphasis that “the key question is whether a defendant actively encouraged infringement through its statements, not merely how others may understand those statements,”³⁹ because “implicit or explicit, the necessary inducement must be ‘clear’ to the relevant audience and ‘affirmative.’”⁴⁰

Notes

Slip op. at 9 n.3.
Slip op. at 5.
Id.
Id.
Id.
Id.
Id.
Id. at 6, citing the Federal Circuit decision, 104 F.4th 1370, 1373–1374.
578 F.Supp. 3d 642, 645–647 (D. Del. 2022); slip op. at 6–7.
Slip op. at 6.
Id.
Id.
Id. at 6–7.
104 F.4th 1370, 1378–1380 (Fed. Cir. 2024).
Slip op. at 7, quoting Ashcroft v. Iqbal, 556 US 662, 678 (2009).
Id.
Id. at 7–8, quoting Iqbal, 556 US at 678, 680, and Bell Atlantic Corp. v. Twombly, 550 US 544, 567 (2007).
Id. at 7–8, quoting Iqbal, 556 US at 678, 680, and Bell Atlantic Corp. v. Twombly, 550 US 544, 567 (2007).
Id. at 8, quoting Global-Tech, 563 US at 760.
Id. at 8, quoting Global-Tech, 563 US at 760, and Grokster, 545 US at 935, 937.)
Id. at 10, citing Takeda Pharms. v. Westward Pharm. Corp., 785 F.3d 625, 632 (Fed. Cir. 2015).
Id. at 8, quoting Amarin’s brief.
Id. at 9, quoting Grokster, 545 US at 937.
Id., emphases in original.
Id. at 9 n.3.
Id. at 10.
Id., citing Grokster, 545 US at 937.
Slip op. at 10–11, quoting Twombly, 550 US at 567.
Slip op. at 11.
Id., citing Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 US 844, 847–848 (1982).
Id. at 10-11.
Slip op. at 11–12 (emphasis in original).
Id. (emphasis in original), citing Grokster, 545 US, at 935, 937, and Twitter, Inc. v. Taamneh, 598 US 471, 489 (2023).
Slip op. at 12.
Id.
Id. at 13.
Id. at 12–13.
Id. at 13–14.
Slip op. at 9 n.3.
Id. at 10.

Brooklyn Yeshiva’s Monitorship Ends, Offering ‘Roadmap’ for Compliance

Tue, 16 Jun 2026 20:36:46 Z

Andrew Goldstein, head of Cooley’s white collar defense and investigations group and co-partner in charge of the Washington, DC, office, was quoted in a Law.com Q&A alongside former US Treasury official Mitchell Silk about the compliance program they developed during the Central United Talmudic Academy’s monitorship stemming from a federal fraud case. Goldstein emphasized that the program serves as both a model for non-profit and religious organizations in a bind and a roadmap for corporations that may face scrutiny from the Department of Justice.

Read the Q&A

Rest Assured: Virginia Enacts Paid Sick Leave Law

Tue, 16 Jun 2026 13:14:22 Z

Virginia recently enacted HB 5, a paid sick leave (PSL) law, requiring all commonwealth employers to provide paid sick leave on a phased schedule beginning July 1, 2027. Employees will accrue up to 40 hours of PSL annually. Below is a summary of key provisions and recommended compliance steps.

Phased effective dates and employer coverage

PSL applies to employers on the following phased schedule based on workforce size:

July 1, 2027: Employers with 50 or more employees
January 1, 2028: Employers with 25 or more employees
January 1, 2029: Employers with one or more employees

Whether the employee count is based on total headcount or Virginia-based employees remains unclear and may be addressed in forthcoming regulations. The law exempts certain employees, including home health workers and certain licensed healthcare professionals.

Accrual and carryover requirements

Employees accrue one hour of paid sick leave for every 30 hours worked, beginning at the start of employment. Any accrued but unused leave must carry over from year to year, though employees may not accrue or use more than 40 hours of leave in a year, unless the employer sets a higher limit. Employees exempt from the Fair Labor Standards Act (FLSA) are assumed to work 40 hours per week for accrual purposes, unless their normal work week is shorter.

Employers may frontload the full 40 hours at the start of the year to satisfy the accrual requirement, in which case they are not required to allow carryover of unused leave into the following year. Employers with existing paid leave policies that provide leave in an amount and under conditions and purposes sufficient to meet the new law’s requirements are not required to provide additional paid sick leave. Similarly, employers subject to collective bargaining agreements that meet the requirements of the law are exempt from providing additional paid sick leave.

Employers need not pay out accrued, unused leave upon separation. However, if an employee is rehired within 12 months, previously accrued leave must be reinstated, unless it was paid out at separation.

PSL uses

Employees may use PSL for the following purposes:

The employee’s own mental or physical illness, injury or health condition, including the need for medical diagnosis, treatment or preventive care.
Care of a family member with a mental or physical illness, injury or health condition, or who needs medical diagnosis, treatment or preventive care.
Absences related to domestic violence, sexual assault or stalking, provided the leave is used to seek or obtain medical or mental healthcare, counseling, legal services, relocation or securing an existing home, or other victim services for the employee or the employee’s family member.

The law defines “family member” broadly to include:

A child (biological, adopted, foster, stepchild, legal ward or child to whom the employee stands in loco parentis).
A parent (biological, adopted, foster, stepparent, adoptive, legal guardian or an individual who stands in loco parentis).
A spouse or domestic partner.
Grandparent, grandchild or sibling.
Individuals for whom the employee provides or arranges health or safety-related care.
Any other individual related by blood or affinity whose “close association with an employee is the equivalent of a family relationship.”

Requesting leave

Employees may request leave orally, in writing, electronically or “by any other means acceptable to the employer.” For foreseeable leave, employees must make a good faith effort to provide advance notice and avoid unduly disrupting operations. Employers requiring notice must provide a written notice policy; failure to do so precludes denying leave for noncompliance with notice requirements.

Documentation

For absences of three or more consecutive workdays, employers may require reasonable documentation that leave was used for a covered purpose. A healthcare professional’s note suffices for health-related leave. For domestic violence, sexual assault or stalking-related leave, acceptable documentation includes a police report, court document, documentation from a victim services advocate or other professional, or the employee’s own written statement.

Confidentiality

Employers may not require disclosure of detailed health information or details of domestic violence, sexual assault or stalking as a condition of providing leave. Any such information must be treated as confidential and may not be disclosed without the employee’s consent, except as required by law.

Notice and recordkeeping

The law directs the commissioner of labor and industry to promulgate regulations governing employee notice and employer recordkeeping. Employers must notify employees of their rights (including the right to file complaints or bring civil actions) in writing and through workplace postings, maintain records of leave accrual and use for at least three years, and ensure the confidentiality of any health or domestic violence-related information.

Anti-retaliation protections

The law prohibits retaliation, including discharge, discipline, threats or discrimination, against employees who request or use PSL, allege violations, participate in investigations or inform others of their PSL rights. PSL may not be counted as an absence under an absence control policy. These protections extend to individuals who allege a violation in good faith, even if the allegation is ultimately mistaken.

Enforcement and penalties

The commissioner of labor and industry will promulgate implementing regulations to enforce the law. Aggrieved individuals may file a complaint with the commissioner within one year of the date they knew or should have known of the violation, and the commissioner may also initiate investigations at their own discretion.

Employers that knowingly violate the law are subject to civil penalties of up to $150 for a first violation, $300 for a second violation within two years and $500 for each successive violation within that period. In determining the amount of the civil penalty, the commissioner must consider the size of the business and the gravity of the violation. Notably, the law provides that no civil monetary penalty will be assessed, and no action will be brought against an employer alleged to have violated the law if the employer corrects the alleged violation within a reasonable time to be established by regulation.

In addition, employees also have a private right of action without first exhausting administrative remedies. A prevailing employee is entitled to:

Twice the amount of uncompensated sick leave.
Twice the amount of actual damages.
Injunctive relief.
Legal or equitable relief, including reinstatement.
Lost wages, benefits and other remuneration, plus interest, attorneys’ fees and costs.

The statute of limitations for a civil action is two years from the violation or the date the employee knew or should have known of it.

Next steps

In light of the new law, Virginia employers should consider the following steps:

Review existing leave policies. Evaluate whether current paid time off policies (e.g. sick leave, vacation, etc.) satisfy the law’s requirements and consider whether to update them to comply with PSL or establish a separate PSL benefit for Virginia employees.
Prepare to update employee handbooks, notices and systems. Update handbooks, policies and workplace postings to reflect the new requirements, including employees’ rights to file complaints or bring civil actions. Employers should also align payroll and timekeeping systems to track accrual and usage accurately.
Train supervisors and managers. Train management on the law’s anti-retaliation provisions and confidentiality protections, among other key provisions.
Monitor regulatory developments. Key issues remain unaddressed, including employer threshold coverage, notice and recordkeeping obligations. Employers should monitor the commonwealth’s rulemaking process for additional guidance.

Virginia’s most recent legislative session closed with significant new obligations for employers, including a newly enacted paid family and medical leave law; for more detail about the new leave law, please see this May 1 Cooley alert. If you have questions about these new laws, contact the Cooley employment team or one of the lawyers listed below.

New State AI Laws Create Dual Misrepresentation Risk

Mon, 15 Jun 2026 19:55:28 Z

Cooley lawyers William Pao, Tijana Brien, Sean Quinn, Rebecca Kahn, Adam Silow and Julian Piroli co-authored a Law360 article examining the recent surge of newly enacted state artificial intelligence (AI) disclosure laws, which now require companies to produce AI‑specific frameworks, transparency reports, consumer notices and more, as states push for greater transparency and accountability around undisclosed uses of AI.

Read the article

US Enforcement Policies Create Favorable Self-Reporting Environment

Mon, 15 Jun 2026 17:14:23 Z

Cooley parter Tejal Shah was quoted in a Global Investigations Review article about the shift in enforcement priorities and the strategic opportunity it creates for companies to self‑report white collar crimes and misconduct. Shah noted that reporting technical violations now may help protect companies from future scrutiny when enforcement priorities evolve.

Read the article (subscription required)

Fin to be Acquired by Salesforce for Approximately $3.6 Billion

Mon, 15 Jun 2026 12:07:40 Z

Cooley advised Fin, formerly Intercom, an industry-leading customer agent company, in its agreement to be acquired by Salesforce, the global leader in CRM, for approximately $3.6 billion.

The transaction was announced publicly in the following press release, which can be viewed here.

Jamie Leigh, Garth Osterman, Sangitha Palaniappa, Queenie Chen, Rachel Proffitt, Emma Mann-Meginniss and Jacob Hanna led the Cooley team advising Fin.

Tracy Rubin, Jeremy Morrison, Nyron Persaud, Jeff Tolin, Patrick Sharma and Brian Mitchell provided invaluable support.

Cooley Continues Rise in Legal 500 US 2026 Rankings

Thu, 11 Jun 2026 19:59:13 Z

New York – June 11, 2026 – Cooley continued its strong showing in the Legal 500 US 2026 edition, gaining increased recognition across a total of 45 practice areas. The firm received top-tier recommendations for life sciences, technology transactions, cyber law (including data privacy and data protection), capital markets: equity offerings: advice to issuers, and venture capital and emerging companies.

The firm additionally received five new practice area rankings for financial services litigation, state attorneys general, copyright, education and sport. Eight of its practice area rankings were higher than they were in 2025.

The Legal 500 US guide also recommended 100 Cooley lawyers, including 46 recognized as leading lawyers in their respective fields, six profiled in the guide’s Hall of Fame, eight highlighted as next-generation partners, and one recognized as a leading trial lawyer.

The following is a complete list of Cooley’s Legal 500 US 2026 rankings:

Recommended practice groups

Capital markets: debt offerings: advice to issuers
Capital markets: debt offerings: advice to underwriters
Capital markets: equity offerings: advice to issuers
Capital markets: equity offerings: advice to managers
Capital markets: global offerings: advice to issuers +
Capital markets: global offerings: advice to underwriters +
Corporate governance +
CFIUS
Civil litigation/class action: defense
Commercial lending: advice to borrowers
Copyright *
Corporate investigations and white-collar criminal defense: advice to corporates +
Corporate investigations and white-collar criminal defense: advice to individuals +
Customs, export controls and economic sanctions
Cyber law (including data privacy and data protection)
Education *
Employee benefits, executive compensation and retirement plans: transactional
Financial services litigation *
Financial services regulation: banking
Financial services regulation: consumer finance
Fintech
General commercial disputes – premium ($500 million+)
International arbitration
Land use/zoning
Leading trial lawyers
Life sciences
M&A: large deals ($1 billion+)
Merger control
Patents: litigation (full coverage)
Patents: prosecution (including re-examination and post-grant proceedings)
Private equity funds (including venture capital)
Product liability, mass tort and class action – defense: consumer products (including tobacco)
Restructuring (including bankruptcy): corporate +
Securities litigation: defense
Shareholder activism: advice to boards
Sport *
State attorneys general *
Technology transactions
Telecoms and broadcast: regulatory
Trade secrets (litigation and non-contentious matters)
Trademarks: litigation
Trademarks: non-contentious (including prosecution, portfolio management and licensing) +
Transport: aviation and air travel – litigation and regulation
US taxes: non-contentious +
Venture capital and emerging companies
Workplace and employment counseling

Indicates Tier 1 ranking
* Indicates new ranking
+ Indicates improved ranking

Cooley Advises ZincFive on DeSPAC Transaction With Spark I Acquisition Corp

Thu, 11 Jun 2026 13:21:21 Z

New York – June 11, 2026 – Cooley advised ZincFive, the leader in immediate power solutions for the data center and artificial intelligence infrastructure markets powered by its proprietary nickel-zinc battery technology, on its definitive business combination agreement with Spark I Acquisition Corporation (Nasdaq: SPKL), a special purpose acquisition company formed by SparkLabs Group. This proposed transaction represents a pro forma enterprise value of approximately $752 million and, upon completion, is expected to result in ZincFive becoming a Nasdaq-listed company under the ticker symbol ZFIV and under the name ZincFive, Inc.

The proposed business combination is expected to deliver gross proceeds of at least $100 million from a committed private investment in public equity (PIPE), which fully satisfies the agreement’s minimum cash condition, and up to $25 million in additional proceeds depending on redemptions.

The boards of directors of both ZincFive and Spark I have unanimously approved the proposed transaction, which is expected to close in the second half of 2026, subject to customary closing conditions, including approval by Spark I shareholders and regulatory review. Upon closing, the combined company will operate as ZincFive, Inc. and is expected to be listed on Nasdaq.

The Cooley team was led by New York and San Francisco partners Yvan-Claude Pierre, Garth Osterman and Peter Byrne and Seattle associate Willy Cowles, with New York capital markets associates Paul Alexander and David Brinton and New York and Los Angeles mergers and acquisitions special counsel Nathan Baum and associates Cameron Gyorffy and Dillon Holdsworth. Advice was also provided on tax matters by Washington, DC, partner Eileen Marshall; and on benefits matters by New York partner Nyron Persaud. Additional advice was provided by other practice groups within the international Cooley offices.

Cooley advised ZincFve on all financings since its formation through its acquisition of PowerGenix Systems in 2016, including their recent Series F funding round in December 2025.

Laekna Announces Exclusive License Agreement With Vasque Bio

Wed, 10 Jun 2026 20:14:00 Z

Shanghai – June 10, 2026 – Cooley advised Laekna (HKSE: 2105.HK), a science-driven biotechnology company, on its exclusive license agreement with Vasque Bio for LAE118, a novel drug candidate discovered and developed by Laekna.

Under the agreement, Laekna grants Vasque Bio an exclusive license to develop, manufacture and commercialize LAE118 on a global basis (excluding mainland China, Hong Kong, Macau and Taiwan), among other rights. Laekna will receive an upfront cash payment of $10 million and the right to acquire up to high teen percentage of Vasque Bio’s outstanding common stock or cash payments in lieu of such common stock, and is also eligible to receive up to $517 million in development and sales milestone payments, as well as tiered royalties based on future net sales.

Yiming Liu, Geoffrey Spolyar, Monica Xu, Zack Gong and Lunga Su led the Cooley transaction team advising Laekna.

Christopher Kimball, Andrew Epstein, Zhijing Yu, Yiying Wang, Tonny Yu, Snow Yang and Nick Mu provided invaluable support.

Cooley previously advised Laekna on its clinical collaboration with Eli Lilly and Company in November 2024.

Washington’s CEMA Amendments Take Effect June 11 – What Consumer-Facing Companies Should Know

Tue, 09 Jun 2026 18:42:32 Z

Background: The litigation wave

Recent court decisions have significantly expanded the reach of Washington’s Commercial Electronic Mail Act (CEMA), a statute enacted in 1998 in response to dial-up era concerns. The claims driving today’s litigation wave follow a recognizable pattern: A merchant sends a promotional email with a subject line announcing that a sale “ends tonight” or “ends today” – and then, days or a week later, announces the sale has been extended. Under the expansive reading of CEMA adopted by the Washington Supreme Court in April 2025, that sequence could give rise to a statutory claim for each email sent, regardless of whether the email body contains qualifying language.

In Brown v. Old Navy, 4 Wn. 3d 580 (2025), the court rejected a narrower reading of CEMA, under which the statute reached only false or misleading subject-line information concerning the commercial nature of the email. Instead, the court held that CEMA’s prohibition on “false or misleading” email subject lines reaches any inaccurate subject line claim – including otherwise routine promotional language like “ends tonight,” “today only” or “50% off” – regardless of whether the email body clarifies the claim. Separately, CEMA prohibits sending or “assisting” the sending of unconsented commercial text messages.

The result has been a surge in class action filings. With $500 in statutory damages per violation – and no express statutory requirement that the plaintiff prove actual harm or intent on the part of defendants – the potential aggregate exposure from a single campaign often reaches into the tens or hundreds of millions of dollars for large retailers. A CEMA violation is also automatically deemed an “unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying” Washington’s Consumer Protection Act (CPA), enabling plaintiffs to sue retailers and other defendants under both statutes. More than 100 CEMA lawsuits were filed in the 12 months following Brown, compared to just eight over the preceding two decades.

What the 2026 amendments change

On March 23, 2026, Washington Gov. Bob Ferguson signed HB 2274 into law, providing tailored reforms to CEMA that take effect on June 11, 2026.

Reduced statutory damages. Per-violation statutory damages are reduced from $500 to $100. This is significant, but high-volume senders remain exposed to substantial aggregate liability even at the lower amount. A campaign reaching one million Washington recipients could still generate up to $100 million in statutory exposure.
Knowledge requirement. For email subject line claims, the statute now includes an express requirement that the sender knew, or that knowledge was fairly implied from objective circumstances, that the subject line was false or misleading at the time of sending. In practice, this may provide a defense where a sender can document that a sale’s end date was set in good faith and an extension was genuinely unplanned, but it may not help where internal records show that extensions were routine or anticipated. For text message claims, the knowledge standard remains unchanged.
Prospective application only. The amendments apply only to lawsuits “commenced on or after” June 11, 2026.

Geographic reach: Risk is not limited to businesses in Washington

CEMA has been interpreted to apply to commercial emails and text messages sent to Washington residents, regardless of where the sender is located. Any retailer or consumer-facing business with customers in Washington faces potential exposure, even if it has no physical presence in the state.

Practical risk mitigation: What companies should do now

Audit existing campaigns for subject lines that contain duration, discount or urgency claims that were later qualified or extended.
Ensure subject lines are independently accurate – do not rely on email body text to correct or qualify a claim in the subject line.
Document the good-faith basis for subject line representations at the time each email is sent, including promotional calendars and approval records.
Audit third-party and affiliate email partners to ensure their practices meet the same standards.

European Union: The Single Market’s Invisible Borders

Tue, 09 Jun 2026 16:00:00 Z

Brussels has territorial supply constraints in its sights. The European Commission has opened a public consultation on one of the most politically charged supply-chain issues in the European Union (EU). Brand owners, manufacturers and distributors should pay close attention.

The direction of travel is clear. Political support for action is broad and growing, and Brussels has set an ambitious timetable. Where this ends up, however, is far from certain. Soft measures – voluntary codes or nonbinding guidelines – are unlikely to satisfy the political appetite that has built around the issue. Harder legislative options carry real legal and commercial risk. For those who have not gotten involved already, now is the time.

Borders without barriers? Not quite

Territorial supply constraints (TSCs) are business practices that restrict customers – especially retailers and wholesalers – from engaging in cross-border arbitrage: buying products in “low-price” EU Member States and reselling them in “high-price” ones. A manufacturer in Spain, say, who receives an order from a Danish retailer may refer that retailer to its Danish subsidiary. If the retailer cannot source at the lower Spanish price, it is less able to compete on price in the higher-cost Danish market.

The EU’s single market does not aim to ensure a single price for every product. But its rules on free movement and nondiscrimination are meant to facilitate cross-border trade. TSCs, in effect, partition the market along national lines. Views differ as to why they exist. Some see them as strategies by manufacturers to create and preserve fat profit margins. Others blame divergent national regulation. Still others regard them as mechanisms that balance commercial relations within domestic value chains. If perspectives differ on the disease cause, they differ on the cure, too.

Are trustbusters not enough? Not always

TSCs are not new. For decades, the Commission has wielded the EU’s antitrust rules against practices that partition the single market: parallel trade restrictions, cross-border price discrimination and the like. The courts have mostly backed this approach, and a rich body of case law has evolved.

Enforcement remains vigorous. Mondelēz was fined €337.5 million for anticompetitive arrangements limiting cross-border sales of chocolates, biscuits and coffee. AB InBev paid €200 million for abusing a dominant position in Belgian beer by hindering cheaper imports of its Jupiler beer from the Netherlands into Belgium. In April 2026, the Commission sent inspectors on dawn raids at Ferrero on suspicion of market segmentation between Member States and obstacles to multicountry purchases.

Yet, despite decades of enforcement, the Commission in 2025 designated TSCs one of the “Terrible Ten” – the 10 most harmful barriers to trade in the single market. Its single-market strategy promised “new tools” to tackle unjustified TSCs beyond the reach of antitrust law, which has inherent limits. Enforcement presupposes either an “agreement” between firms or unilateral action by a “dominant” one. Investigations drag on: The Mondelēz case took four-and-a-half years; AB InBev’s took six or seven. A perceived regulatory gap has been identified, particularly for unilateral practices by firms that are not dominant.

A bandwagon gathers speed

TSCs may not be new, but the political momentum for regulatory action is – and it is considerable. For instance:

Enrico Letta, Italy’s former prime minister, called TSCs out by name in his 2024 report on the single market. He argued that they recreate internal economic frontiers contrary to the fundamental freedoms of movement and the principle of nondiscrimination and recommended strengthening national authorities’ capacity to tackle suspected TSCs through a formal procedure for cross-border cases.
In May 2025 the European Parliament published a briefing paper calling TSCs “an unaddressed barrier to single market integration”. It noted that regulatory progression – from partial regulation through competition law to full internal-market legislation – may be required.
The European Council followed suit. In its conclusions of 19 March 2026, it called for measures to address the negative impact of TSCs as a high priority.

Four ways to fill the gap

On 28 May 2026, the Commission launched the next formal step: a 12-week public consultation on regulatory options, open until 20 August. The indicative timetable for a proposal is tight: the fourth quarter of 2026.

The consultation seeks input from all stakeholders on the sources, prevalence, nature and justifications of TSCs. Crucially, stakeholders can submit evidence and real-world experience to help define the problem and shape potential solutions.

Four policy options are on the table:

Option 1 – Self-regulatory action (e.g. a code of conduct). Stakeholders identify practices that hamper the sourcing of products from across the EU and when these practices may be justified.
Option 2 – Guidelines for national authorities and market operators. The Commission identifies practices that hamper the sourcing of products from across the EU and when these practices may be justified.
Option 3 – Legislation based on the concept of economic dependence that would cover territorial supply constraints resulting from unilateral decisions by nondominant operators (assessment on a case-by-case basis).
Option 4 – Legislation identifying a list of prohibited practices and when they may be justified.

Brace for impact

Critics may call this a broad regulatory initiative in search of a problem. There is genuine debate about root causes – whether TSCs stem from imperfect national regulation, corporate rent-seeking or some combination of the two.

No matter. Political calls for intervention are strong. Member States, the European Parliament, the Commission and various stakeholders all want action – and an expansion of regulatory powers beyond the existing, well-oiled antitrust framework.

The regulatory options under consideration are wide-ranging, and they center on corporate business practices rather than regulatory barriers. Both suppliers and buyers of goods in the EU would be wise to engage in the consultation and the debate that surrounds it. The goal should be regulation that is well-calibrated and proportionate – aimed at real-world distortions, not a phantom menace.

Tango Therapeutics Announces $600 Million Upsized Public Offering

Tue, 09 Jun 2026 14:42:00 Z

New York – June 9, 2026 – Cooley advised the underwriters of Tango Therapeutics (Nasdaq: TNGX), a clinical-stage biotechnology company committed to discovering and delivering the next generation of precision cancer medicines, on Tango's $600 million upsized public offering. The offering consisted of an underwritten offering of 18,166,667 shares of its common stock priced at $30 per share and pre-funded warrants to purchase up to 1,833,395 shares of its common stock priced at $29.999 per share. Tango has also granted the underwriters a 30-day option to purchase up to an additional 3,000,009 shares of common stock at the public offering price, less the underwriting discount.

J.P. Morgan, Leerink Partners, Cantor and Stifel are acting as joint bookrunning managers for the offering.

The Cooley capital markets team included partners Evan Leitner, Darah Protas, Daniel Goldberg and Richard Segal and associates Eric Delgado, Matthew Iannone and Zachary Polen.

PhysicsX Raises $300 Million Series C

Mon, 08 Jun 2026 20:41:08 Z

London – June 8, 2026 – Cooley advised PhysicsX, the physics AI company for industrials, on its $300 million Series C financing at a valuation of approximately $2.4 billion. The round was led by Temasek, with participation from new investors M&G Investments and Intrepid Growth Partners, alongside existing investors including Applied Materials, Atomico, General Catalyst, July Fund, NGP, NVIDIA, Radius and Siemens.

Lawyers Aaron Archer, Charles Baker, Ellen Dewhurst, Maddie Drabble and Kevin King led the Cooley team advising PhysicsX.

Cooley previously advised PhysicsX on its $135 million Series B financing in June 2025.

Cooley Features Among Forbes’ Top Women Lawyers

Mon, 08 Jun 2026 16:00:00 Z

San Francisco and New York – June 8, 2026 – Forbes has recognized Cooley’s CEO and a leading litigator from the firm’s New York office on its inaugural list of America’s Top Women Lawyers.

Rachel Proffitt, partner and CEO, focuses on shaping and executing the firm’s strategic priorities, reinforcing and strengthening its unique culture, and promoting the continued elevation of Cooley’s powerful brand.

Rebekah Donaleski, the head of business litigation for New York, handles complex commercial disputes, high-stakes white-collar defense and investigations, and federal and state trials.

Forbes’ list honors 200 women lawyers who “distinguished themselves through notable deals and transactions, impressive trial work, sound judgment, and the respect of clients, peers and industry leaders.” Honorees were rated on multiple factors, including notable litigation, leadership, client impact, firm and community involvement, and recognition within the broader legal industry.

Cooley Recognized with Equity Market Deal of the Year at the ALB SE Asia Law Awards 2026

Mon, 08 Jun 2026 16:00:00 Z

Singapore – June 8, 2026Cooley was recognized by Asian Legal Business (ALB) in its annual SE Asia Law Awards series, which honours outstanding performance by private practitioners and in-house legal teams.

The firm’s work was honored as Equity Market Deal of the Year based on the representation of AvePoint’s SG$260 million underwritten SEC-registered public offering and concurrent listing on the Mainboard of the Singapore Exchange. The award is based on the legal expertise, client service, and cross-border collaboration required of the deal.

The award was presented during the annual awards ceremony in Singapore. Cooley was also shortlisted as International Deal Firm of the Year, Private Equity and Venture Capital Law Firm of the Year, and SE Asia Law Firm of the Year.

Federal Circuit Insulet Ruling Narrows DTSA Time-Bar Window, Prompting Concerns Over Rushed Claims

Mon, 08 Jun 2026 15:17:57 Z

Cooley partner Elizabeth Prelogar was quoted in an IAM article about the US Court of Appeals for the Federal Circuit overturning a major jury verdict, holding that Insulet Corp’s trade secret claims against EOFlow were filed too late under the Defend Trade Secrets Act (DTSA). Prelogar emphasized that the ruling highlights the importance of acting without delay in asserting trade secret violations, describing the decision as a significant win for EOFlow and for innovation.

Read the article (subscription required)

AI Executive Order Creates Voluntary Framework for Frontier Models, Advances Critical Infrastructure Cybersecurity

Mon, 08 Jun 2026 14:40:51 Z

On June 2, 2026, President Donald Trump signed a new executive order (EO) addressing the intersection of artificial intelligence and cybersecurity. This EO has direct implications for AI developers, critical infrastructure companies, and any business operating at the intersection of AI and cybersecurity. The EO directs federal agencies to take a series of actions (many within 30 to 60 days) with the purposes of upgrading the cyber defenses of government information systems, establishing a voluntary framework for the deployment of advanced AI models and reinforcing criminal enforcement against the misuse of AI. Below, we summarize the key provisions of the EO and highlight potential implications for AI developers, critical infrastructure operators and other stakeholders.

Importantly, the EO does not impose mandatory licensing or pre-clearance; the EO’s voluntary framework for frontier model deployment creates a structured pathway for engagement with the federal government, but participation is not mandatory. The EO also does not create new civil liability, and it does not address AI governance beyond the cybersecurity context.

Background

The EO frames the United States’ continued leadership in AI as a product of private-sector innovation and a regulatory environment that avoids overly burdensome restrictions. At the same time, the EO acknowledges that advanced AI capabilities introduce new national security considerations requiring coordinated federal action.

Key issues for developers

The most significant provision for AI developers is the direction to the secretary of the Treasury, the secretary of Defense (through the director of the National Security Agency (NSA)) and the secretary of Homeland Security (through the director of the Cybersecurity and Infrastructure Security Agency (CISA)), in consultation with other senior officials, to develop within 60 days:

A classified benchmarking process. This classified benchmarking process will assess the advanced cyber capabilities of AI models and determine the threshold at which a model should be designated a “covered frontier model” for purposes of the EO. The director of NSA will make such designations in consultation with the National Cyber Director, the assistant to the president for Science and Technology, the director of CISA and other Department of Defense representatives. The benchmarking will be classified, and the process is to be “developed and maintained,” presumably to reflect the changing “frontier” of development, in contrast with the EU AI Act's publicly available risk-tier classification criteria.

A voluntary developer framework. The EO provides for a voluntary framework through which AI developers would be able to:
- Engage the federal government to determine whether models under development meet the “covered frontier model” designation.
- Provide the government with access to covered frontier models for up to 30 days before releasing them to trusted partners (subject to confidentiality, cybersecurity, insider risk and intellectual property protections).
- Collaborate with the government to select trusted partners for early access to promote secure innovation and strengthen critical infrastructure cybersecurity.

Notably, the EO expressly provides that nothing in that portion of the EO shall be construed to authorize the creation of a mandatory governmental licensing, preclearance or permitting requirement for the development, publication, release or distribution of new AI models, including frontier models. This voluntary framing is consistent with the administration's broader deregulatory posture.

Additional elements of the EO

In addition to the benchmarking process and voluntary developer framework, the EO imposes additional instructions to other government agencies regarding AI.

Upgrading federal cyber defenses

The EO imposes aggressive 30-day deadlines on federal agencies to prioritize and enhance the cybersecurity of government information systems. The Committee on National Security Systems and the secretary of Defense are each directed to prioritize the cyber defense of National Security Systems and Department of Defense information systems, respectively. The secretary of Homeland Security, acting through the director of CISA, is directed to release Binding Operational Directives and other guidance to:

Expedite the cyber defense of civilian federal information systems.
Establish or expand federal programs that enhance AI-enabled defensive tools.
Facilitate access to cybersecurity tools and services – including, where appropriate, covered frontier models – for agencies, state and local authorities, and critical infrastructure operators, such as rural hospitals, community banks and local utilities.

AI cybersecurity clearinghouse

The secretary of the Treasury, in consultation with the National Cyber Director, the secretary of Defense(through the director of the NSA) and the secretary of Homeland Security (through the director of CISA), is directed to establish an AI cybersecurity clearinghouse. This clearinghouse would operate in voluntary collaboration with the AI industry and critical infrastructure operators to coordinate and deconflict vulnerability scanning, discover and validate such vulnerabilities, and coordinate and prioritize remediation and distribution of vulnerability patches.

Grant funding and workforce

The director of the Office of Management and Budget, in coordination with the National Cyber Director and the director of CISA, is directed to identify federal grant programs with available funding that can be directed toward advanced AI vulnerability detection. Separately, within 60 days, the director of the Office of Personnel Management must expand the US Tech Force information cybersecurity specialist hiring and placement pathways.

Deadline	Agency/actor	Required action
30 days	CISA	Release Binding Operational Directives on cyber defense of civilian federal systems
30 days	Committee on National Security Systems/ secretary of Defense	Prioritize cyber defense of National Security Systems
60 days	Treasury, NSA, CISA	Develop classified benchmarking process and voluntary developer framework
60 days	Office of Personnel Management	Expand US Tech Force cybersecurity hiring pathways
Ongoing	Attorney general	Prioritize enforcement against AI-facilitated cyber crimes

The EO also directs the attorney general to prioritize enforcement of 18 USC §§ 1028 (identity fraud), 1030 (computer fraud and abuse) and 1343 (wire fraud), and all other applicable federal criminal laws, against anyone who utilizes AI to illegally access or damage a computer without authorization, or who utilizes AI in furtherance of such illegal access to commit other crimes. This includes breaching any public or private information technology system or employing AI agents to unlawfully access data or information that is subsequently used for a criminal or unlawful purpose. While these statutes already apply to AI-facilitated conduct, the EO signals the administration’s intent to make such prosecutions a priority.

Key next steps

The EO’s voluntary framework for frontier model deployment creates a structured pathway for engagement with the federal government, but participation is not mandatory.

For AI developers

Monitor the forthcoming classified benchmarking process and assess whether models may meet the "covered frontier model" threshold.
Establish an internal working group to evaluate the costs and benefits of voluntary framework participation before the 60-day window closes.
Ensure IP, confidentiality and cybersecurity protocols can accommodate government pre-release access if you choose to participate.

For critical infrastructure operators (healthcare, financial services, utilities)

Monitor CISA for Binding Operational Directives expected within 30 days.
Evaluate participation in the AI cybersecurity clearinghouse.
Assess eligibility for federal grant funding for AI vulnerability detection.

For all companies

Review cyber incident response plans in light of the heightened federal enforcement priority.
Assess whether your AI deployments introduce any potential liability exposure under the prioritized statutes.

Importantly, the EO does not impose mandatory licensing; it does not create new civil liability; and it does not address AI governance beyond the cybersecurity context.

How Cooley can help

Cooley’s AI and cyber/data/privacy teams are available to advise on voluntary framework participation, IP and confidentiality protections, and incident response planning.

2026 Shareholder Proposal Season Early Review and Look Ahead to 2027

Fri, 05 Jun 2026 17:48:00 Z

’Cause when life looks like Easy Street, there is danger at your door

Despite the heightened drama of the 2026 shareholder proposal season – precipitated by the landmark announcement from the staff of the Division of Corporation Finance of the SEC (SEC staff) that it would generally not respond to no-action requests during the 2026 proxy season – the year-over-year trends remained largely consistent with the prior year. Overall proposal volume continued to decline, driven primarily by fewer environmental and social (E&S) proposals, while governance and anti-ESG proposal activity and support levels remained broadly consistent with last year.

This alert provides an overview of proposal submissions and early voting trends for the 2026 season, examines exclusion and litigation developments under the SEC staff’s new no-action policy, as well as evolving proponent tactics, and considers the implications for what may be an even more chaotic 2027 season.

Key takeaways so far:

Overall submission and voting trends in 2026 are consistent with 2025: Aggregate proposal volumes continue to decline, driven primarily by fewer E&S proposals, which continue to attract low shareholder support, while governance proposals remain steady with continued robust support.

The SEC staff’s effective withdrawal from the Rule 14a-8 no-action process introduced significant uncertainty in 2026, contributing to a likely increase in negotiated withdrawals and a marked reduction in companies submitting unilateral Rule 14a-8(j) exclusion notices relative to prior-year no-action requests.

A significant uptick in proponent litigation in 2026 may introduce a disruptive dynamic into the 2027 season, further complicating how companies navigate shareholder proposal management.

The prospect of an SEC rulemaking to substantially revise or rescind Rule 14a-8 altogether may shape proponent strategies in 2027, though any such rule change would almost certainly face substantial legal and procedural challenges and would likely not take effect before the next proxy season.

Shareholder proponents and activists have continued to deploy innovative strategies in 2026, which may preview the pressure tactics companies can expect in 2027 or following a potential Rule 14a-8 rescission.

Recap of SEC actions

In September 2025, SEC Chairman Paul Atkins indicated that the SEC staff would explore ways to give companies additional tools to challenge shareholder proposals. In that speech, Atkins suggested the SEC staff might take a favorable view of companies submitting Delaware law opinions asserting that precatory proposals are improper under state law or adopting bylaw amendments that impose submission requirements beyond those in Rule 14a-8. Atkins also signaled the SEC was considering a comprehensive reassessment of Rule 14a-8’s role and purpose. Although amendments to Rule 14a-8 are on the SEC’s current rulemaking agenda, the SEC has not yet advanced a rule proposal.

In November 2025, the SEC staff announced a new policy for the 2026 proxy season under which it would no longer provide substantive responses to Rule 14a-8 no-action requests from companies seeking to exclude shareholder proposals from their definitive proxy materials, except for requests based on Rule 14a-8(i)(1) state law violation arguments. Companies seeking to exclude a shareholder proposal must still submit a notice of intent to exclude the proposal under Rule 14a-8(j). While the policy may have been intended to encourage companies to pursue the types of Delaware state law violation arguments under Rule 14a-8(i)(1) contemplated by Atkins, no companies have done so to date.

Initial expectations that the policy would lead to widespread unilateral exclusions and greater proponent flexibility in negotiating withdrawals have not fully materialized. As discussed below, a significant number of companies chose to exclude proposals, and the uncertainty generated by the SEC staff’s current no-action policy appears to have influenced some negotiations. However, the percentage of proposals included in proxies remained generally consistent with prior years, and in some proposal categories (social and anti-ESG proponent proposals) increased. In addition, the emergence of proponent-initiated litigation in March may further complicate the landscape if the SEC staff, as expected, maintains its current no-action policy for the 2027 season.

Notably, anticipated proxy advisor opposition to companies that unilaterally excluded shareholder proposals this season did not materialize, notwithstanding policy statements issued by Institutional Shareholder Services (ISS) and Glass Lewis indicating they would scrutinize companies’ Rule 14a-8(j) exclusion notices. Adverse vote recommendations on that basis were virtually nonexistent, with proxy advisors generally deferring to companies’ judgments where companies provided substantive explanations in support of the exclusion. Should proxy advisors adopt a more aggressive approach for the 2027 proxy season, companies would need to incorporate the prospect of proxy advisor opposition into their shareholder proposal exclusion analysis.

Proposal submissions and early vote results

The analysis below reflects shareholder proposals submitted for annual shareholder meetings at Russell 3000 companies scheduled between January 1 and June 30, 2026 (the 2026 proxy season). This alert adopts a January 1 through June 30 measurement period for all years referenced in the analysis – a departure from prior-year alerts, which used a July 1 through June 30 period – to align with the SEC staff’s announcement of its no-action policy for the 2026 season.[1] Vote results capture outcomes through May 25, leaving 131 proposals, approximately 32% of all proposals appearing in proxy statements to date, to be voted on this season. As a result, the voting trends discussed herein are preliminary and will continue to evolve as additional meetings are held.

Overview

The 2026 proxy season reflects a continuation of several multiyear trends, including a steep and sustained decline in E&S proposal submissions, steady governance proposal volume and a growing share of submissions from anti-ESG proponents. Of the 626 proposals submitted this season, approximately 66% have appeared in proxy statements, generally consistent with recent years (59% in 2025 and 63% in 2024). Average support across all proposal categories has risen slightly to 24.6% in 2026, up from 22.7% in 2025 and 22.5% in 2024.

A notable development this season is the sharp increase in ISS support rates. After recommending in favor of only 34.1% of proposals in 2025, ISS has supported 47.9% of proposals to date this season, broadly in line with its 47.3% support rate in 2024. That shift is reflected across all proposal categories, most strikingly for environmental proposals, where ISS support jumped from 0% in 2025 to 16.7% in 2026. The return of ISS support is likely a contributing factor to the modest improvement in average vote outcomes this season.

Anti-ESG proponents submitted 105 proposals in 2026, consistent with recent years, and average support for those proposals edged up to 5.3% from approximately 2.5% in each of the prior two years, principally driven by higher investor support for independent board chair proposals from those proponents.

Governance proposals

Governance proposals remained steady in volume and continue to receive relatively robust support. Proponents submitted 319 governance proposals in 2026, compared to 305 in 2025 and 316 in 2024, and average support of 33.8% is only slightly below the 35.2% and 35.1% averages observed in 2025 and 2024, respectively. As in prior seasons, governance proposal submissions were heavily concentrated among a small group of serial proponents, who collectively accounted for more than 75% of this season’s submissions.

Several governance proposal topics stand out this season:

Independent board chair – Submissions surged to 99 submissions in 2026 from just 31 in 2025, with average support of 24.6% (down from 31.3% in 2025).

Shareholder written consent rights – Submissions increased sharply to 51 submissions in 2026 from 11 in 2025, all from the same group of proponents referenced above, and average support increased to 38.3% (from 26.3% in 2025).

Shareholder special meeting rights – This remained a prominent proposal topic in 2026, with 59 submissions (down from 70 in 2025), and average support of 39.2% (up from 32.8% in 2025).

Simple majority voting – Proposals to eliminate supermajority voting provisions from governing documents declined to 32 submissions in 2026 from 40 in 2025, but remain among the highest-supported proposal topics at 59.1% average support, albeit down from 71.9% in 2025.

The following governance proposal topics have achieved majority support in 2026 to date:

Elimination of supermajority voting provisions from governing documents (5 proposals)

Establishment of shareholder special meeting rights (4)

Establishment of shareholder written consent rights (3)

Board declassification (3)

Shareholder approval prior to issuance of blank check preferred shares (2)

Adoption of a majority vote standard for director removal (1)

Shareholder approval of certain change-in-control severance agreements (1)

Notably, Exxon Mobil Corporation received a proposal this season relating to its new retail voting program, launched in September 2025, which allows retail holders to opt in to provide standing instructions to vote their shares at all future meetings in line with the board’s recommendations. The proposal requested that the company modify the program to offer additional voting options not aligned with the board’s recommendations. It failed with 23.5% support, but litigation challenging Exxon’s program remains ongoing.

Social proposals

Social proposal submissions continued their sharp multiyear decline. Proponents submitted 133 social proposals in 2026, down from 208 in 2025 and 298 in 2024, while average support has modestly increased to 16.4% (from 16% in 2025, though it has fallen from 19.6% in 2024).

The decline in lobbying proposals was particularly pronounced, falling from 38 submissions in 2025 to just seven in 2026. This drop likely reflects both successful exclusions in 2024 and 2025 on Rule 14a-8(i)(7) grounds and the low support these proposals received in 2025 (13.3%), though average support has rebounded to 26.5% this season. By contrast, political contributions proposals increased to 29 submissions (from 18 in 2025), likely buoyed by strong support last year (40.9%), though support has moderated to 28.2% this season.

Diversity proposals also continued their multiyear decline, falling to 19 submissions from 44 in 2025 and 68 in 2024. Average support declined to 13.6%, down from 14.3% in 2025 and 21.7% in 2024.

AI proposals attracted renewed attention in 2026. After first emerging in 2024, proponents submitted 14 AI-related proposals this season, compared to eight in 2025 and 11 in 2024. To date, only two AI-related proposals have been voted on, both submitted by anti-ESG proponents, and they received average support of 5.3%.

No social proposals have received majority support to date this season, but several topics have garnered more than 25% support:

Political contributions (6 proposals)

Lobbying payments (1)

Collective bargaining rights (1)

Environmental proposals

Environmental proposal submissions also continued their pronounced decline, falling to 69 proposals in 2026 from 107 in 2025 and 163 in 2024. Despite this reduced volume, average support for environmental proposals has increased moderately to 17% in 2026 from 12.4% in 2025 – a shift that correlates with the reversal in ISS recommendations this season.

Proposals focused on emissions-related reporting reflect the broader trend, declining from 42 submissions in 2025 to 22 in 2026, while average support is up to 22.9% from 12.9% in 2025 (though still below the 26.6% average in 2024). Among environmental proposals, emissions-related reporting is the only topic to receive greater than 25% support to date this season (3 proposals).

Impact of withdrawn proposals

Shareholder proposal data is subject to inherent uncertainty each year due to the impact of nonpublic proposal withdrawals. While withdrawals following a Rule 14a-8(j) exclusion notice or proxy filing, as well as those publicized by proponents, are reflected in the data, many companies and proponents negotiate withdrawals privately and before any filings or other proponent disclosures occur. The uncertainty created by the SEC staff’s current no-action policy appears to have increased the incentive for such negotiations in 2026, and our experience suggests that withdrawal volumes were likely higher this season than in prior years.

As discussed in our 2025 proxy season alert, the mid-season publication of Staff Legal Bulletin No. 14M in February 2025, which rescinded perceived proponent-friendly guidance published in 2021 that had limited companies’ ability to exclude proposals raising issues with “broad societal impact,” may also have contributed to elevated withdrawal activity last year. As a result, the year-over-year declines in submitted proposals between 2026 and 2025, and between 2025 and earlier years, may be meaningfully overstated due to the likelihood that a significant number of negotiated withdrawals were not publicized.

Proposal exclusions and litigation

As of June 1, companies had submitted 170 Rule 14a-8(j) exclusion notices under the SEC staff’s current no-action policy since its announcement in November 2025, compared to 360 no-action requests submitted during the comparable period of the prior season (November 2024 through May 2025). Even accounting for the year-over-year decline in proposal submissions, the magnitude of this decrease – a 53% reduction in exclusion-related filings against a 15% reduction in proposal submissions – suggests that a meaningful number of companies that would have sought no-action relief in prior years elected not to pursue exclusion under the SEC staff’s revised approach.

Companies’ decisions appear to have reflected a probability/magnitude assessment of the risks associated with unilateral exclusion. For many companies, even a relatively low probability of costly shareholder litigation (along with the negative publicity such litigation can generate), together with the prospect of adverse proxy advisor recommendations against individual directors, was sufficient to outweigh the benefits of exclusion, given the severity of those potential consequences. While anticipated proxy advisor opposition largely failed to materialize, litigation challenging proposal exclusions emerged later in the season, as discussed below.

The 170 Rule 14a-8(j) exclusion notices submitted this season included a mix of substantive and procedural exclusion bases, as reflected below. Notably, however, companies relied considerably less on certain substantive arguments requiring more subjective judgments. This trend was particularly evident for ordinary business and micromanagement exclusions under Rule 14a-8(i)(7), which appeared in only 33% of Rule 14a-8(j) exclusion notices this season, down markedly from the 56% rate observed in 2025 no-action requests. This may reflect a broader inclination among companies to adopt a more conservative posture under the SEC staff’s current no-action policy, favoring more objective bases for exclusion. This season’s Rule 14a-8(j) exclusion notices included:

51 exclusions based purely on procedural grounds

51 exclusions citing Rule 14a-8(i)(7) (ordinary business/micromanagement)

34 exclusions citing Rule 14a-8(i)(10) (substantial implementation)

17 exclusions citing Rule 14a-8(i)(3) (false/misleading)

Following the SEC staff’s announcement of its no-action policy for the 2026 season, early commentary focused on the potential for proponent litigation in the absence of the SEC staff’s role as arbiter, and the possibility that this risk would drive conservative company approaches to unilateral exclusions under the new policy. Early Rule 14a-8(j) exclusion notices appeared to confirm this expectation, emphasizing procedural and relatively straightforward substantive bases. Beginning in February, however, companies increasingly asserted 14a-8(i)(7) and other more expansive exclusions, suggesting an increase in company confidence. That trend shifted again in late February, when the first of what are now six proponent lawsuits was filed challenging the validity of company exclusions under Rule 14a-8.

Of the six lawsuits filed to date, one covered a human rights and diversity proposal, four covered E&S proposals, and one covered a political spending and lobbying proposal. In five of the six cases, the company relied on the “ordinary business” exclusion under Rule 14a-8(i)(7); the sixth was based on procedural defects.

As of June 2, 2026, three lawsuits have been settled, with companies agreeing either to implement the proposal or include it in their proxy materials. One case was voluntarily dismissed, and two remain pending. In the pending matters, one company filed its 2026 proxy statement with the proposal included after the court denied the company’s motion to dismiss and granted the proponent’s motion for injunctive relief, while the other filed the proxy without the proposal after the court denied the proponent’s motion for a preliminary injunction.

An even earlier look at 2027

Prospects for Rule 14a-8 repeal

The SEC’s 2026 rulemaking agenda includes a potential proposal addressing Rule 14a-8, and many observers have speculated that the SEC may seek to rescind the rule entirely. Any such proposal would be subject to the SEC’s standard rulemaking process, including notice-and-comment procedures. Given Rule 14a-8’s central role in the shareholder proposal landscape, a rescission proposal would likely generate a substantial volume of public comments (e.g., investor groups are already petitioning to keep Rule 14a-8 in place), requiring meaningful consideration by the SEC before adoption of a final rule. Recent SEC rulemakings have frequently taken more than a year to progress from proposal to adoption, suggesting that one or more proxy seasons could continue under the SEC staff’s current no-action policy before any rescission could become effective. In addition, a rescission of Rule 14a-8 would almost certainly face legal challenges, which could result in injunctive relief or a voluntary SEC stay (as occurred with the SEC’s 2024 climate rules). Consequently, uncertainty surrounding the future of Rule 14a-8 could persist past the 2028 presidential election.

2027 shareholder proposal landscape

Regardless of the timing of any SEC rulemaking, the prospect of a Rule 14a-8 rescission is likely to influence the 2027 proxy season. An imminent or pending rescission proposal may create a highly contentious “last chance” environment in which proponents seek to maximize leverage while the SEC staff’s current no-action policy remains in effect. One potential consequence may be proponents submitting precatory or binding bylaw proposals designed to provide shareholders with proposal access rights independent of Rule 14a-8.

The 2027 season could be further complicated if the SEC staff maintains its current no-action policy. Under that scenario, companies may have reduced leverage in negotiations with proponents, particularly given proponents’ demonstrated willingness during the 2026 season to use litigation as a means of challenging proposal exclusions.

Faced with elevated proposal volumes and heightened litigation risk, some companies may conclude in 2027 that allowing a greater number of proposals to proceed to a vote presents the lower-risk path, particularly on E&S topics, where shareholder and proxy advisor support continues to erode. That calculus may differ, however, for proposals addressing more consequential matters, such as binding bylaw amendments, or proposals with a greater likelihood of attracting substantial shareholder support.

To date, no company has taken up Atkins’ invitation to seek exclusion of a shareholder proposal on state law grounds under Rule 14a-8(i)(1). As the shareholder proposal landscape continues to evolve, however, some companies may become more willing to explore that avenue during the 2027 proxy season.

Evolution of proponent tactics

Even in the absence of further SEC staff policy changes, shareholder proponents continue to experiment with new ways to pressure companies to advance their objectives. Facing headwinds from the SEC staff’s current no-action policy, declining levels of shareholder support for certain proposal categories and the prospect of a future rescission of Rule 14a-8, proponents have continued to test innovative strategies in 2026, many of which may provide insight into how proponents could seek to maintain influence in a world where Rule 14a-8 plays a diminished role or has been repealed. These strategies include:

Litigation challenging proposal exclusions.

Running or threatening Rule 14a-4 “zero slate” campaigns where multiple shareholder proposals are submitted on the proponent’s universal proxy card while sidestepping the parameters of Rule 14a-8 (see, e.g., BJ’s Wholesale Club and Nexstar Media Group in 2026, following a strategy similar to that employed at Warrior Met Coal, as discussed in our 2024 shareholder proposal alert).

Withhold campaigns targeting directors, threatening to make director elections an alternative forum for E&S and governance activism.

Public campaigns criticizing companies that exclude proposals or are perceived as insufficiently responsive to shareholder concerns.

Binding bylaw amendment proposals submitted pursuant to Rule 14a-8 or through independent solicitation efforts.

The 2026 proxy season has been characterized by significant policy changes, strategic experimentation and legal uncertainty, and those dynamics are likely to persist into 2027. The practical effects of SEC skepticism toward shareholder proposals and E&S activism, political and regulatory scrutiny of proxy advisors, and declining support for certain categories of E&S proposals may be offset, at least in part, by evolving proponent strategies and continued uncertainty regarding the future of Rule 14a-8. In this environment, companies should prepare for a range of potential outcomes. Boards and management teams may benefit from ongoing education regarding developments in the shareholder proposal landscape, proactive engagement with shareholders and other key stakeholders, and periodic reassessments of governance and disclosure practices in light of evolving investor expectations and regulatory developments.

[1] Proposal submission and voting figures in this alert accordingly differ from those reported in prior-year alerts.

SEC Proposes Broad Expansion of Shelf Registration Access and Capital Markets Efficiencies

Fri, 05 Jun 2026 15:24:02 Z

The Securities and Exchange Commission (SEC) has proposed amendments to the rules and forms governing registered securities offerings, with the stated goal of enabling a significantly broader universe of public companies to access shelf registration and the capital markets efficiencies that accompany it.

The rulemaking, titled “Registered Offering Reform,” would expand eligibility to use Form S-3, replace the well-known seasoned issuer (WKSI) framework with a new tiered structure extending similar benefits to a wider set of exchange-listed issuers, preempt state securities law registration requirements for all registered offerings, and introduce related reforms for business development companies (BDCs), registered closed-end funds, certain registered annuity products and issuers using Form S-1.

If the rules are adopted, approximately 74% of existing US Exchange Act reporting issuers would be eligible to raise capital by filing an automatically effective shelf registration statement, without waiting for the SEC to review and declare it effective – compared to 36% currently. Additionally, nearly all US Exchange Act reporting issuers would be able to use Form S-3 for shelf offerings in unlimited amounts – compared to 61% currently. See Appendix A for a plain-language tabular comparison of the current and proposed frameworks – and our predictions for the real-world impact.

Expanded Form S-3 eligibility (and why it matters)

Under the current framework, approximately 3,400 issuers are able to use Form S-3 for unlimited primary offerings – i.e., for registered offers and sales by the issuer.¹The proposal would extend access to this more flexible capital raising process to nearly all US Exchange Act reporting issuers – more than 2,000 additional issuers – an improvement that would be particularly useful to smaller issuers. The proposal would also relax certain existing limitations that may currently apply when using Form S-3 to register securityholders’ resales, otherwise known as “secondary” offerings.

Background: What is Form S-3?

Form S-3 is a short-form registration statement that eligible issuers can use to register offerings of securities on a delayed or continuous basis – often referred to as offerings off the “shelf.” Once the Form S-3 registration statement is effective and generally for three years after its initial effective date, the issuer can use it to offer and sell securities in one or more primary offerings without waiting for further SEC staff review or action. This provides eligible issuers with important flexibility in capitalizing on opportunistic market windows.

Form S-3 also allows issuers to omit certain information initially and to automatically incorporate by reference to future filings the issuer makes under the Securities Exchange Act of 1934, as amended (Exchange Act). Issuers use this accommodation to keep the registration statement up to date and to satisfy the post-effective amendment undertakings provided for in Item 512 of Regulation S-K.

Current eligibility requirements and ‘baby shelf’ limitations

Under current rules, an issuer must meet certain issuer eligibility requirements to use Form S-3, which include being subject to Exchange Act reporting for at least 12 calendar months. Form S-3 is also currently available only for certain types of transactions. The most common transaction-based limitation is colloquially known as the “baby shelf” limitation, which applies to primary offerings by issuers having a public float of less than $75 million and limits these issuers to selling no more than one-third of their public float during a rolling 12-month calendar period. For all practical purposes, the baby shelf limitation substantially impairs the utility and flexibility of Form S-3 by issuers subject to that limitation, including small-cap issuers for which at-the-market (ATM) offerings may be an important means of raising additional capital. Issuers with a public float of $75 million or more are not subject to this cap.

The proposal would simplify eligibility

The proposed amendments would streamline Form S-3 eligibility by simply requiring the issuer to:

Be subject to the reporting requirements of the Exchange Act.
Have filed all reports and other materials required under Sections 13(a), 14(a), 14(c) and 15(d) of the Exchange Act during the preceding 12 calendar months (or for such shorter period that the registrant was required to file such reports and materials), and any portion of a month immediately preceding the filing of the registration statement.
Be timely in their Exchange Act reporting, other than specified reports on Form 8-K, but the proposal would create a limited exception that preserves Form S-3 eligibility if an issuer has a single untimely filing within the relevant lookback period, i.e., 12 months, so long as that filing is submitted within seven calendar days of its original due date.
- Where Exchange Act Rule 12b-25 applies, the seven calendar days would still be calculated from the original due date of the report and not the extended due date.
- For Exchange Act filings, such as Form 8-Ks where Rule 12b-25 does not apply, the proposed seven-day grace period would effectively eliminate the need for an issuer to seek confirmation from the SEC staff about continued Form S-3 eligibility when the issuer has filed a single Form 8-K merely hours or one day late.

The proposal would eliminate:

The one-year seasoning requirement.
The $75 million public float threshold for primary offerings of unlimited amounts (i.e., the baby shelf limitation described above).
All other transaction requirements, including complex restrictions on the types and amounts of securities that can be offered, such as the requirement that issuers register nonconvertible securities (other than common equity) only if they meet certain issuance-volume or WKSI-related thresholds, and the conditions on registering securities issuable upon exercise of outstanding rights, warrants or options.
The limitation on using Form S-3 for secondary (resale) offerings of securities that are not listed on a national securities exchange or quoted on the automated quotation system of a national securities association, which currently applies if an issuer has less than $75 million public float.
The eligibility requirement to file all electronic filings and interactive data files.
The eligibility requirement that issuers must not have failed to pay dividends or sinking fund installments on preferred stock or defaulted on indebtedness.

Any issuer satisfying the proposed registrant eligibility requirements would be able to use Form S-3 for primary or secondary registered offerings in any amount – whether the offering relates to convertible or nonconvertible debt or equity, common or preferred equity, or other types of securities. The proposal would have the effect of simplifying what is currently a complex process of determining whether certain offerings can be registered on Form S-3, especially for companies that are not WKSIs under the current framework.

Background: Understanding the impact on debt and ATM offerings

Because the proposal would significantly expand access to ATM offerings, it would also amend Rule 415 to limit eligibility to conduct ATM offerings to securities listed or traded only in specified markets, in order to facilitate capital formation in a manner that is consistent with investor protection.

The SEC indicates in the proposal that the OTCQX Best Market and OTCQB Venture Market tiers of the OTC Link ATS would likely qualify based on current criteria, though neither has been formally designated. Currently, Rule 415(a)(4) defines “at the market offering” as “an offering of equity securities into an existing trading market for outstanding shares of the same class at other than a fixed price.” The proposed amendment would include a nonexclusive list of attributes that the SEC would consider in determining whether to designate a market as a “trading market” or to withdraw a market’s status as a “trading market.” For exchange-listed issuers that already conduct ATM offerings, the proposal would not introduce any new requirements – national securities exchanges would be certain to qualify as trading markets.

For debt offerings, although the elimination of the nonconvertible debt issuance requirements broadens Form S-3 eligibility on its face, practitioners should note that registered debt offerings are less common in practice. Investment-grade and high-yield debt deals are overwhelmingly structured as Rule 144A transactions even for companies that already maintain an effective Form S-3. The practical significance of this particular change is therefore limited for most of the issuers described in this alert.

See our observations and commentary below for additional practical takeaways.

Ineligible issuers and offerings

Under the proposal, a new “ineligible issuer” category would expressly bar certain categories of issuers from using Form S-3, including issuers that are, or that have been during the past three years, or that have any predecessor that was a(n):

Blank check company, shell company (other than a business combination-related shell company), though a domestic issuer would not be considered a shell company solely because it has a special purpose acquisition company (SPAC) predecessor, preserving Form S-3 eligibility for deSPAC companies, or issuer of penny stock.
Specified bad actor.
Foreign private issuer (FPI), including an FPI that chooses to report on domestic Exchange Act forms.
Asset-backed issuer.
Registered investment company.
BDC.

As is currently the case, Form S-3 would not be available for exchange offers or business combination transactions.

A note on subsidiary eligibility

The proposal would also permit certain majority-owned subsidiaries that are not Exchange Act reporting companies to continue to register guarantee-related offerings on a parent’s Form S-3, provided their parent is eligible to use Form S-3 and the parent and subsidiary are identified on the registration statement as co-registrants.

Additionally, the proposal would permit a majority-owned subsidiary that is independently eligible to use Form S-3 to be treated as an eligible listed issuer (ELI) or seasoned eligible listed issuer (SELI) under the new tiered framework described below. The determination would be based on its parent’s status for purposes of registering nonconvertible securities other than common equity. If the parent were a SELI, the majority-owned subsidiary could be treated as a SELI with respect to the offering, meaning that the majority-owned subsidiary could register the offering on an automatic shelf registration statement with the parent as a co-registrant. This provision is most relevant for structured finance and holding company structures.

New tiered framework: ELIs and SELIs

Since 2005, enhanced registration flexibility has been available to the WKSI category of issuers, compounding the traditional benefits of Form S-3. For example, WKSIs’ shelf registration statements are automatically effective upon filing, they can use a “pay-as-you-go” filing fee process (so that the shelf registration statement does not need to specify the total dollar amount of securities to be offered), and they have more flexibility to communicate about an offering. Current rules require an issuer to have at least $700 million in public float or $1 billion in registered debt offerings to qualify as a WKSI.

The proposal would replace the existing domestic WKSI concept with two new issuer categories, which issuers would assess on an annual basis:

Eligible listed issuer (ELI): A Form S-3 eligible issuer that has at least one class of common equity securities listed on a national securities exchange.
Seasoned eligible listed issuer (SELI): An ELI that has additionally been subject to Exchange Act reporting requirements for at least 12 months.

Most of the enhanced benefits currently available only to WKSIs would, under the proposal, become available to all ELIs. The most significant additional benefit of SELI status over ELI status is automatic effectiveness for Form S-3 shelf registration statements – meaning the SEC staff does not review the registration statement, and there is no need to request acceleration of effectiveness from the SEC staff. The registration statement is effective when filed and can be easily used for subsequent offers and sales.

For the 36% of issuers that currently qualify as WKSIs, automatic shelf registration has streamlined processes and enhanced both planning and flexibility. Under the proposal, approximately 74% of Exchange Act reporting issuers would qualify as SELIs and be eligible to use this streamlined process. For companies already qualifying as WKSIs, the transition to SELI status will largely be seamless in practice. The proposal would retain the WKSI category for FPIs.

Blue-sky preemption extended to all registered offerings

The proposal would substantially expand federal preemption of state securities registration requirements. Securities Act Section 18 currently preempts state “blue sky” registration and qualification requirements for “covered securities,” a category that has generally been limited to securities listed on national securities exchanges and certain other specified transactions.

The proposal would amend Rule 146 to add a new definition of “qualified purchaser,” and for purposes under Section 18(b)(3) of the Securities Act, to include any person offered or sold securities in any registered offering under the Securities Act. If adopted as proposed, all registered offerings – including offerings of securities not listed on any national exchange –would constitute “covered securities” and would be exempt from state registration and qualification requirements.

This would resolve pain points for federally registered offerings of securities that are not listed on a national securities exchange – such as side-by-side offerings of common stock and unlisted warrants, employee equity plans of over-the-counter-traded issuers, or unlisted registered direct offerings. Currently, these types of transactions may need to comply with a patchwork of state law registration and qualification requirements – and while manageable, navigating the patchwork requires time and attention. States would retain antifraud enforcement authority.

BDCs, closed-end funds and registered annuity products

The proposal would extend parallel reforms to investment funds and insurance products. Exchange Act-listed BDCs and registered closed-end funds would become eligible to use an expanded “Short-Form N-2” and access certain enhanced registration and communication benefits under the same ELI/SELI framework described above. Unlisted affected funds² would continue to operate under the existing Rule 486 framework.

For annuity products, the proposal would amend Rule 482 to permit broad-based advertising of registered index-linked annuities (RILAs) and registered market value adjustment (MVA) annuities, without requiring Form S-3 eligibility or reliance on Rule 433 prospectus-delivery mechanics. This expanded advertising flexibility would be subject to tailored conditions, including constraints on the presentation of RILA performance information, fee and expense disclosure requirements, and filing obligations with the SEC or Financial Industry Regulatory Authority (FINRA).

Form S-1 modernization and other proposed amendments

In addition to expanding access to Form S-3, the proposal would make using the traditional “long form” registration statement on Form S-1 less burdensome. Specifically, it would expand the ability of issuers to incorporate filings by reference to Form S-1 in two ways:

Eliminate the requirement that an issuer must have filed a Form 10-K for the most recently completed fiscal year before having the ability to incorporate certain disclosure by reference in a Form S-1 (an issuer that has not been required to file a Form 10-K since becoming subject to Exchange Act Section 13(a) or 15(d) would incorporate by reference to a Securities Act or Exchange Act filing containing “Form 10 information”).
Expand forward incorporation by reference – the ability to automatically incorporate future Exchange Act filings into a registration statement – to all qualifying Form S-1 issuers, not just smaller reporting companies (SRCs).

The proposal would also modernize the “delaying amendment” procedure for Form S-1. Delayed effectiveness would become the default for most registration statements (other than those that become automatically effective in accordance with SEC rules), rather than the current framework of every registration statement including an archaic legend.

Are Form S-1 and Form S-3 converging?

As noted in the proposal, if Form S-1 were amended as proposed, it effectively would serve as a short-form registration statement for issuers that are eligible for and choose to use backward and forward incorporation by reference. Nonetheless, there would still be key distinctions between Form S-1 and Form S-3. Delayed primary shelf offerings and ATM offerings by or on behalf of an issuer under Rule 415 would remain limited to offerings registered or qualified to be registered on Form S-3.

FPIs, investment companies and BDCs also would be expressly prohibited from using Form S-1. The SEC expects minimal impact from this limitation. FPIs tend to file on Form F-1, rather than using domestic forms, and investment companies and BDCs are required to use other specific forms.

Elimination of income-related conditions for financial statements grace period

The proposals would eliminate the income-related conditions in Regulation S-X Rules 3-01 and 8-08 that currently affect the staleness dates for audited financial statements in registration statements and proxy statements filed close in time to the end of the most recently completed fiscal year. Under existing rules, issuers are not required to provide, in a registration statement or proxy statement, audited financial statements for the most recently completed fiscal year when the date of effectiveness of such registration statement or mailing date of such proxy statement falls within the first 45 days after such fiscal year-end – and this “grace period” may be extended for up to 45 more days depending on filer status and certain other conditions.

The current conditions imposed under Rule 3-01(c) and Rule 8-08(b) may result in a situation in which loss-generating issuers – which may have a greater need for capital but are ineligible for the extended grace periods – incur greater compliance costs in connection with filing a registration statement or conducting certain proxy solicitations than higher-income registrants, as they may be required to expedite the preparation of audited annual financial statements for the most recently completed fiscal year before they would otherwise be required in an annual report on Form 10-K.

Essentially, the proposal would align the financial statement requirements with the applicable issuer’s Form 10-K due date. If this proposal and the SEC’s recent proposal to simplify its filer status framework are both adopted as proposed, most public companies would be non-accelerated filers and would have 90 days after fiscal year-end to provide audited financial statements for the most recently completed fiscal year, regardless of timing of a registration statement or proxy statement, unless the financial statements become available earlier. ³

Open questions and areas for comment

The proposal raises many interpretive and policy questions on which the SEC has invited comment, and that may attract significant attention from practitioners and issuers, including:

Whether the elimination of a one-year seasoning requirement for Form S-3 eligibility is appropriate.
The appropriateness of eliminating Form S-3 transaction requirements (including the $75 million public float requirement to conduct unlimited primary offerings) and the minimum public float requirement.
The appropriateness of the categories of issuers identified as ineligible to use Form S-3 and of the three-year lookback period applicable to certain types of issuers.
Whether prohibiting FPIs from using Form S-3 at any time is appropriate, and if not, what the transition period should be.
Whether the replacement of the current categories of domestic issuers with the ELI/SELI framework is appropriate.
The appropriateness of proposed Form S-1 changes to expand backward and forward incorporation by reference, including whether to align forward incorporation eligibility more closely with Form S-3 eligibility.
Whether prohibiting FPIs, investment companies and BDCs from using Form S-1 is appropriate.

Observations and commentary

The proposal, if adopted, would restructure the registered offering framework. The significance of the changes will depend on where an issuer sits in the capital markets landscape. For large-cap, exchange-listed issuers that are WKSIs under the current rules, current practices will be largely unaffected by the transition to the ELI/SELI framework. For mid-cap and small-cap exchange-listed issuers that do not currently qualify as WKSIs, the changes could be more significant. See Appendix A for a tabular comparison of the current and proposed frameworks – and our predictions for the real-world impact. Below, we highlight several key takeaways for our client base:

Expanded access to shelf registration benefits for exchange-listed issuers. All domestic issuers would be Form S-3 eligible immediately after completing their IPO. Moreover, the proposed replacement of the WKSI framework with the ELI/SELI structure means that any exchange-listed Form S-3 eligible issuer would, as an ELI, gain access to pay-as-you-go registration fees, pre-filing communication flexibility, the ability register additional securities or additional classes of securities by filing a post-effective amendment to a nonautomatic shelf registration statement before the issuer satisfies the 12-month Exchange Act reporting requirement to be a SELI, and the ability to omit information as to whether an offering is a primary offering or secondary offering and pricing and deal-specific terms from the shelf registration statement at the time of effectiveness. These are capabilities currently reserved for WKSIs.
- Newly eligible issuers should begin assessing their readiness to take advantage of the proposed framework, including evaluating Exchange Act reporting history, potential ineligible issuer disqualifications, and the cost and timing differences between registered and exempt offering pathways. For many smaller issuers, the combination of Form S-3 eligibility, pay-as-you-go registration fees and full blue-sky preemption could shift the economics of capital raising away from exempt structures such as structured private investments in public equity (PIPEs), toward registered offerings.
- That said, practitioners should note that many of the communication flexibility benefits – in particular, the ability to conduct pre-filing investor outreach – are already available to non-WKSIs through the testing-the-waters provisions of Section 5(d) of the Securities Act and Rule 163B, which permit communications with qualified institutional buyers (QIBs) and institutional accredited investors regardless of WKSI or ELI status. The incremental benefit on the communications side is therefore most significant for mid-market issuers not currently taking advantage of those exemptions.
Significant expansion of automatic shelf registration eligibility. For issuers that meet the SELI threshold – ELI status plus 12 months of Exchange Act reporting – the principal additional benefit is automatic shelf registration. For most exchange-listed companies that have been public for more than a year, SELI status will be the default, and this benefit should be built into capital formation playbooks accordingly.
DeSPAC companies would not be automatically barred from Form S-3. This change would make the deSPAC pathway more attractive from a capital markets perspective and is consistent with the SEC’s previously stated objective of aligning disclosure and regulatory requirements for deSPAC companies with those applicable to companies completing traditional IPOs.
- However, a deSPAC company would not be permitted to count the Exchange Act reporting history of the former SPAC toward the 12-month seasoning requirement for SELI status and automatic shelf registration eligibility. Additionally, because FPIs are separately prohibited from using Form S-3 under the proposal, the SPAC predecessor carve-out would effectively benefit only domestic issuers.
- In addition, while the proposal does not address Rule 144(i) or Rule 145 under the Securities Act, meaning that shareholders of deSPAC companies would still be subject to the rolling 12-month current public information requirement if seeking to rely on the Rule 144 safe harbor for resales of securities issued by a deSPAC company, in addition to the statutory underwriter provision under Rule 145, the proposed amendments would mitigate these downsides because of the expanded availability of Form S-3. For private resales, unless and until Rule 144(i) and Rule 145 are addressed through separate rulemakings, deSPAC companies and their shareholders would still have to consider the risks imposed by these rules in connection with resales of securities.
A potentially less favorable regime for former FPIs. The proposal does not extend to FPIs, which would continue to use Form F-3. Form F-3 retains its existing 12-month seasoning and $75 million public float requirements. The SEC has deferred FPI-related changes pending its separate review of the FPI definition and various issues that it identified in its June 2025 Concept Release.
- Former FPIs that have converted to domestic issuer status, a transition that can occur automatically based on changes in shareholder composition or other factors, may find themselves in a worse position under the proposed framework, at least temporarily. Under the proposal, Form S-3 would be unavailable to any issuer that has been an FPI at any point during the preceding three years, while Form F-3 would remain unavailable to issuers that no longer qualify as FPIs. During that period, the issuer’s only registered offering option would be Form S-1. This creates a gap that does not exist under the current framework, where a former FPI that was eligible to use Form F-3 could seamlessly transition to using Form S-3 (assuming it meets the other eligibility criteria).
- For this reason, the proposal may accelerate a trend toward domestic issuer status at the time of IPO for foreign companies that are on the margin of FPI eligibility. Electing domestic issuer status at IPO could avoid the three-year Form S-3 eligibility lag if it is likely that the issuer will eventually lose FPI status down the road. Moreover, the proposed rule may make the domestic election more favorable, since domestic issuers will gain substantially expanded shelf access. Historically, FPI status has been attractive because it carries meaningful accommodations, including reduced executive compensation disclosure, exemption from complying with the proxy rules, and the ability to report on a semi-annual rather than quarterly basis, with relatively limited downside from a capital markets perspective, given that FPIs have generally had access to Form F-3 on terms largely comparable to those available to domestic issuers under Form S-3. Under the proposed framework, however, domestic issuers would gain substantially expanded access to shelf registration, automatic effectiveness, pay-as-you-go filing fees, and enhanced communication flexibility – benefits that would not be extended to FPIs. Additionally, the SEC previously proposed rules which, if adopted, would permit domestic issuers to elect semi-annual reporting – a benefit that is currently available only to FPIs.⁴
Form S-1 modernization. The proposed changes to Form S-1 would simplify ongoing offering programs and reduce the burden of post-effective amendments and prospectus supplement updates for issuers that rely on the long-form registration statement, by expanding the ability to incorporate by reference. The structural advantages of Form S-3 – including the takedown mechanics, automatic effectiveness and pay-as-you-go fee structure – remain exclusive to Form S-3 eligible issuers.
Elimination of income-related conditions for financial statements grace period. This change to Regulation S-X, to extend to loss-generating issuers the grace period for updated audited financial statements in connection with filing a registration statement or conducting certain proxy solicitations, would facilitate these issuers – who may have a greater need for capital than higher-income registrants – in raising capital or completing strategic transactions without the need to expedite the preparation of audited annual financial statements for the most recently completed fiscal year before they would otherwise be required in an annual report on Form 10-K.
ATM offering implications. Although the proposed “existing trading market” requirement would introduce a new constraint on ATM offerings, its practical significance may be modest given the SEC’s indication that the OTCQX Best Market and OTCQB Venture Market tiers would likely qualify for designation. Overall, the proposal intends to expand access to ATM offerings for issuers while balancing investor protections.
Blue-sky preemption extended to warrant coverage in registered offerings. Under current law, when an issuer conducts a registered offering of listed common stock concurrently with non-prefunded warrants (a structure that is common in certain industries, including life sciences), the common stock is already exempt from state blue-sky requirements by virtue of its exchange listing. The warrants, however, are not exchange-listed and therefore do not benefit from that exemption. As a result, practitioners must currently conduct a jurisdiction-by-jurisdiction blue-sky analysis for the warrants – an additional procedural step that must be tracked and completed for each such transaction. If the proposal is adopted, this friction would be eliminated because all securities offered and sold in a registered offering would constitute “covered securities” under the proposed definition of “qualified purchaser.” The warrants would be preempted from state registration and qualification requirements on the same basis as the listed common stock.

Call for additional IPO process modernization

On May 26, 2026, SEC Chairman Paul Atkins recommitted to the SEC’s agenda to “Make IPOs Great Again,” and discussed the steps currently taken by the SEC to fulfill that agenda. As noted above, in addition to the proposed amendments to reform registered offerings that are the subject of this alert, the SEC has proposed amendments to reform its filer status rules, which would extend meaningful disclosure and filing deadline accommodations to approximately 80% of US public issuers and allow a 60-month ramp-up to full disclosure requirements for all newly public companies, and has proposed amendments to permit domestic issuers to file semiannual reports in lieu of the current quarterly reporting regime.⁵

At the conclusion of his speech, Atkins solicited written comment on broader ideas for modernizing IPOs, including ways to improve the SEC’s communication or other IPO-related rules and identifying ways the SEC can remove roadblocks to nontraditional paths to going public.

Next steps

The comment period closes on July 27, 2026, including the larger call for comment on additional ways the SEC can modernize the IPO process. Issuers, underwriters, placement agents, fund sponsors, insurance companies and their counsel who participate in registered offerings should review the proposal carefully and evaluate whether to submit comments. Exchange-listed companies that expect to qualify as ELIs or SELIs under the proposed framework should also begin evaluating their readiness to take advantage of the proposed changes. Cooley’s capital markets attorneys are available to discuss these issues. Reach out to your existing Cooley contact or email the Cooley capital markets team.

Appendix A

Plain-language guide to enhanced benefits

The table below explains the key registration and communication benefits available under the current and proposed frameworks:

Benefit	Current framework	Proposed framework	Real-world impact
Registration benefits
Form S-3 eligibility Eligible issuers can use Form S-3 to register offerings of securities on a delayed or continuous basis – often referred to as offerings off the “shelf.” Once the Form S-3 registration statement is effective and generally for three years after its initial effective date, the issuer can use it to offer and sell securities in one or more primary offerings without waiting for further SEC staff review or action. This provides eligible issuers with important flexibility in capitalizing on opportunistic market windows.	One-year seasoning requirement for all issuers. For deSPAC issuers, the 12-month seasoning requirement does not begin to run until the business combination closes. “Baby shelf” limitations for issuers with less than $75 million public float. Various other complex transaction requirements.	Domestic issuers would be Form S-3 eligible immediately after completing the IPO. ⁶ DeSPAC issuers would no longer be “ineligible issuers” and would be immediately eligible to use Form S-3, though they would not be permitted to count the Exchange Act reporting history of the former SPAC toward the seasoning requirement for SELI status. No public float limitations. Limited exception for late filings. No other transaction requirements. No iXBRL eligibility requirement.	Enhances capital formation flexibility, especially for equity offerings by issuers that are smaller, newly public or previously SPACs (for example, issuers can now establish ATMs within the first year of going public). Newly public companies could also incorporate disclosures by reference from their Form S-1 for the IPO, reducing time and expense.
Registration of additional securities or additional classes of securities (Rule 413) Permits an issuer to register additional securities or additional classes of securities, including securities of a majority-owned subsidiary, via automatically effective post-effective amendments.	☒ WKSIs ☒ WKSI affected funds	☒ ELIs ☒ ELI affected funds	Allows for a greater number of issuers to benefit from expedited execution and certainty in timing public securities offerings.
Omission of certain information from base prospectus (Rule 430B(a)) The shelf registration statement does not need to include the type of offering (primary and/or secondary), offering price, size or other transaction-specific details; these are filled in at the time of each shelf takedown via a prospectus supplement.	☒ WKSIs ☒ WKSI affected funds	☒ ELIs ☒ ELI affected funds	Broadens access to the basic shelf takedown structure for non-WKSI ELIs.
Omission of identities of selling securityholders and amount of securities to be registered on their behalf from a base prospectus (Rule 430B(b)).	☒ WKSIs ☒ Non-WKSIs eligible for primary offerings under General Instruction I.B.1 of Form S-3, subject to certain conditions ☒ Seasoned affected funds	☒ All Form S-3 eligible issuers ☒ ELI affected funds	Broadens access to operational flexibility for secondary offerings, requiring only a prospectus supplement rather than a post-effective amendment to name selling securityholders.
Free-writing prospectus flexibility (Rule 433) Issuers can use supplemental marketing materials (term sheets, pitch decks, etc.) during an offering without first delivering a complete Section 10-compliant prospectus.	☒ WKSIs ☒ Non-WKSIs eligible for primary offerings under General Instructions I.B.1, I.B.2 or 1.C of Form S-3 ☒ Seasoned affected funds	☒ All Form S-3 eligible issuers ☒ Affected funds will rely on Rule 482 advertisement requirements	This change would simplify compliance and provide flexibility. Similar to the caveat above, much of this flexibility is already accessible to non-WKSIs through Rule 163B for testing-the-waters communications. The incremental benefit is most notable for ELIs that do not currently qualify as WKSIs.
Pay-as-you-go registration fees (Rules 456(b) and 457(r)) Issuers do not need to calculate or pay the full registration fee upfront when filing shelf registration statements; instead, fees are paid at each actual takedown, based on the securities sold.	☒ WKSIs ☒ WKSI affected funds	☒ ELIs ☒ ELI affected funds	Eliminates upfront cash outlay and the need to update fee calculations as shelf amounts change, and enhances usefulness and flexibility of the shelf registration process. Meaningful for issuers maintaining large, frequently used shelf registration statements.
Automatic shelf registration (Rule 462) The shelf registration statement takes effect the instant it is filed – no waiting for SEC staff review, and no acceleration request needed. Issuers can move directly from filing to launching an offering.	☒ WKSIs ☒ WKSI affected funds	☒ SELIs ☒ SELI affected funds	This is the most operationally significant benefit for frequent issuers. Under the proposal, ~74% of Exchange Act reporting issuers would qualify, up from ~36% today.
Blue-sky preemption	Preemption applies to “covered securities” – generally limited to securities listed on national securities exchanges	All registered offerings – including offerings of securities not listed on any national exchange – would constitute “covered securities” and would be exempt from state registration and qualification requirements. States would retain antifraud enforcement authority.	Resolves administrative complexity for registered offerings not involving an exchange-listed security. Most relevant to side-by-side offerings of common stock and unlisted warrants, employee equity plans of OTC-traded issuers, or unlisted registered direct offerings.
Form S-1 incorporation by reference The ability to incorporate by reference to prior filings frees issuers from the need to repeat lengthy information. The ability to incorporate by reference to future filings allows issuers to keep the Form S-1 updated on an ongoing basis without manually filing post-effective amendments and prospectus supplements when making other SEC filings.	Issuers must file a Form 10-K before being eligible to incorporate previously filed information into Form S-1. Only smaller reporting companies are permitted to incorporate future Exchange Act filings by reference into Form S-1.	Any issuer that has made a Securities Act or Exchange Act filing that contains Form 10 information would be eligible to incorporate by reference to previously filed information as well as to future filings.	While S-1 remains unavailable for delayed primary shelf offerings, the modernized approach to incorporation by reference would allow more issuers to mitigate duplicative disclosure and compliance costs – e.g., for follow-on offerings on Form S-1 or for ongoing secondary offerings.
Communication benefits
Research report safe harbor (Rule 139) Broker-dealers can publish issuer-specific research reports and make buy/sell recommendations about a company while participating in its registered offering, without those reports being treated as part of the offering.	☒ WKSIs ☒ Non-WKSIs eligible for primary offerings under General Instructions I.B.1 or I.B.2 of Form S-3 ☒ Covered investment funds that have a public float greater than $75 million	☒ All Form S-3 eligible issuers ☒ All covered investment funds	Brings the benefits of Rule 139 to a broader universe of issuers, although Rule 139 remains unavailable for issuer-specific research if the research analyst has not initiated coverage prior to the commencement of the registered offering at issue.
Pre-filing offers (Rule 163) Issuers and underwriters can engage in oral and written communications about an upcoming offering – including road show materials and investor contacts – before the registration statement is filed, without those communications constituting a prohibited “gun-jumping” offer.	☒ WKSIs ☒ WKSI affected funds	☒ ELIs ☒ ELI affected funds	Provides more flexibility in early-stage deal preparation. Note, however, that many pre-filing communications for non-WKSI issuers are already permissible through testing-the-waters communications, Section 5(d) and Rule 163B, which allow QIB and institutional accredited investor outreach before and after filing, regardless of WKSI status.

Notes

Out of 5,555 Exchange Act reporting companies (excluding asset-backed issuers, shell companies and BDCs) that filed a Form 10-K in 2024.
Throughout this alert and in the SEC’s proposal, the term “affected fund” refers to a registered closed-end fund or BDC whose securities are listed on a national securities exchange, and that has a specified advisory or management relationship with a WKSI (under the current framework) or, under the proposed rule, with an ELI or SELI. These funds are treated analogously to their affiliated operating company parent for purposes of the enhanced registration and communication benefits described in this alert and Appendix A.
On May 19, 2026, the SEC proposed amendments to substantially simplify its domestic public company filer status framework and extend existing scaled disclosure and other accommodations, including filing due dates. The proposal would eliminate the current rubric of overlapping filer status categories – large accelerated filer (LAF), accelerated filer, nonaccelerated filer (NAF), SRC and emerging growth company – and replace it with two primary reporting categories: LAF and NAF. For NAFs, the Form 10-K would be due 90 days after fiscal year end. See Cooley’s alert, SEC Proposes Simplified Filer Status Rules and Expanded Disclosure Accommodations, published May 22, 2026, for a more fulsome discussion of the proposed amendments.
See Cooley’s alert, The SEC’s Semiannual Reporting Proposal: Fare Thee Well Quarterly Reporting?, published May 11, 2026, for a more fulsome discussion of the proposed amendments.
See Cooley’s alerts, SEC Proposes Simplified Filer Status Rules and Expanded Disclosure Accommodations, published May 22, 2026, and The SEC’s Semiannual Reporting Proposal: Fare Thee Well Quarterly Reporting?, published May 11, 2026.
Other than “ineligible issuers” as defined in the proposal and described above.