SEC Issues “Innovation Exemption” for Tokenized Securities

Colin D. Lloyd, Marie-Louise M. Huth and Mario Schollmeyer are Partners at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Mr. Lloyd, Ms. Huth, Mr. Schollmeyer, Natasha Vasan, James M. Shea Jr., and Rebecca J. Simmons, all at Sullivan & Cromwell.

Summary

On September 17, 2026, the Securities and Exchange Commission issued two five-year, conditional exemptions to facilitate the permissioned trading of “Tokenized NMS Stock” through automated market makers (“AMMs”) and liquidity pools (together, “AMM Liquidity Pools”):

  • an exemption from the definition of “exchange” for Tokenized Securities Venues (“TSVs”); and

  • an exemption from the definition of “dealer” for certain liquidity providers in an AMM Liquidity Pool that supplies liquidity to the liquidity pool in the form of Tokenized NMS Stock.

Together, these exemptions allow certain venues that use AMM Liquidity Pools to facilitate trading tokenized versions of certain listed U.S. stocks without registration as a national securities exchange or alternative trading system, while also permitting liquidity providers to deposit tokenized stock into those AMM Liquidity Pools without registering as dealers, in each case subject to several conditions and limitations as discussed below. The Innovation Exemption is effective immediately. The SEC is requesting comment on all aspects of the Innovation Exemption.

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Weekly Roundup: September 18-24, 2026


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This roundup contains a collection of the posts published on the Forum during the week of September 18-24, 2026

Remarks by Chairman Atkins on 24-Hour Trading


Statement by Commissioner Peirce on the Innovation Exemption


Forced CEO Departures


The Risks of Designated Directorships—Current Guidance for Directors and Those Who Appoint Them


A Breakout Year for CVRs: 2025 and First-Half 2026 Trends in Life Sciences Public M&A



FDA and SEC Open a New Information-Sharing Channel: Implications for Public Life Sciences Companies


Compensation Clawbacks – Surveying the Disclosures to Date


SEC Proposes to Rescind Rule 14a-8


The CEO Decision: How PE Investors Select and Reassess Leaders from Entry to Exit


Dodiya v. Franklin and the Emerging Rules of the DGCL’s Section 144 Safe Harbors


Rescission of Rule 14a-8: Anticipating the Potential Evolution of Shareholder Engagement Strategies


Rescission of Rule 14a-8: Anticipating the Potential Evolution of Shareholder Engagement Strategies

Carmen X. Lu and Frances F. Mi are Partners at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on their Paul Weiss memorandum.

As anticipated, the U.S. Securities and Exchange Commission (the “SEC”) has proposed to rescind Rule 14a-8 under the Securities Exchange Act of 1934. The SEC has also proposed to close the Rule 14a-4(c) “loophole,” which has inadvertently allowed shareholders who file their own proxy materials to add multiple shareholder proposals to a company’s proxy card. The rescission of Rule 14a-8 and the closure of the Rule 14a-4(c) loophole would mean that shareholders would need to turn to a company’s governing documents to propose business at an annual meeting. With the exception of Texas, which last year adopted ownership and solicitation requirements for shareholder proposals, no other state has enacted legislation governing shareholder proposals.

Rule 14a-8 will likely remain effective for most if not all of the 2026-27 proxy season, and the proposed rescission could be challenged in the courts. However, the SEC has already discontinued responding to all no-action requests related to Rule
14a-8, although companies are still required to notify the SEC of their decision and basis for excluding a shareholder proposal. With the SEC no longer substantively adjudicating shareholder proposal exclusions for the second year running, companies will need to continue making an independent judgment as to whether there is a reasonable basis to exclude a proposal. Last year, shareholder proponents filed six lawsuits contesting the exclusion of their proposals. Those lawsuits resulted in three settlements that led to the inclusion of the proposal in the company’s proxy statement and one successful preliminary injunction.

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Dodiya v. Franklin and the Emerging Rules of the DGCL’s Section 144 Safe Harbors

John Butler, Adam Cromie, David Grubman are Partners at Sidley Austin LLP. This post is based a Sidley memorandum by Mr. Butler, Mr. Cromie, Mr. Grubman, Courtney Hauck, Arthur Adler, all at Sidley, and is part of the Delaware Law Series; links to other posts in the series are available here.

On August 26, 2026, the Court of Chancery issued Dodiya v. Franklin, C.A. No. 2025-0932-LWW (Del. Ch. Aug. 26, 2026), concluding that the “striking breakdown in corporate governance” detailed in the complaint made the “predictable path to safe harbor” under amended Section 144 of the Delaware General Corporation Law (DGCL) unavailable at the pleading stage. Dodiya’s message for boards is simple: the safe harbors deliver powerful protection, particularly by virtue of the presumption of disinterestedness afforded to directors determined to be independent for listing standard purposes, but only to boards that (i) run a process that is not grossly negligent and (ii) provide materially accurate disclosure to stockholders.

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The CEO Decision: How PE Investors Select and Reassess Leaders from Entry to Exit

Emily Taylor and Heather Hammond are Consultants, and Courtney Byrne is an Associate at Russell Reynolds Associates. This post is based on their Russell Reynolds memorandum.

For much of the past decade, private equity (PE) performance has benefited from favorable market conditions. Cheap financing, easy multiple expansion and relatively short hold periods meant that even subpar execution could produce attractive returns. [1] These conditions peaked in 2021 and early 2022, when abundant capital, intense competition for assets and supportive financing markets drove deal activity and valuations to record levels. Many sponsors moved quickly to acquire companies at elevated entry multiples and underwrote ambitious growth plans.

Since then, the operating environment has become far more challenging. Higher interest rates, more volatile financing conditions and uncertain exit markets have coincided with geopolitical uncertainty, tariffs and supply chain disruption, and rapid advances in AI. Together, these forces have altered many of the assumptions underpinning investment theses developed at the height of the market.

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SEC Proposes to Rescind Rule 14a-8

Jennifer Zepralka is a Partner, and Ali Perry and Liz Walsh are Counsels at Mayer Brown LLP. This post is based on a Mayer Brown memorandum by Ms. Zepralka, Ms. Perry, Ms. Walsh, and Christopher Nickas.

In an awaited but not surprising proposing release, on September 16, 2026, the Securities and Exchange Commission (the “SEC” or the “Commission”) proposed rescinding Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which governs the processes under which a shareholder may include a proposal in a public company’s proxy materials. The SEC also proposed to amend Rule 14a-4(c) to expand the circumstances under which a company may exercise, with respect to proxies it receives, discretionary voting authority on proposals that will be presented at a shareholder meeting but not included in the company’s proxy materials. This proposal (the “Rule 14a-8 Rescission Release”) marks a significant change in the Commission’s view of the federal government’s role in interactions between companies and their shareholders.

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Compensation Clawbacks – Surveying the Disclosures to Date

Mark Borges and Hannah Orowitz are Principals and Brigid Rosati is a Senior Consultant at Compensia. This post is based on their Compensia memorandum.

As we approach the third anniversary of the date when incentive compensation “received” is subject to clawback, we have taken a closer look at the disclosures companies have made since implementation.

This Thoughtful Pay Alert summarizes our findings from reviewing publicly available disclosures of “recovery analyses” conducted between January 1, 2024 and June 30, 2026.

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FDA and SEC Open a New Information-Sharing Channel: Implications for Public Life Sciences Companies

Paul Rubin and Paul Rodel are Parterns, and Melissa Runsten is a Counsel at Debevoise & Plimpton LLP. This post is based on their Debevoise memorandum.

Key Takeaways:

  • The U.S. Food and Drug Administration and Securities and Exchange Commission recently announced a new three-year Memorandum of Understanding (“MOU”) establishing a formal framework for the agencies to exchange nonpublic information concerning FDA-regulated products, activities and companies.
  • For pharmaceutical, biotechnology and medical-device companies that are publicly traded or otherwise are SEC-reporting companies, the MOU could have significant implications for disclosures concerning clinical trials, FDA interactions, product approvals, manufacturing and inspection developments, and other regulatory matters that may be material to investors.
  • Although the MOU does not change the securities-law disclosure standard, it likely makes it easier for SEC staff to test a company’s account of an FDA interaction against FDA’s own contemporaneous record.

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2026 U.S. Compensation Post Season Review: Strong Investor Support Despite Resurgence of One-Time Grants

Subodh Mishra is the Global Head of Communications at ISS STOXX. This post is based on an ISS STOXX by Pranav Pradeep, Compensation & Governance Advisor; Tim Sessing, Compensation & Governance Advisor; & Chris Sayo, Data Analytics, at ISS-Corporate.

Key Takeaways

  • CEO pay continued to climb to record levels in fiscal 2025, with median S&P 500 CEO compensation reaching $17.5 million, while median pay among Russell 3000 companies (excluding the S&P 500) remained relatively stable;

  • Equity compensation remained the primary driver of CEO pay growth, as companies increased long-term incentive award values and expanded both the prevalence and magnitude of one-time equity grants;

  • The prevalence of CEO security perquisites in the S&P 500 continued to increase sharply, and the Russell 3000 has followed suit;

  • Say-on-Pay (SOP) support climbed to five-year highs across both the S&P 500 and Russell 3000, while SOP failures reached multi-year lows;

  • Potential changes in SEC rulings may fundamentally alter compensation disclosure and voting in years to come.

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A Breakout Year for CVRs: 2025 and First-Half 2026 Trends in Life Sciences Public M&A

Sally Wagner Partin and Sharon R. Flanagan are Partners at Sidley Austin LLP. This post is based on their Sidley Austin memorandum.

Three years after our first survey documented the reemergence of contingent value rights (“CVRs”) in public life sciences M&A, 2025 marked their biggest year yet. A record 28 of 59 announced public life sciences transactions (approximately 47%) included a CVR, the highest ever annual count and share. The concentration was even greater in biopharma, where over half of announced public biopharma transactions included a CVR. CVRs also moved upmarket and carried more of the potential deal value. More than a third (approximately 37%) of the $1 billion-plus life sciences CVR deals in our full dataset (going back to 2008) were announced in 2025 and the first half of 2026. Moreover, nearly half of all life sciences CVR deals above $3 billion were announced in 2025 and the first half of 2026, with two additional CVR deals over $3 billion announced since June 30, 2026. In addition, 2025 produced more CVRs with maximum potential payouts exceeding 100% of the upfront consideration than any other year surveyed.

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