Minimum Amounts, Maximum Access: New Offering Framework Allows Greater Public Access to Private Markets

On March 12, 2025, the Division issued the 506(c) Letter, providing for a more streamlined method for issuers, including private funds and registered funds, to raise capital in the private markets. The 506(c) Letter confirmed that a fund issuer using general solicitation to offer securities (meaning the issuer can use public means to advertise the offering) could satisfy the “reasonable steps” requirement to verify an investor’s “accredited investor” status by reference to a minimum investment amount.

This much-needed guidance should increase a fund’s ability to raise additional capital from investors that, to date, many fund sponsors had difficulty accessing due to onerous verification standards that they and fund intermediaries (e.g., fund platforms, placement agents and bank-sponsored feeder funds) were reluctant to employ. Notably, the 506(c) Letter confirms that investment minimums are not the only methods that may be used to satisfy Rule 506(c); issuers may continue to use other reasonable methods.

Rule 506(c) and the Rule 506(c) Letter

The 506(c) Letter provides an alternative verification method for both entity and natural person investors with minimal additional documentation, which can be met by private funds and registered funds if:

• The offering requires or the investor invests a minimum investment amount of at least $1,000,000 for an entity investor or $200,000 for a natural person investor, in each case inclusive of binding commitments:

• an entity investor accredited solely on a “look-through basis” (i.e., based on the accredited investor status of all of its equity owners, such as certain feeder funds) must agree to invest a minimum of $1,000,000, or $200,000 for each of the look‑through entity’s equity owners if all of the look-through entity’s equity owners number fewer than five natural persons;

• The fund receives a written representation from the investor (which can be provided in a subscription agreement, a standalone document, an affirmative written electronic
  communication from the investor or any other written means as the issuer reasonably determines under the circumstances of the offering):

• that the investor is an “accredited investor” as defined in Rule 501;

• for look-through entities, each of its equity owners has a minimum investment obligation to the look-through entity (inclusive of binding commitments) of at least $200,000 for natural persons and $1,000,000 for legal entities;

• that the investment amount is not financed by a third party for the specific purpose of investing in the offering;

• for look-through entities, the minimum investment amount of the look-through entity and each of its equity owners is not financed in whole or in part by any third party for the specific purpose of making the particular investment in the issuer; and

• The fund has no actual knowledge of any facts that indicate that the investor’s representations above are otherwise inaccurate.

Issues to Consider

Many private funds relying on Section 3(c)(7) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), already require investment minimums higher than those reflected in the 506(c) Letter, which could make the prospect of relying on Rule 506(c) more appealing to private funds due to the ability to more freely market their interests and avoid foot-faults for public statements made at conferences or on firm websites. Funds relying on Section 3(c)(1) of the Investment Company Act or another exception thereunder may more universally welcome the new verification options, although such funds should nonetheless pay close attention to investor qualification requirements in addition to Rule 506, such as the “qualified client” standard under the Investment Advisers Act of 1940, as amended, so as to be able to charge performance fees to such funds.

Any “switch” to Rule 506(c) should be analyzed broadly, as the rule does not relieve an issuer or its affiliates from general antifraud requirements applicable to any offering of securities. U.S. 3(c)(7) funds (and 3(c)(1) funds) that make global offerings should also consider the effect of a “general solicitation” under Rule 506(c) on a foreign jurisdiction’s offering requirements. A U.S. 3(c)(7) or 3(c)(1) fund’s use of Rule 506(c), however, should alleviate any tension between the offering standards imposed by Section 3(c)(7) and the standard permitted by Regulation S under the Securities Act.

For more information, see Debevoise Update.

Choppy Waters: Navigating Board Diversity Amid Changing DEI Sentiment

The 2025 proxy season has provided an occasion for companies to reconsider their board diversity commitments and related disclosures and to respond to changing expectations. Although many companies are reframing their disclosures, wholesale abandonment of board diversity commitments appears unlikely, as many companies continue to believe that inclusive talent strategies and board refreshment practices are important ingredients for sustainable performance and long-term value.

In December 2024, the U.S. Court of Appeals for the Fifth Circuit vacated the SEC’s order approving Nasdaq’s board diversity requirements. In response to the decision, some Nasdaq-listed companies removed the mandated disclosure from their proxy statements while others voluntarily retained the disclosure, adopting a “wait and see” approach to gauge stakeholder reaction.

More broadly, following revisions to the voting guidelines of proxy advisors and institutional shareholders, many companies have scaled back their board diversity and other DEI disclosures.

In a rare mid-season revision, ISS announced in February that it would indefinitely halt consideration of the gender, racial or ethnic diversity of a company’s board when making director election voting recommendations at U.S. companies. Glass Lewis continues to apply its existing policies for the 2025 proxy season, but it issued a mid-season update stating that it will now provide a “For Your Attention” flag on any proxy report with a negative diversity-related director recommendation “pointing clients to a supporting rationale they can leverage if their preference is to vote differently from the recommendation.”

BlackRock and Vanguard also revised their policies, shifting away from prescriptive policies on board diversity and instead focusing on whether a board’s composition aligns with “market norms.”

These developments have required companies to make decisions about board diversity and other DEI disclosures, even as they finalize their proxy statements. Many companies have softened their existing DEI disclosures, focusing on “belonging,” “inclusion” and merits-based practices rather than on “diversity” and “DEI.” SEC disclosure rules require companies to disclose whether the board considers diversity in identifying director nominees, and many proxy statements continue to indicate that companies do value diversity in board composition.

Some companies have transitioned from standalone statistics regarding board diversity in their proxy disclosure to a skills matrix format that incorporates demographic attributes alongside other director experience and abilities. Boards are also focusing on regularly reassessing the skills on the board against the shifting business landscape and engaging in refreshment by adding new directors with diverse backgrounds and areas of expertise.

Beyond the 2025 proxy season, companies are likely to continue navigating choppy waters, with some stakeholders pushing for robust board diversity commitments, while others challenge their very premise.

For more information, see our publication on The Agenda. For readers who do not have a subscription to The Agenda, please reach out to one of the Digest authors below to obtain a copy.

Proposals to Improve the Capital Markets

On March 31, 2025, Nasdaq released a comprehensive set of policy recommendations to enhance U.S. public markets, aiming to bolster capital formation and strengthen the American economy. The paper addresses the challenges faced by public companies and proposes actionable recommendations to create a more conducive environment for growth and innovation. The paper also emphasizes the long-term decline in U.S. public listings, warning that this trend reduces capital access for businesses and limits wealth-building opportunities for everyday investors. Key recommendations include:

1. Proxy Process Modernization
   • Improving Proxy Plumbing: Revise rules to foster direct communication between companies and shareholders, assign objecting beneficial owner costs to relevant shareholders, give issuers a say in selecting intermediary providers and eliminate preliminary proxy requirements for certain routine matters. Nasdaq calls for the modernization of proxy communication channels to improve efficiency and reduce unnecessary costs.
   • Common-Sense Proxy Access and Shareholder Proposal Reforms: Update proxy rules to prevent repetitive and unsuccessful proposals from reappearing, increase minimum shareholding for submissions, extend resubmission periods for failed proposals and modify rules to ensure proposals considered at annual meetings are meaningful to the business.
   • Proxy Advisory Reform: Require proxy advisory firms to register with the SEC, disclose conflicts of interest and provide issuers with a reasonable amount of time to respond to mistakes in voting recommendations.
2. Scaled Disclosure Relief
   • Reviving Scaled Disclosure: Extend emerging growth company status, harmonize smaller reporting company definitions and expand eligibility for well-known seasoned issuer registrations and use of free-writing prospectuses.
   • Streamlining Quarterly Reporting Practices: Standardize quarterly press release guidelines to replace Form 10-Q and offer semiannual reporting options.
   • Anchoring Disclosure Requirements in Materiality: Anchor disclosure regimes in materiality, ensure that special interest disclosures do not fall under multiple jurisdictions and extend the four-day window for cybersecurity disclosures.
   • Right-Sizing Regulation S-K Disclosures: Streamline Reg S-K disclosures, focusing on company-specific risks and reducing page limits and exempt non-volitional transactions from the two-business-day filing deadline for Section 16(a) reporting.
3. Leveling the Playing Field with Smart Regulation
   • Ensuring Audits Remain Relevant and Affordable: Create a PCAOB office, role or committee for stakeholder feedback and implement cost-benefit analyses for future rulemakings.
   • Updating Short-Selling Disclosures: Align short position disclosures with long position disclosures and enhance transparency around short positions for research publishers.
   • Reining in Unproductive Litigation Practices: Enact the Litigation Transparency Act, ease the standard for imposing sanctions for frivolous lawsuits, limit plaintiff legal fees, tighten requirements for class action lawsuits, require proof of material misstatements, codify scienter and loss causation criteria, create a safe harbor for general risk factors, require loser to pay legal fees in securities class-action lawsuits, and permit companies to require shareholders to pursue arbitration claims against the company.

For more information, see Nasdaq’s full publication here.

The Nasdaq proposal is not the only proposal made to enhance U.S. public markets. For example, on January 30, 2025, the Society for Corporate Governance sent a letter to Acting SEC Chair Mark T. Uyeda presenting several recommendations aimed at enhancing corporate governance and disclosure practices.

In addition, Republicans have put forward recommendations to improve the regulatory framework governing U.S. public markets. These proposals include revising proxy advisory firm regulations, reforming shareholder proposal rules, enhancing disclosure requirements, encouraging long-term investment, improving market access and strengthening investor protections.


Acting SEC Chair Uyeda Advocates for Deliberative and Inclusive Rulemaking Process

On March 17, 2025, at the Investment Company Institute’s 2025 Investment Management Conference, Acting SEC Chair Mark T. Uyeda remarked on the SEC’s rulemaking approach, emphasizing the necessity for a return to a more deliberate and inclusive process. Acting Chairman Uyeda expressed concerns over the recent tendency of the SEC to take “rulemaking shortcuts,” and remarked that the SEC needs to prioritize meaningful public engagement, including restoring historical comment periods of at least 60 days. Notably, Acting Chairman Uyeda maintained that the SEC’s rulemaking approach will prioritize “effective and cost-efficient regulations that respect the limits of our statutory authority.” Acting Chairman Uyeda emphasized the need for a flexible approach to foster innovation and highlighted the ability for funds to offer both mutual fund and ETF share classes.

For more information, see Acting Chairman Uyeda’s full remarks here.


SEC Extends Time to Consider NYSE’s Proposal on Delisting Companies with Unpaid Fees

The SEC has announced that it will make a decision by June 13, 2025 as to whether it will either approve or disapprove NYSE’s proposal to amend its listing rules regarding unpaid fees. The proposed amendment stipulates that NYSE will not review a compliance plan submitted by a listed company that is below compliance with a continued listing standard if the company has any unpaid fees to NYSE. Instead, NYSE will immediately commence suspension and delisting procedures if such fees are not paid in full by the plan submission deadline or at the time of any required periodic review of such plan.


SEC Updates Compliance and Disclosure Interpretations on Exempt Offerings

On March 12, 2025, the Division issued updates to its C&DIs on Securities Act Rules regarding the SEC’s exempt offering framework. These updates primarily affect offerings under Regulation A, Regulation D and Regulation Crowdfunding.

Corporation Finance Division Updates C&DIs on Forms S-3, 20-F, F-SR

On March 20, 2025, the Division updated certain C&DIs related to Forms S-3, 20-F and F-SR:

Selected Recent Securities Law Legislation Proposals

A summary of selected recent securities-law related legislation proposed in March 2025 follows. 

Markets At a Glance 

The below market snapshot shows the volume of U.S. IPOs, follow-on offerings, investment grade corporate debt issuances, convertible bonds issuances and high-yield corporate debt issuances from the first quarter of 2024 through the first quarter of 2025. 

This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.