Shareholder Advocate Fall 2025

Shareholder

Fall 2025

SEC Upends Decades of Precedent and Endorses Forced Arbitration Provisions in IPOs

On September 17, 2025, the U.S. Securities and Exchange Commission issued a “policy statement” endorsing the inclusion of forced arbitration provisions in initial public offering registration statements.

SEC to Propose Rule Easing Financial Reporting Frequency from Quarterly to Semiannual PAGE 5

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Cohen Milstein Obtains Preliminary Approval of $167.5 Million Settlement with EQT Corporation PAGE 9

Fiduciary Focus: Two Administrations, Two Divergent Approaches in Regulating How Investment Advisors Use Artificial Intelligence PAGE 12

SEC Upends Decades of Precedent and Endorses Forced Arbitration Provisions in IPOs On September 17, 2025, the U.S. Securities and Exchange Commission (SEC) issued a “policy statement” endorsing the inclusion of forced arbitration provisions in initial public offering (IPO) registration statements.

Editor’s Note: If you are interested in learning more about how you can join the fight against forced arbitration, please reach out to Laura Posner @ 212-220-2925 or lposner@cohenmilstein. com

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Issued with just one week of public notice, with no opportunity to comment, and without any analysis of the impact of such a “policy” change on either investors or the public markets, the move reverses the Agency’s decadeslong opposition to such clauses. Though touted by SEC Chairman Paul Atkins as part of his plan to “make IPOs great again,” this dramatic policy shift overlooks the significant costs that forced arbitration imposes not only on investors, but also on the companies it purports to benefit.

The harm to investors is clear. Forced arbitration strips them of the well-established right to pursue class-wide recovery in court. Without the class action mechanism, only the wealthiest shareholders will have the resources to bring claims, leaving retail investors without any recompense when companies engage in fraud. Further, because arbitration is confidential and non-public, the deterrent effect of such litigation will evaporate, likely leading to more fraud.

Laura H. Posner Partner

212.220.2925

lposner@cohenmilstein.com

Christina Schiciano Associate

202.408.4657

Though touted by SEC Chairman Paul Atkins as part of his plan to “make IPOs great again,” this dramatic policy shift overlooks the significant costs that forced arbitration imposes not only on investors, but also on the companies it purports to benefit.

cschiciano@cohenmilstein.com

But smaller investors aren’t the only ones at risk. Fragmenting singular class actions into multiple individual arbitrations will also burden companies with duplicative claims from deep-pocketed, sophisticated investors. Litigating identical allegations across dozens, if not hundreds, of separate arbitrations will significantly inflate legal costs and risks by increasing the likelihood of adverse outcomes, compelling company officers and executives to be deposed in each separate arbitration, and driving up directors’ and officers’ insurance premiums. Companies will also lose key protections available under the Private Securities Litigation Reform Act (PSLRA) and the Federal Rules of Civil Procedure,

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such as heightened pleading standards and discovery stays during motions to dismiss. Moreover, early adopters of forced arbitration provisions will face an onslaught of litigation challenging the constitutionality and viability of such provisions under both federal and state law.

Without the class action mechanism, only the wealthiest shareholders will have the resources to bring claims, leaving retail investors without any recompense when companies engaged in fraud.

The structure of private arbitration adds further risk for both sets of stakeholders. Arbitrators are not bound by precedent, and decisions are not published, thereby depriving investors and companies alike of guidance on what conduct is permissible. And without a guaranteed right to appeal, parties have few avenues for recourse if an arbitrator issues a ruling untethered to law.

Both investors and issuers have recognized these risks. In recent years, shareholders and corporations alike have opposed adding forced arbitration clauses to corporate bylaws. In 2018, pharmaceuticals giant Johnson & Johnson sought an SEC no-action letter to exclude a shareholder proposal mandating arbitration for securities fraud claims. The SEC granted such relief, agreeing the provision would violate both federal law and New Jersey state law. More recently, 97.5% of Intuit shareholders— including all major asset managers—voted against a similar proposal.

Litigating identical allegations across dozens, if not hundreds, of separate arbitrations will significantly inflate legal costs and risks by increasing the likelihood of adverse outcomes, compelling company officers and executives to be deposed in each separate arbitration, and driving up directors’ and officers’ insurance premiums.

Ultimately, forced arbitration undermines the integrity of U.S. public markets as a whole. These markets have long attracted investors by operating under a disclosure-based regime that provides material information and a path for redress in cases of fraud. If investors are unable to vindicate their rights, they will exit the market, eroding investor confidence and, in turn, company valuations.

Laura H. Posner is a partner in the firm’s Securities Litigation & Investor Protection practice group.

Christina Schiciano is an associate in the group.

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SEC to Propose Rule Easing Financial Reporting Frequency from Quarterly to Semiannual Responding to a call to action by President Donald Trump, Securities and Exchange Chair Paul Atkins is “fast-tracking” a proposal that would allow publicly traded US companies to file financial reports twice a year instead of quarterly. The proposed rule change has triggered opposition by some stakeholders.

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If the rule is relaxed, it would end a practice that has undergirded the US investment framework for 55 years. Since 1970, US companies have been required to file unaudited “Form 10-Q” reports with the SEC to share certain information about their financial performance with shareholders, in addition to submitting audited annual Form 10-K reports.

The quarterly reporting requirement makes the US somewhat of a global outlier—to some, quarterly reporting is part of what makes US stock markets the gold standard for transparency; others consider it costly red tape that encourages shorttermism.

President Trump falls squarely in the latter camp. During his first term in 2018, he urged the SEC to ditch quarterly reports, but the initiative stalled after the Commission issued a request for comment on the matter. On September 15, President Trump again pushed the idea in a social media post as a way for corporations to “save money” spent on compliance “and allow managers to focus on properly running their companies” instead of doing so “on a quarterly basis.”

Critics say less frequent reporting will hurt shareholders, especially retail investors, by widening the gap between publicly available information and facts known by company insiders.

This time, however, President Trump has an important ally in SEC Chair Atkins, who voiced immediate support and pledged to fasttrack the rule in a September 29 Financial Times opinion piece.

“The government should provide the minimum effective dose of regulation needed to protect investors while allowing businesses to flourish,” Chair Akins wrote, saying he was “fast-tracking President Trump’s proposal to equip companies with the option to report on a semi-annual basis, rather than locking them into the current quarterly reporting regime.”

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Richard E. Lorant

Director of Institutional Client Relations 202.408.3622

rlorant@cohenmilstein.com

In the article, Chair Atkins praised President Trump for ending the “mission creep” by which the SEC had “drifted from the precedent and predictability that sustain … confidence” in capital markets and abandoned “its core mission of protecting investors, maintaining fair, orderly and efficient markets, and facilitating capital formation.”

Specifically, he blasted predecessors who he believes strayed from the “principle of materiality” to write rules “for shareholders who seek to effect social change or have motives unrelated to maximising the financial return on their investment.”

“Giving companies the option to report semi-annually is not a retreat from transparency,” SEC Chair Paul Atkins wrote in an opinion article for the Financial Times.

“It is time for the SEC to remove its thumb from the scales and allow the market to dictate the optimal reporting frequency based on factors such as the company’s industry, size and investor expectations,” Chair Atkins said. “Giving companies the option to report semi-annually is not a retreat from transparency.”

Chair Atkins noted that foreign companies listed on US exchanges are only required to file semiannual reports, as are companies in the European Union and the United Kingdom. Both imposed quarterly financials for a time before reverting to twice-yearly reports, the EU from 2004 to 2013 and the UK from 2007 to 2014. Most Canadian and Japanese companies, like those in the US, file quarterly financial reports, as do all companies in India and China, which is ironic, given President Trump’s assertion in his social media post that “China has a 50 to 100 year view on management of a company …”

Critics say less frequent reporting will hurt shareholders, especially retail investors, by widening the gap between publicly available information and facts known by company insiders. Unlike Chair Atkins, they say the move will undermine transparency by reducing the steady flow of reliable financial information to market participants.

In a 2020 research article in The Accounting Review, researchers studying thousands of US and European peer companies across multiple industries found that when US companies announced quarterly earnings, the European companies’ stock price more closely tracked their US counterparts when the European companies weren’t reporting.

The authors of article, “The Dark Side of Low Financial Reporting Frequency,” concluded that the “information vacuum” created by semiannual reporting caused investors to “periodically overreact to peer-firm earnings news in the absence of own-firm earnings disclosures in interim periods.” In addition, investors overcorrected when the European peer companies finally issued their semiannual earnings reports.

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“We conclude[d] that less-transparent reporting causes more volatile and less efficient stock prices,” said Salman Arif, an associate professor at the University of Minnesota’s Carlson School of Management and one of the paper’s authors.

Some also take issue with the idea that semiannual reporting will motivate managers to make longerterm decisions. On September 19, columnist James Mackintosh of The Wall Street Journal argued that President Trump was “wrong in every possible way.” For one thing, six months isn’t the long term, he wrote. For another, US companies actually do invest for the long term despite quarterly reporting, he said, citing technology companies’ investment of “nearly $400 billion this year in long-term artificial intelligence projects.”

Furthermore, Mackintosh wrote, there was “no effect on investment or research spending for companies that switched to half-yearly reporting” in the UK since quarterly requirements were eliminated in 2014. “Indeed, if quarterly reporting were such a huge barrier to companies, it’s odd that the U.S. market is thriving, while London is struggling to attract new listings or even hold on to existing once,” he said.

Chair Atkins has said he would present a proposed rule for public comment late this year or in early 2026. SEC rule changes typically take more than a year go into effect, even when expedited, and there is no guarantee the new rule will be approved or what exact shape it will take. Given the strong opposition to less frequent reporting among academics, institutional investors, and shareholder advocates, the public comment period should yield a vigorous debate.

Richard E. Lorant is the firm’s Director of Institutional Client Relations.

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Cohen Milstein Obtains Preliminary Approval of $167.5 Million Settlement with EQT Corporation On July 22, 2025, Judge Robert J. Colville of the U.S. District Court for the Western District of Pennsylvania granted preliminary approval of a $167.5 million all-cash settlement to resolve claims that EQT Corporation overstated the synergistic benefits of its $6.7 billion merger with Rice Energy, another natural gas drilling company operating in the Marcellus shale of Western Pennsylvania, in violation of the federal securities laws.

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The $167.5 million settlement is the largest securities class action recovery ever in the history of the Western District of Pennsylvania and the 14th largest in the history of the Third Circuit.

As co-lead counsel in the case, Cohen Milstein represents a lead plaintiff group consisting of the Eastern Atlantic States Carpenters Annuity Fund, Eastern Atlantic States Carpenters Pension Fund, Government of Guam Retirement Fund, and Cambridge Retirement System.

The $167.5 million settlement is the largest securities class action recovery ever in the history of the Western District of Pennsylvania and the 14th largest in the history of the Third Circuit.

In particular, the case alleged that from June 19, 2017 through June 17, 2019, Defendants made materially false and/ or misleading statements and omissions regarding EQT’s drilling performance and capability, and about the purported benefits of acquiring Rice Energy, a competitor. The alleged false and misleading statements concerned, among other things, the combined company’s ability to drill 1,200 lateral wells at an average lateral length of 12,000 feet, and to realize $2.5 billion in synergies. The complaint alleged that, after the acquisition, following disappointing financial results midway through the class period, former Rice executives launched and ultimately won a proxy contest to take control of the combined company, citing in part EQT’s failure to seek or realize the stated synergies. The complaint asserted that Defendants’ alleged misrepresentations and omissions caused investors to purchase EQT common stock at artificially inflated prices and/ or to approve EQT’s proposed Acquisition. The complaint further alleged that the truth was revealed to the public in a series of partially corrective disclosures on October 25, 2018, February 5, 2019, and June 17, 2019, that caused the price of EQT common stock to decline, causing investors to suffer damages when the truth was revealed.

In arriving at this settlement, Cohen Milstein and its colead counsel reviewed over 7 million pages of documents, subpoenaed over 50 third parties, participated in over 50

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S. Douglas Bunch Partner

202.408.4600

dbunch@cohenmilstein.com

The case alleged that from June 19, 2017 through June 17, 2019, Defendants made materially false and/or misleading statements and omissions regarding EQT’s drilling performance and capability, and about the purported benefits of acquiring Rice Energy, a competitor.

depositions of fact and expert witnesses, retained and worked with experts on the subjects of damages, loss causation, natural gas drilling, and corporate due diligence, and thoroughly reviewed the applicable facts and law. Furthermore, the parties extensively briefed motions to dismiss, for class certification, for summary judgment, and to exclude expert opinions and testimony.

During the hard-fought litigation, the Court certified the class on August 11, 2022, and on September 23, 2022, the U.S. Court of Appeals for the Third Circuit denied Defendants’ petition for interlocutory review of the Court’s order granting class certification.

In arriving at this settlement, Cohen Milstein and its co-lead counsel reviewed over 7 million pages of documents, subpoenaed over 50 third parties, participated in over 50 depositions of fact and expert witnesses, retained and worked with experts on the subjects of damages, loss causation, natural gas drilling, and corporate due diligence, and thoroughly reviewed the applicable facts and law.

The case team at Cohen Milstein included Steven J. Toll, Daniel S. Sommers, S. Douglas Bunch, Christina D. Saler, Benjamin F. Jackson, and Alexandra Gray. A hearing to consider final approval of the settlement is set for October 30, 2025.

S. Douglas Bunch is a partner in the firm’s Securities Litigation & Investor Protection practice group, and co-chair of the firm’s Pro Bono Committee.

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Fiduciary Focus Two Administrations, Two Divergent Approaches in Regulating How Investment Advisors Use Artificial Intelligence

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In September, the Securities and Exchange Commission (SEC) withdrew 14 proposed rules dating from the Biden administration.

The announcement represented a significant shift in the agency’s regulatory approach to the financial sector under President Trump’s SEC Chair Paul Atkins. Specifically, withdrawing a rule that required investment advisors to “eliminate or neutralize” conflicts of interest arising from their use of artificial intelligence highlights major differences between the Biden and Trump administrations’ assessments of the threat posed by predictive analytical technologies and how best to regulate this rapidly advancing area.

Under the Biden administration, then SEC Chair Gary Gensler rang the alarm bell about the potential impact of artificial intelligence on the financial markets. Prior to becoming SEC Chair, Gensler was a professor at MIT and co-authored a research paper arguing that uniform data and model designs would result in financial market risks. He explained “models built on the same datasets are likely to generate highly correlated predictions that proceed in causing crowding and herding” leading to systematic risks that could unleash a financial crisis. As an example, Gensler cited the 2008 financial crisis, where systemic risk created by the financial sector’s heavy reliance on three major credit agencies to regulate collateral obligations contributed to a global crash. In an August 2023 interview with The New York Times, then-Chair Gensler predicted that just a few AI companies would create financial models undergirding the economic system, setting up global markets for a financial crash. “This technology will be the center of future crises, future financial crises,” Gensler said. “It has to do with this powerful set of economics around scale and networks.”

Jay Chaudhuri Of Counsel

jchaudhuri@cohenmilstein.com

The SEC under Gensler proposed in July 2023 a rule that would have prevented broker-dealers or investment advisors from using AI that resulted in investment firms placing their own interests ahead of investors.

Not surprisingly, the SEC under Gensler proposed in July 2023 a rule that would have prevented broker-dealers or investment advisors from using AI that resulted in investment firms placing their own interests ahead of investors. Under the proposed rule, investment firms were also required to adopt and maintain written policies and

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procedures that would prevent such violation of the policy. In addition, the firm would have to comply with certain record-keeping requirements.

The proposal was criticized for several reasons. First, opponents argued the rules would place a serious compliance burden on investment firms. Second, opponents argued that such a proposal hurt the development of new technologies and innovation. Finally, opponents argued the definition of “covered technology” (as applied to AI) was too broad. For example, “covered technology” would include regulating a simple technology like Excel spreadsheets.

The Trump administration and SEC Chair Atkins have taken positions diametrically opposed to Gensler’s, focusing more on enabling innovation than on enforcement. In July, President Trump announced an “AI Action Plan” that described regulation as a barrier to AI innovation. In August, Chair Atkins announced the creation of an AI Task Force consistent with the administration’s approach. The announcement said that the Task Force would “remove barriers to progress” and “focus on AI applications that maximize benefits.”

Furthermore, the SEC under Atkins is examining whether investment firms possess the proper governance procedures to monitor AI technologies as opposed to eliminating any conflicts of interests associated with new technologies.

The Trump administration and SEC Chair Atkins have taken positions diametrically opposed to Gensler’s, focusing more on enabling innovation than on enforcement.

Even those who are proponents of AI’s capabilities believe that AI poses a real threat to financial stability and continue to sound the alarm. In July, OpenAI CEO and ChatGPT co-creator Sam Altman warned about a “significant, impending fraud crisis brought about by artificial intelligence.” The effectiveness of the new administration’s focus on proper disclosure of investment firms’ AI use and governance—as opposed to eliminating conflicts on new technologies—can only be determined over the course of time.

Jay Chaudhuri is Of Counsel at Cohen Milstein.

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UPCOMING EVENTS October 26-29 | National Conference on Public Employee Retirement Systems FALL Conference

November 9-12 | International Foundation of Employee Benefit Plans

November 11-14 | State Association of County Retirement Systems Fall Conference

November 12-13 | Louisiana Trustee Education Council Educational Dinner Panels

November 18-19 | Global Class Actions Symposium

November 23-25 | County Commissioners Association of Pennsylvania Fall Conference

Hollywood Beach, FL – JD Davis, Richard Lorant and Cristine Turner

Huntington Beach, CA – Richard Lorant and Tom Straw

London, UK – Jay Chaudhuri, Carol Gilden (speaking), and Benjamin Jackson

December 7-10 | Massachusetts Association of Contributory Retirement Systems Fall Conference Springfield, MA – Richard Lorant

Honolulu, HI – Molly Bowen, Carol Gilden and Richard Lorant

Baton Rouge, LA and New Orleans, LA – JD Davis and Manuel “John” Dominguez

Dauphin County, PA – David Maser

December 13 | Pennsylvania Society 127th Annual Dinner New York, NY – David Maser and Christina Saler

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Editor: Christina D. Saler Editorial Team: Richard E. Lorant and Samuel P. Waite Please contact us with questions or comments at 202.408.4600.

The materials in this edition of the Shareholder Advocate are for informational purposes only.

They are not intended to be, nor should they be taken as, legal advice.

The opinions expressed herein reflect those of the respective author.

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