May 2025 One-Minute Reads

ESMA releases proposed rules for regulation of ESG ratings providers

On May 2, ESG Today reported that the European Securities and Markets Authority (ESMA) published draft Regulatory Technical Standards (RTS) under the European Union’s ESG Rating Regulation, outlining proposed rules for environmental, social and governance (ESG) ratings providers. The process behind the regulation began in 2021, with the issuance of a letter by ESMA to the European Commission, advising that lack of regulation and transparency in the ESG ratings sector could pose a risk to investors. In July 2021, the European Commission launched a new sustainable finance strategy, which included a pledge to take action to improve the reliability, comparability and transparency of ESG ratings, and subsequently asked ESMA to begin examining the market participants. The regulation places ESG ratings providers under ESMA’s authority, requiring them to be authorized and supervised by the regulator and meet transparency standards – such as disclosing their ratings methodologies and information sources. See the consultation paper on the new RTS.

SEC town hall addresses personnel cuts

On May 6, SEC Chair Paul Atkins’ opening remarks at the Securities and Exchange Commission (SEC) town hall addressed the personnel cuts resulting from the SEC’s voluntary buyout program, noting that headcount had decreased by 15% since the current fiscal year began last October. He also said that at its height last year, the SEC had a total of 5,000 employees and 2,000 contractors, and that today headcount is down to approximately 4,200 employees and 1,700 contractors.

Per this Reuters article, several SEC divisions experienced significant headcount reductions since January 25, 2025, including:

• The SEC’s Chicago and Denver offices: nearly 20%
• Office of the General Counsel: 19.5%
• Investment Management: 16.7%
• Trading and Markets: 14.7%
• Enforcement: 13.0%
• Corporation Finance (Corp Fin): 8.7%

For more information on the town hall, see this Governance Beat post and this TheCorporateCounsel.net blog.

DOJ establishes Civil Rights Fraud Initiative

On May 19, the Department of Justice (DOJ) announced the establishment of the Civil Rights Fraud Initiative, which will utilize the False Claims Act (FCA) to investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws. Violations of the FCA can result in treble damages and significant penalties. In the announcement, the DOJ strongly encourages anyone with knowledge of discrimination by federal funding recipients to consider filing a qui tam action under the FCA (see 31 USC § 3730). When a qui tam action is successful, the whistleblower typically receives a portion of the monetary recovery. The DOJ also encourages the public to report instances of such discrimination to the appropriate federal authorities. For more information, see this Reuters article referring to this memo issued by Deputy Attorney General Todd Blanche and this Bloomberg Law article.

NYSE amends rules to require payment of fees before compliance plan review

On May 20, the SEC approved NYSE’s proposed amendments to Sections 802.02 and 802.03 of the NYSE Listed Company Manual to provide that the exchange will not review a compliance plan submitted by a listed company that is below compliance with a continued listing standard if the company owes any unpaid fees to the exchange, and will instead commence suspension and delisting procedures if such fees are not paid in full. For more information, see this TheCorporateCounsel.net blog.

NYSE implements fee cuts during first five years of listing

The New York Stock Exchange (NYSE) has amended Section 902.03 of its Listed Company Manual to state that during the first five years after the initial listing of a class of common equity on the NYSE, an issuer will:

• Only be subject to initial and annual listing fees for its primary class of equity securities.
• Be exempt from all other listing fees, including fees for:
• Listing additional shares of the primary class of equity securities (including shares issued in connection with a stock split or stock dividend).
• Listing an additional class of common stock, preferred stock, warrants or rights.
• Listing securities that are convertible into, or exchangeable or exercisable for, additional securities of the issuer’s primary class of equity securities.
• Applications related to a technical original listing or reverse stock split.
• Applications for changes involving modifications to exchange records or related to a poison pill.

EEOC opens 2024 EEO-1 data collection

On May 20, the Equal Employment Opportunity Commission (EEOC) opened its 2024 EEO-1 Component Data 1 Collection Portal. The portal will close on June 24, 2025, and no reports will be accepted after that date. Covered employers that fail to file by the deadline will be out of compliance with mandatory filing requirements. Unlike in prior years, the agency has now eliminated the optional reporting of nonbinary employee data, in response to President Donald Trump’s January 20, 2025, Executive Order 14168, “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” which announced the policy of the US to recognize two sexes – male and female. The instruction booklet now states, “[t]he EEO-1 Component 1 data collection provides only binary options (i.e., male or female) for reporting employee counts by sex, job category, and race or ethnicity.” For more information, see this message issued by the EEOC acting chair and this Cooley alert.

SEC publishes data on Regulation A, crowdfunding offerings and private fund beneficial ownership concentration

The Division of Economic and Risk Analysis has published three new reports that provide the public with information on capital formation and beneficial ownership of qualifying private funds. The three reports are:

• “Analysis of the Regulation A Market: A Decade of Regulation A,” which provides statistics on the state of the Regulation A offering exemption over the past decade.
• “Analysis of Crowdfunding Under the JOBS Act,” which provides an analysis of offering activity in the Title III securities-based crowdfunding market between May 16, 2016, (effective date of Regulation Crowdfunding) and December 31, 2024.
• “Beneficial Ownership Concentration and Fund Outcomes for Qualifying Hedge Funds,” which provides statistics describing the relationship between beneficial ownership concentration and fund outcomes for qualifying hedge funds and their advisers from 2013 to 2023.

See this SEC press release on May 28, 2025 for more information.

Glass Lewis releases executive perquisites report

In its report, “The Resurgence of Executive Perquisites,” Glass Lewis presents S&P 500 executive perk trends for each of 2019, 2020 and 2023 (based on proxy statement disclosures), categorized by perk category, with a focus on aircraft, housing and relocation, and personal security. A breakdown of security expenses by industry reveals the communication services industry led in perk usage in 2023, with $36.7 million of $62.7 million in the aggregate, followed by financials at $8.5 million and information technology at $6.4 million.

ISS recommendations “against” say on pay spike again in June

This Exequity analysis finds that companies with annual meetings in June are more likely to receive adverse recommendations from Institutional Shareholder Services (ISS) than those holding meetings in other months. Per this CompensationStandards.com blog, Exequity found that last year, 43% of all adverse recommendations came in June. From 2011 to 2024, the data showed:

• The average annual rate of “against” recommendations for January through May was 10% and July through December was 13%.
• The average annual rate of “against” recommendations in June was 18%.

Per Exequity, the causes of spikes in “against” recommendations for June meetings are unclear, and the findings give rise to questions as to why the “June phenomenon” occurs.

Director stock ownership impacts crash risk

This study in the Journal of Accounting and Public Policy examines the relationship between outside directors’ equity-based compensation (DEC) and stock price crash risk using a sample of US firms from 2008 to 2021. The study finds that DEC is associated with lower crash risk, primarily through its role in reducing over-investment, financial misreporting and bad news hoarding. The findings highlight that equity pay can align outside directors’ interests with shareholders by strengthening risk oversight and offering insights into optimal compensation contracts and governance mechanisms to mitigate crash risk. For more insight, see this CompensationStandards.com blog.

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