CSB’s New Transparency Initiative
On January 14, 2025, the U.S. Chemical Safety and Hazardous Investigation Board (“CSB”) released Volume One of a series of detailed reports on serious accidental chemical incidents reported to CSB under the Accidental Release Reporting Rule, implemented in March 2020.[1]
Prior to July 2022, CSB incident reported was limited to basic incident data—facility name, locate, date, and outcome: fatality, serious injury, or substantial property damage. CSB’s new initiative represents a landmark shift in chemical safety transparency. The release of detailed incident summaries, including analysis of probable cause and contributing factors, creates significantly increased legal and operational risks that require immediate strategic attention.
Volume One: A Look at the Data
This initial report meticulously details 26 events from April 2020 to September 2023 across 15 states, including California, Texas, and Louisiana. The incidents, resulting in 5 fatalities, 17 serious injuries, and approximately $700 million in damages, involved refineries, chemical plants, and food processing facilities.
Volume One does not just report the what—it delves into the why, detailing various incident types and causes. This means that specifics about incidents, previously kept internal, will now be accessible to the public, including employees, communities, and competitors. As a result, companies should expect heightened scrutiny and a renewed focus on preventing incidents.
Each incident summary goes beyond a basic factual account, offering:
Detailed Chronology: A timeline of events, actions taken, and consequences.
Probable Cause Determination: A clear statement of the probable cause of the incident, often pinpointing equipment failures, process malfunctions, operational errors, or inadequate safety procedures.
Contributing Factors: A breakdown of secondary factors contributing to the incident’s severity, such as inadequate training, maintenance deficiencies, and design flaws.
Technical Specifications: Inclusion of technical data, such as pressure readings, temperatures, and quantities of materials released.
Safety Recommendations: Concrete, actionable recommendations for preventing similar incidents, directed at specific companies, industry organizations, and/or regulatory bodies.
Implications
The release of Volume One and future volumes carries significant implications for legal strategy and risk management. For example, the detailed reports may provide plaintiffs with readily accessible evidence and new avenues for legal action and argumentation. Any incidents reported to the CSB, no matter how minor, will be subject to public review and analysis. This includes the details of the incident and the CSB’s findings regarding its probable cause. CSB’s finding may also influence regulatory agencies to enact stricter enforcement and new regulations. Public awareness of incidents and associated probable causes may also affect a company’s reputation and investor or stakeholder relations.
The CSB’s new transparency initiative fundamentally changes the legal and operational environment for energy companies. Proactive analysis of Volume One and the implementation of robust safety and compliance measures are no longer optional—they are essential for mitigating future legal and reputational risks. CSB intends to make these compiled incident reports available to the public via its website “on a regular basis.”[2]
Volume One can be found here.
[1] CSB News Release, “U.S. Chemical Safety Board Announces New Safety Product to Provide the Public with More Information about Serious Chemical Incidents Reported to the Agency” (Jan. 14, 2025), available at https://www.csb.gov/-us-chemical-safety-board-announces-new-safety-product-to-provide-the-public-with-more-information-about-serious-chemical-incidents-reported-to-the-agency-/.
[2] Id.
SEC Updates Names Rule FAQs
On 8 January 2025, the staff of the Division of Investment Management of the US Securities and Exchange Commission (the SEC) released an updated set of Frequently Asked Questions (the FAQs) related to the amendments to Rule 35d-1 (Names Rule) under the Investment Company Act of 1940, as amended (the 1940 Act) and related form amendments (collectively, the Amendments) adopted in 2023. The FAQs modify, supersede, or withdraw portions of FAQs released in 2001 (the 2001 FAQs) related to the original adoption of the Names Rule. In addition to the FAQs, the SEC staff also released Staff Guidance providing an overview of the questions and answers withdrawn from the 2001 FAQs (Staff Guidance). Together, the FAQs and the Staff Guidance on the withdrawn FAQs are intended to provide guidance to the various implementation issues and interpretative questions left unclear by the adopting release of the Amendments to the Names Rule (2023 Adopting Release). While the FAQs and the Staff Guidance do not address all key issues and questions related to the Names Rule, they do provide new guidance on certain areas and suggest interpretive frameworks that can be more universally applied.
Revisions to Fundamental Policies
In the revised FAQs the SEC staff updates certain FAQs, broadening the reach of those FAQs’ applicability. For instance, the SEC staff modifies the 2001 FAQ relating to the shareholder approval requirement for a fund seeking to adopt a fundamental 80% Policy to also provide guidance in instances where an 80% investment policy (an 80% Policy) that is fundamental is being revised. The SEC staff provides clarification concerning the process required to revise fundamental investment policies. The FAQ states that a fundamental 80% Policy may be amended to bring such policy into compliance with the requirements of the amended Names Rule without shareholder approval, provided the amended policy does not deviate from the existing policy or other existing fundamental policies. The FAQs restate that individual funds must determine, based on their own individual circumstances, whether shareholder approval is necessary within this framework. Accordingly, funds may take the position that clarifications or other nonmaterial revisions to a fundamental 80% Policy in response to the amended Names Rule would not require shareholder approval. If it is determined that nonmaterial revisions have been made to a fundamental 80% Policy, notice to the fund’s shareholders is required.1 Funds should also continue to provide 60 days’ notice (as required by amended Rule 35d-1) for any changes to nonfundamental 80% policies. A similar analysis can be applied in determining whether a post-effective amendment filed pursuant to rule 485(a) under the Securities Act of 1933 is required in connection to the Names Rule implementation process.
Guidance on Tax-Exempt Funds
The FAQs provide insight into the SEC staff’s view of the applicability of the Names Rule to funds whose names suggest their distributions are exempt from both federal and state income tax. According to the FAQs, such funds fall within the scope of the Names Rule and, per Rule 35d-1(a)(3), must adopt a fundamental policy to invest, under normal circumstances, either:
At least 80% of the value of its assets in investments, the income from which is exempt from both federal income tax and the income tax of the named state.
Its assets so that at least 80% of the income that it distributes will be exempt from both federal income tax and the income tax of the named state.
With respect to the 80% Policy basket of single-state tax-exempt funds (e.g., a Maryland Tax-Exempt Fund), the FAQs reiterate that those funds may include securities of issuers located outside of the named state. For such a security to be included in the fund’s 80% Policy basket, the security must pay interest that is exempt from both federal income tax and the tax of the named state, and the fund must disclose in its prospectus the ability to invest in tax-exempt securities of issuers outside the named state.
Additionally, with respect to the terms “municipal” and “municipal bond” in a fund’s name, the FAQs reiterate that such terms suggest that the fund’s distributions are exempt from income tax and would be required to comply with the requirements of Rule 35d-1(a)(3) described above. It further reconfirms that securities that generate income subject to the alternative minimum tax may be included in the 80% Policy basket of a fund that includes the term “municipal” within its name but not a fund that includes “tax-exempt” within its name.
Specific Terms Commonly Used in Fund Names
In addition, the FAQs provide some insight as to the SEC staff’s view of the application of the Names Rule with respect to a number of other terms such as:
High-Yield
The FAQs affirm the SEC staff’s view that funds with the term “high-yield” in the name must include an 80% Policy tied to that term. The FAQs note that the term “high-yield” is generally understood to describe corporate bonds with particular characteristics, specifically, that a bond is below certain creditworthiness standards. However, the SEC staff made an exception for funds that use the term “high-yield” in conjunction with the term “municipal,” “tax-exempt,” or similar. Based on historical practice and as the market for below investment grade municipal bonds is smaller and less liquid, the SEC staff asserts that it would not object if such funds invested less than 80% of their assets in bonds with a high yield rating criteria.2
Tax-Sensitive
The SEC staff confirms in the amended FAQs that “tax-sensitive” is a term that references the overall characteristics of the investments composing the fund’s portfolio and would not require the adoption of an 80% Policy.
Income
The FAQs confirm that the term “income,” is not alluding to investments in “fixed income” securities, but rather when used in a fund’s name, it suggests an objective of current income as a portfolio-wide result. The FAQs declare that the term “income” would not, alone, require an 80% investment policy.
While SEC staff’s guidance when considering the three terms noted above does not provide an overview of how all terms should be treated because an amount of judgment is required for certain terms, they do confirm the general framework should be used when analyzing the applicability of Rule 35d-1 to other terms. Specifically, and consistent with the 2023 Adopting Release, the examples reiterate that terms describing overall portfolio characteristics are outside the scope of the Names Rule, while the terms describing an instrument with “particular characteristics” are within scope of the Names Rule.
Money Market Funds
The FAQs also confirm that funds that use the term “money market” in their name along with another term or terms that describe a type of money market instrument must adopt an 80% Policy to invest at least 80% of the value of their assets in the type of money market instrument suggested by its name. The FAQs further explain that a generic money market fund, one where no other describing term is included in its name, would not be required to adopt an 80% Policy. The FAQs also cite relevant information included in frequently asked questions related to the 2014 Money Market Fund Reform.
Withdrawals from 2001 FAQs
In addition to the modification of certain questions within the FAQs, the SEC staff also withdrew a number of key questions from the 2001 FAQs. The SEC staff stated that certain questions were removed for several reasons, including the fact that certain questions were no longer relevant as they addressed circumstances that were specific to the 2001 adoption of the Names Rule, or that they believed the questions were already addressed in the 2023 Adopting Release. Below is a discussion of certain questions that were removed:
The SEC staff withdrew the outdated 2001 FAQ discussing revising former 65% investment policies to 80% Policies.
The FAQs also withdrew a question related to notice to shareholders of a change in investment policy as the Amendments and the 2023 Adopting Release both clearly describe the requirements for Rule 35d-1 notices.
The 2001 FAQs’ guidance regarding terms such as “intermediate-term bond” was also withdrawn. This guidance in the 2001 FAQs set forth the SEC staff position that a bond fund with the terms “short-term”, “intermediate-term”, or “long-term” in its name should have a dollar-weighted average maturity of, respectively, no more than three years, more than three years but less than 10 years, or more than 10 years and an 80% investment policy to invest in bonds. The FAQs removal of the definition suggests the potential for expanding the definition of such terms.
The 2001 FAQs’ guidance also removed several FAQs related to specific terms:
The question regarding the use of terms such as “international” and “global” was removed as the 2023 Adopting Release states that such terms describe an approach to constructing a portfolio and thus not requiring an 80% investment policy. However, the SEC staff would often require funds to adopt certain policies reflecting “international” or “global” investing in practice prior to the 2023 Adopting Release, so whether that reference changes the review staff practice will remain to be seen.
The question related to the use of “duration” was also removed as the 2023 Adopting Release states that such term references a characteristic of the portfolio as a whole.
Although the FAQs may be helpful, many uncertainties regarding the implementation and application of the Amendments to the Names Rule exist and additional guidance will be necessary to more clearly understand and implement the Amendments. Additionally, this guidance comes on the heels of the Investment Company Institute’s letter to the SEC in late December 2024 requesting that the SEC delay implementation of the Names Rule. Given that the development and finalizing of the FAQs requires a significant amount of time and effort, the timing of their release does not suggest that the SEC will or will not act on that request.
FDA Furthers Efforts to Improve the Accelerated Approval Pathway through New Draft Guidance on Confirmatory Trials
On January 6, the U.S. Food and Drug Administration (“FDA” or the “Agency”) released a draft guidance titled “Accelerated Approval and Considerations for Determining Whether a Confirmatory Trial is Underway” (the “Draft Guidance”). The Draft Guidance responds to FDA’s new authorities and responsibilities in administering the accelerated approval program under the 2023 Consolidated Appropriations Act, which FDA addressed at a high level in an initial draft guidance about a month ago (see our article on this initial guidance here). The new Draft Guidance narrows in on heightened requirements for confirmatory trials and outlines the granular process for ensuring that confirmatory trials are “underway” to verify the clinical benefits of accelerated approval drugs. FDA is inviting comments to the Draft Guidance, with a deadline set for March 10, 2025.
Background
As explained in greater detail in our previous article, the accelerated approval program balances the urgent need for treatment of certain serious and/or rare conditions with the equally important need to ensure patient safety by allowing for the conditional approval of drugs for serious and/or rare conditions before the drug has been fully proven “safe and effective” under the traditional three-phase clinical study route, based on the identification of a “surrogate” or “intermediate” endpoint reasonably likely to predict the drug’s ultimate clinical benefit.[1] As a condition of accelerated approval, sponsors are required to perform post-market confirmatory trials to verify anticipated clinical benefits (i.e., support a complete finding of safety and efficacy that meets FDA’s standard for full market approval). Accordingly, the successful completion of these confirmatory studies converts a drug’s accelerated approval to a traditional approval.
New Confirmatory Trial Requirements – “Underway”
In this Draft Guidance, FDA provides a detailed explanation of the heightened requirement – established in last month’s draft guidance – that confirmatory trials be “underway” prior to accelerated approval. Under the heightened requirement, FDA mandates that confirmatory trials be “well underway, if not fully enrolled” before accelerated approval is granted, with full enrollment required for instances in which post-approval enrollment would be particularly challenging. The Agency explains that a trial is “underway” if it (1) has a target completion date “consistent with diligent and timely conduct of the trial; (2) “the sponsor’s progress and plans for post-approval conduct of the trial provide sufficient assurance to expect timely completion of the trial”; and (3) enrollment of the trial has been, at least, initiated. The Draft Guidance goes on to provide considerations for determining the target completion date for a confirmatory trial, which must be supported by “clear and sound justification,” as well as other measurable benchmarks that FDA intends to consider in reviewing confirmatory trial plans, such as recruitment and retention goals, site activation statistics, and accrual rates.
The Draft Guidance does establish that FDA may make exceptions to the heightened confirmatory trial requirement for scenarios like unexpected future events or rare diseases with “very small populations” and “high unmet need,” where non-randomized studies may be adequate and appropriate justification is made, but makes clear that such exceptions will likely be few and far between. Further, as it did in its initial draft guidance last month, FDA emphasizes the importance in ongoing collaboration with sponsors, and encourages sponsors to engage in early and frequent discussions with the Agency to align on clinical trial plans and timelines.
Takeaways
In our previous article, we suggested that the 2023 Consolidated Appropriations Act served as a clear signal to FDA to “tighten the reins” on the accelerated approval program in light of the significant lag time between accelerated approval and full approval of accelerated approval drugs being used to treat patients (data shows many drugs lingering on the market for years before confirmatory trials were initiated – if they were ever started at all). This Draft Guidance appears to be doing exactly that, but in a more prescriptive manner than last month’s high-level framework guidance. Here, FDA underscores that confirmatory trials are the key to ensuring that balance between urgent access to potentially life-saving drugs and patient safety, and, helpfully, sets out clearer operational expectations for sponsors’ execution of such trials.
Although the 2023 Consolidated Appropriations Act gave FDA until June of this year to develop the Draft Guidance, the Agency put it out just a month after its initial draft guidance – no doubt because the two are meant to work in tandem.[2] The prior draft guidance introduced the heightened requirements for the accelerated approval program and the latter honed in on more granular confirmatory trial requirements, clearly defining when FDA considers a trial to be “underway” and putting sponsors on notice that FDA will be monitoring these trials far more scrupulously than in years past. Specifically, when reviewing accelerated approval applications, FDA will be monitoring to ensure that sponsors have established a full plan with measurable benchmarks and that the enrollment process has been, at least, initiated. These heightened requirements communicate that FDA wants accelerated approval drugs to be as close to traditional approval route as possible at the time of application – without swallowing the purpose of the accelerated approval program in the first place.
The new Draft Guidance provides actionable steps for sponsors to take in developing and initiating confirmatory trials to support accelerated approval applications, which furthers the overall goal to expedite the period of time that a drug has “accelerated approval” status, as opposed to traditional approval status. Moreover, Sponsors may also be motivated not only by these new requirements – as FDA will either reject initial accelerated approval or initiate a post-market withdrawal if its detailed new confirmatory trial requirements are not met – but by forces at play in the greater healthcare landscape. For example, a Pennsylvania-based insurer recently issued a policy excluding non-oncology accelerated approval drugs from most benefit plans.[3] If other payors adopt this approach, and accelerated approval drugs are widely excluded from insurance coverage, sponsors could be financially motivated to complete confirmatory trials to prove full safety and efficacy of their drugs, which may prove to be a much stronger driving force than the regulatory motivation established in the new Draft Guidance. Ultimately, whatever the impetus, it appears that the industry may be headed toward more expeditious completion of confirmatory trials for accelerated approval therapies – which, in any case, is probably a good thing for patients.
FOOTNOTES
[1] Section 506(c)(1)(A) of the Federal Food, Drug, and Cosmetic Act (FD&C Act)
[2] Not to mention, of course, that FDA may be trying to sure up regulation through guidances in light of uncertainties regarding its authority under the new administration.
[3] See Claim Payment Policy Bulletin – Drugs, Biologics, or Gene Therapies with an Accelerated Approval, Independence Blue Cross (Jan. 1, 2025).
Julian Klein also contributed to this article.
FTC Announces 2025 Thresholds for HSR Act Filings and Interlocking Directorates Violations
The Federal Trade Commission (FTC) announced Friday increased jurisdictional thresholds for (1) notifications under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act), (2) the HSR Act filing fee schedule, and (3) the interlocking directorate thresholds under Section 8 of the Clayton Act.
Revised HSR Thresholds
The FTC revises these thresholds annually based on changes in the gross national product. The new thresholds will be effective 30 days after publication in the Federal Register and will apply to all transactions closing on or after that date.
The HSR Act requires parties engaged in certain transactions (including mergers, joint ventures, exclusive licenses, and acquisitions of voting securities, assets, or non-corporate interests) to file an HSR notification and report form with the FTC and the Antitrust Division of the Department of Justice — and to observe the statutorily prescribed waiting period (usually 30 days, or 15 days in the case of cash tender offers and bankruptcy) prior to closing — if the parties meet “Size of Transaction” and “Size of Person” thresholds (absent any applicable exemptions).
A transaction is reportable if:
Size of Transaction Threshold
The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities and assets of the acquired person valued in excess of $505.8 million;
Or
The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities and assets of the acquired person valued in excess of $126.4 million, AND the Size of Person thresholds below are met.
Size of Person Threshold
Either the acquiring or the acquired person has at least $252.9 million in total assets (or annual net sales if that party is engaged in manufacturing), and the other party has at least $25.3 million in total assets or annual net sales.
Revised Filing Fee Schedule
Size of Transaction (transaction value)
New Filing Fee
Less than $179.4 million
$30,000
Not less than $179.4 million but less than $555.5 million
$105,000
Not less than $555.5 million but less than $1.111 billion
$265,000
Not less than $1.111 billion but less than $2.222 billion
$425,000
Not less than $2.222 billion but less than $5.555 billion
$850,000
$5.555 billion or more
$2,390,000
Revised Interlocking Directorate Thresholds
The FTC also approved revised jurisdictional thresholds under Section 8 of the Clayton Act, which become effective upon publication in the Federal Register. Section 8 prohibits an officer or director of one firm from simultaneously serving as an officer or director of a competing firm if each firm has capital, surplus, and undivided profits of more than $51,380,000 unless one of the following de minimus exemptions is met:
The competitive sales of either corporation are less than $5,138,000.
The competitive sales of either corporation are less than 2% of its total sales.
The competitive sales of each corporation are less than 4% of its total sales.
The FTC’s upcoming changes to the HSR Rules,[1] effective February 10, place an emphasis on gathering additional information as part of the merger filing process to better inform the agencies of potential Section 8 violations. In addition, the agencies have evidenced an increased scrutiny of interlocking directorates through numerous policy statements and actions.[2]
It is therefore especially important in the current antitrust enforcement environment to monitor roles of a company’s officers and directors at other organizations.
Endnotes
[1] Bruce D. Sokler, Robert G. Kidwell, Kristina Van Horn, Payton T. Thornton, Federal Trade Commission Finalizes HSR Changes, Mintz (Oct. 11, 2024), available at: https://natlawreview.com/article/federal-trade-commission-finalizes-hsr-changes.
[2] See, e.g., Karen S. Lovitch, Bruce D. Sokler, Joseph M. Miller, Raj Gambhir, FTC Hosts Panel and Launches Public Inquiry with DOJ and HHS on Private Equity and Health Care, Mintz (Mar. 6, 2024), available at: https://natlawreview.com/article/ftc-hosts-panel-and-launches-public-inquiry-doj-and-hhs-private-equity-and-health; Bruce D. Sokler, Robert G. Kidwell, Payton T. Thornton, FTC Proposed Settlement Requires Private Equity Firm to Divest Shares, Relinquish Potential Board Seat, and Other Expansive Remedies, Mintz (Aug. 21, 2023), available at: https://natlawreview.com/article/ftc-proposed-settlement-requires-private-equity-firm-to-divest-shares-relinquish; Bruce D. Sokler, Joseph M. Miller, Payton T. Thornton, A Dose of Steroids: Chair Khan’s FTC Releases Expansive Policy Statement on Unfair Methods of Competition, Mintz (Nov. 14, 2022), available at https://natlawreview.com/article/dose-steroids-chair-khan-s-ftc-releases-expansive-policy-statement-unfair-methods.
Cookware Association Files Federal Challenge to Minnesota’s Ban on PFAS in Cookware
The Cookware Sustainability Alliance (CSA) announced on January 9, 2025, that it has filed suit in the U.S. District Court for the District of Minnesota, seeking a preliminary injunction of Minnesota’s ban on the sale of cookware containing intentionally added per- and polyfluoroalkyl substances (PFAS). CSA v. Kessler (No. 0:25-cv-00041). According to CSA, the chemical coating on nonstick cookware contains fluoropolymers, which “are fundamentally different compounds from the chemicals that have motivated concerns about PFAS.” CSA claims that Minnesota’s ban violates the U.S. Constitution’s prohibition on individual states regulating interstate commerce and has raised other constitutional challenges to Minnesota’s statute. CSA states that it has offered to work cooperatively with Minnesota “to secure an exemption for fluoropolymer coated nonstick cookware because of their low-risk profile.”
California DFPI Finalizes New Earned Wage Access Regulations
Go-To Guide:
The California Department of Financial Protection and Innovation (DFPI)’s finalized regulations for earned wage access (EWA) providers that include new registration and compliance requirements.
Starting Feb. 15, 2025, EWA providers must register with the DFPI, provide operational and financial information, and adhere to state lending laws.
Registered entities must submit annual reports detailing activities, fees, and complaints.
The DFPI plans to conduct examinations to monitor compliance with state consumer financial protection laws.
In October 2024, the California DFPI finalized regulations for providers of income-based advances (Earned Wage Access or EWA) [DEFINED ABOVE], clarifying registration requirements under the California Consumer Financial Protection Law (CCFPL). These changes impose new compliance obligations for businesses offering EWA products to California consumers.
This GT Alert summarizes the regulation’s highlights.
Classification as Loans
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California law classifies EWA transactions as “loans,” even if fees are nominal or structured as “tips” or “donations.”
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Providers must adhere to state lending laws, including rate caps and disclosure requirements.
Mandatory Registration
–
Beginning Feb. 15, 2025, the DFPI will register and regulate EWA products similar to how it regulates debt settlement services, student debt relief services, and private post-secondary education financing.
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EWA providers covered by the new regulations must file an application by the deadline to continue operating legally in the state. After Feb. 15, 2025, it is prohibited to offer EWA products in the state without filing an application.
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The Nationwide Multistate Licensing System & Registry (NMLS) will manage the application process, which requires providing detailed operational and financial information, compliance policies, and evidence of consumer protection measures. Registrants will also be required to create a self-service portal account with the DFPI.
Fee Transparency Requirements
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Providers must clearly disclose all fees, including optional charges, to consumers before offering services.
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Misleading marketing practices, including presenting fees as “voluntary” without adequate explanation, are prohibited.
Consumer Protection Standards
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Providers must implement policies to ensure consumers fully understand the terms of EWA services.
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Mechanisms to address complaints and disputes must be accessible and transparent.
Annual Reporting Requirements and Examinations
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Registered entities must submit annual reports detailing their activities, fees charged, and complaints received.
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Non-compliance with reporting requirements may lead to penalties, suspension, or revocation of registration.
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The DFPI will also conduct examinations to monitor compliance with applicable state consumer financial protection laws to detect any unfair, unlawful, deceptive, or abusive acts and practices.
Exemptions
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Under the CCFPL, certain persons are generally exempt from the law and its implementing regulations, such as licensees of other California state agencies and those who are already licensed under the DFPI, including, but not limited to, finance lenders and brokers, residential mortgage lenders, mortgage servicers, mortgage loan originators, and escrow agents.
These regulations mark a significant shift in the regulatory landscape for EWA providers in California. Businesses should review their operational models to enhance compliance with lending laws, registration obligations, and consumer protection standards. Failure to comply may result in enforcement actions, including financial penalties and loss of operational rights in the state.
In response to these new regulations, EWA providers should consider:
Assessing the Current Model
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Determine whether the EWA services offered fall under the DFPI’s definition of “loan.”
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Evaluate fee structures, marketing practices, and consumer disclosures for compliance.
Initiating Registration
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Create an account in the NMLS and submit the required application to the DFPI as soon as possible after the application is released, but no later than Feb. 15, 2025.
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Prepare the application’s supplemental documentation requirements, including financial records and compliance policies.
Enhancing Compliance Policies
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Implement robust consumer protection measures and train employees on the new requirements.
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Establish internal processes for ongoing compliance monitoring and reporting.
The DFPI released FAQs to assist EWA providers in complying with the new regulations.
A proactive and thorough approach may help EWA providers navigate the complexities of California’s new EWA regulations. Compliance is crucial to minimizing the risk of penalties but may also help build trust with consumers and regulators alike. By staying ahead of these regulatory changes, EWA providers can potentially enhance their standing in the financial services industry and maintain their operations in the nation’s largest market.
EPA Releases Draft Risk Assessment of PFOA and PFOS in Biosolids, Will Hold Webinar on January 15, 2025
The U.S. Environmental Protection Agency (EPA) announced on January 14, 2025, a draft risk assessment of the potential human health risks associated with the presence of perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS) in biosolids, also known as sewage sludge. According to EPA, the findings show that there may be human health risks associated with exposure to PFOA or PFOS with all three methods of using or disposing of sewage sludge — land application of biosolids, surface disposal in landfills, or incineration. The draft risk assessment focuses on those living on or near impacted sites or those that rely primarily on those sites’ products (e.g., food crops, animal products, drinking water). EPA notes that the draft risk assessment does not model risks for the general public. EPA states that once prepared in final, the assessment will help EPA and its partners understand the public health impact of per- and polyfluoroalkyl substances (PFAS) in biosolids and inform any potential future actions to help reduce the risk of exposure. EPA has posted a pre-publication version of the Federal Register notice announcing the availability of the draft risk assessment. Publication of the notice in the Federal Register will begin a 60-day comment period. EPA will hold a webinar on January 15, 2025, at 12:00 p.m. (EST) to provide information on the draft risk assessment. The webinar will include an opportunity for questions and answers. EPA will post a recording of the webinar.
Extended Producer Responsibility for Packaging: Taking Stock for 2025
The Extended Producer Responsibility (“EPR”) movement for packaging is growing in the U.S., marking a shift in how some states are approaching waste management and recycling. Rather than leaving municipalities to bear the full cost of waste management and recycling programs, states with EPR programs are poised to shift costs associated with building out recycling infrastructure to producers of products covered by EPR requirements. In 2024, there were significant legislative, regulatory, and programmatic developments in several states. We expect these trends to accelerate in 2025, as several programs reach the initial implementation phase of their EPR programs.
Legislative Developments
Since 2021, five states (Maine, Oregon, Colorado, California, and Minnesota) have passed EPR programs for packaging, and more are considering similar legislation. These programs target “producers,” typically defined as the manufacturer or brand owner for packaged products sold in the relevant state. Producers are generally required to join a Producer Responsibility Organization (“PRO”), which is responsible for collecting data regarding the volume of single-use packaging being sold into the state, charging producer fees based on their contribution, and using the funds to improve recycling infrastructure across the state.
In May of 2024, Minnesota passed legislation for a statewide EPR program addressing most types of packaging and paper products. A number of other states considered some form of EPR legislation in 2024. Although these measures were not adopted, we expect to see advances in 2025. States to watch include Massachusetts, which in December passed legislation calling for a legislative commission on EPR for several product categories, including plastics and packaging, paint, mattresses, and lithium-ion batteries; New York, which has been working on passing EPR legislation for several years; and Washington, which already imposes post-consumer recycled content and other requirements for plastic product packaging and recently considered but failed to pass a bill that would have added packaging to the state’s existing product classes subject to product stewardship programs.
Regulatory Developments
States with existing EPR programs spent the year developing regulatory programs. Colorado, Oregon, and Maine all adopted regulations in 2024. These regulations define key program terms, such as criteria for setting producer fees and conditions of reimbursing municipalities for program implementation costs. California initiated the rulemaking process in 2024, but missed the statutory deadline. CalRecycle will likely adopt final rules soon.
Key issues to watch as regulatory programs develop include covered product exemptions and ecomodulation provisions, which allow the PRO to offer fee adjustments to producers that make changes to the way in which they produce, use, and market covered products, potentially leading to lower fees for covered products with a lower environmental impact.
Programmatic Developments
Different states have different timelines for selecting a PRO, adopting a PRO plan, and requiring producers to join a PRO and begin reporting. Circular Action Alliance (CAA) has emerged as the leading Producer Responsibility Organization (PRO) for states with EPR programs. So far, Colorado and California have both selected CAA as the official PRO.
Producers in Colorado were required to register with the PRO by October 1, 2024. CAA reporting guidance is now available to registered producers, and producers will begin reporting in August 2025. CAA’s program plan for Colorado is due early this year and will detail how CAA plans to establish costs, reimburse recyclers for services, and other program details for review by the state’s EPR advisory board.
In California, producers registration with CAA is open. Producers are waiting for CAA to publish a program plan to initiate program implementation ahead of the January 1, 2027 implementation date.
In Oregon, CAA was the only organization to submit a program plan for consideration by Oregon’s Department of Environmental Quality, and will likely be selected as the official PRO early this year. Implementation is moving forward most quickly in Oregon, where producers are required to pre-register with the PRO and submit data on covered products sold into the state by March 31, 2025. CAA plans to launch a producer reporting portal during the first quarter of 2025.
In Minnesota, the producer-appointed PRO is expected to register with a with the Minnesota Pollution Control Agency by July 1 of this year. On December 30, 2024, CAA submitted an application for registration to the agency .
In late summer, Maine is expected to release a request for proposal for a potential PRO, called a stewardship organization under Maine’s terminology, and CAA is expected to respond to Maine’s request.
Early this year, Maryland is expected to publish the results of its Needs Assessment, which evaluates and provides recommendations on the state’s recycling system, including infrastructure, labor, and environmental impacts. The Producer Responsibility Advisory Council has been meeting regularly since May of 2024 to draft recommendations for the Needs Assessment.
Key Tasks for Producers in 2025
Producers should focus on the following tasks in 2025:
Evaluate applicability under the five EPR programs that are already in place, including by assessing “small producer” exemptions and exemptions for certain categories of covered materials. Importantly, some covered material exemptions apply automatically, while some will require submitting documentation to the relevant states.
If not already done, register with CAA in Colorado, California, Oregon, and Minnesota.
Develop a data collection plan.
Assess opportunities for fee reduction, including by leveraging ecomodulation provisions and lifecycle assessments.
Continue to monitor new legislation, regulatory processes, and updates from CAA.
Composition of the Federal Energy Regulatory Commission Under the New Administration
With President-elect Trump poised to take office, some in the energy sector are considering what this means for the composition of the Federal Energy Regulation Commission (FERC).
FERC has five Members. Although frequently FERC does not have its full complement of Members, there are currently five seated FERC Members: three Democrats and two Republicans. The Democrats are Chairman Willie Phillips (term ending June 30, 2026), Commissioner David Rosner (term ending June 30, 2027), and Commissioner Judy Chang (term ending June 30, 2029). The two Republicans are Commissioner Mark Christie (term ending June 30, 2025), and Commissioner Lindsay See (term ending June 30, 2028). Upon expiration of a Member’s term, an individual commissioner may choose to continue at FERC until Congress goes out of session. This occurs frequently.
Neither the FERC Chairman nor any Commissioner is required to resign because a President of the opposite political party is elected. Moreover, the relevant statutory provision, 42 U.S.C. § 7171(b), allows the President to remove a sitting FERC Commissioner only in very limited circumstances. Specifically, the President may remove a sitting FERC Commissioner only for “inefficiency, neglect of duty, or malfeasance in office.” However, if Chairman Phillips voluntarily steps down from his role as FERC Chairman because President-elect Trump takes office, it would not be a novel action among Democrat appointed agency Chairs. Commodity Futures Trading Commission (CFTC) Chairman, Rostin Behnam, very recently announced his intention to step down from his role as CFTC Chairman on January 19th (the day before President-elect Trump’s inauguration), and then resign from the CFTC altogether shortly thereafter on February 7th,prior to the expiration of his term.
The sitting President does have statutory authority to designate one of the seated FERC Commissioners as Chairman. See 42 U.S.C. § 7171(b). The expectation is that President Trump will designate Commissioner Christie or Commissioner See as Acting Chair. In that case, Chairman Phillips could remain at FERC as a Commissioner. If Chairman Phillips or one of the Commissioners voluntarily resigns, President Trump would have the opportunity to nominate a candidate of his choosing (presumably a Republican) to become the fifth FERC Commissioner following Senate confirmation and the related processes.
In the context of the National Labor Relations Board (NLRB), some have speculated that once in office, President Trump may use the Unitary Executive Theory to broadly interpret his constitutionally endowed removal powers and replace NLRB Board Members before their terms expire. Although Supreme Court precedent holds that certain removal restrictions on the President do not violate the President’s executive power or the President’s constitutional duty “to take Care that the Laws be faithfully executed,” the Unitary Executive Theory posits that statutory removal restrictions on the President interfere with the President’s constitutional authority. Thus, with the backing of a conservative Court that may be deferential to expansive executive powers, there has been talk that President Trump may seek to replace NLRB Board Members before their terms expire. Although the NLRB is an independent agency similarly situated to FERC in many ways, the statutory removal restriction for FERC has material differences from the statutory removal restriction for the NLRB and FERC’s removal restriction is far less likely to be found unconstitutional (i.e., President Trump is less likely to try to rely on the Unitary Executive Theory to remove FERC Members than to remove NLRB Members).
Keeping Fraud Out of Research: Government Grant Whistleblower Awarded Over $200,000
A whistleblower recently played a pivotal role in exposing research misconduct, leading to a $4 million settlement from Athira Pharma Inc. under the False Claims Act. This case highlights the importance of safeguarding government-funded research and enforcing transparency in scientific investigations. Whistleblowers contribute to protecting taxpayer dollars, and under the qui tam provision of the False Claims Act, they may be entitled to 15-25% of the government’s recovery.
The Case Against Athira Pharma Inc.
The Bothwell, Washington-based biotechnology company allegedly failed to disclose research misconduct to the National Institutes of Health (NIH) and the Department of Health and Human Services (HHS) Office of Research Integrity. Athira’s former CEO, Leen Kawas, allegedly manipulated scientific images in her dissertation and published works. These publications were then referenced in multiple grant applications submitted to the NIH, one of which led to a successful grant award in 2019. The timeline of the alleged misconduct spans from January 1, 2016, to June 20, 2021, during which Athira violated its regulatory obligations to disclose these concerns.
The Role of the Whistleblower in Exposing Fraud
Whistleblower Andrew P. Mallon, Ph.D. filed the case under the qui tam provisions of the False Claims Act. The False Claims Act allows private individuals to act on behalf of the U.S. government and bring attention to fraudulent claims submitted to government programs. For his role in uncovering the misconduct, Dr. Mallon is set to receive $203,434 as part of the settlement.
Taxpayer Dollars and the Impact of Research Misconduct
This case underscores the need for ethical conduct in government-funded research programs. When federal agencies such as the NIH distribute grants, they trust recipients to provide accurate and truthful information. Any form of fraud, including the manipulation of research data, not only undermines the scientific process but also wastes public funds. As the Principal Deputy Assistant Attorney General said about the case, “The partnership between the scientific community and the federal government is built on trust and shared values of ethical scientific conduct.”
Why the False Claims Act Matters
The False Claims Act remains one of the U.S. government’s most effective tools for recovering taxpayer funds lost to fraud. Originally enacted to combat fraud against military supplies during the Civil War, the False Claims Act has since evolved to encompass broader areas of misconduct, including government research grants, healthcare programs, and other federally funded activities.
Nine PFAS Compounds Added to EPA TRI List
EPA has added nine additional per- and polyfluoroalkyl substances (PFAS) compounds to Toxic Release Inventory (TRI) reporting requirements for facilities that release the compounds into the environment. The TRI program requires companies that release quantities of toxic chemicals above the regulatory threshold amounts to report how much they release each year.
This program is part of the Environmental Protection Community Right-to-Know Act, which maintains a publicly accessible database of the companies that release the chemicals, how much of each chemical is released and the location of the facilities. The program was created in 1986 in response to the release of toxic methyl isocyanate gas in Bhopal, India in 1984, which killed thousands of people in what was one of the worst industrial disasters in history.
The newly added PFAS compounds were added for Reporting Year 2025 under the framework for the automatic addition of PFAS to TRI created by the Fiscal Year 2020 National Defense Authorization Act. These nine PFAS compounds are:
Ammonium perfluorodecanoate (PFDA NH4)
Sodium perfluorodecanoate (PFDA-Na)
Perfluoro-3-methoxypropanoic acid
6:2 Fluorotelomer sulfonate acid
6:2 Fluorotelomer sulfonate anion
6:2 Fluorotelomer sulfonate potassium salt
6:2 Fluorotelomer sulfonate ammonium salt
6:2 Fluorotelomer sulfonate sodium salt
Acetic acid
The new compounds join the 197 PFAS compounds previously listed by the EPA. According to the EPA, “As of Jan. 1, facilities that are subject to reporting requirements for these chemicals should begin tracking their activities involving these PFAS as required by Section 313 of [EPCRA]. Reporting forms will be due by July 1, 2026.”
Bank M&A Outlook for 2025
Overall M&A activity in 2024 continued to be subdued; however, the fourth quarter, especially after the Trump bump, showed signs of a significant pick up. Our M&A outlook for 2025 suggests the potential for a banner year. Numerous variables could hinder deal activity, but improving economic conditions coupled with enhanced net interest margins (NIMs) from lower short term interest rates and possible tax cuts should improve fundamentals. Moreover, a less hostile regulatory regime should eliminate a risk overhang to earnings.[1] The prospect for a more relaxed antitrust enforcement regime or at least less distrust of business combinations could create significant opportunities for strategic growth and investment.
Positive Factors for Dealmaking in 2025
CEO Confidence and Stock Market Performance. CEO confidence continues to go up, which can give C-suites and boards the necessary conviction to pursue M&A. If economic conditions improve, then capital markets should also strengthen. M&A volume frequently tracks stock market performance. In addition, improved economic conditions and higher trading price multiples could narrow valuation gaps between buyers and sellers that were obstacles to some transactions last year.
Antitrust. Not since Grover Cleveland has a President lost a bid for reelection and then ran again successfully. Thus, while a change in Presidential administration and political party leadership ordinarily brings policy uncertainty, we can look to President Trump’s first term for some guidance – but no guarantees – as to how his administration may govern this time around. This is particularly the case with the current regulatory skepticism, if not hostility, toward M&A. In 2023, President Biden adopted an Executive Order ostensibly designed to promote competition. The effect of that admonition was that regulators touching M&A across his administration, whether as part of an independent agency or otherwise, added criteria for M&A while also slowing the pace of review to allow for greater scrutiny. Bank regulators leaned into this Executive Order. Over the next four years, we generally expect regulators to be more open to structural remedies and less likely to block mergers outright. But caution is warranted. We may see bipartisan scrutiny of certain aspects of banking such as Fintech in light of lingering Synapse concerns. There are also populist views in the Trump administration and Congress that may scrutinize major consolidations or mergers, particularly if they will impact US jobs. The current expectation is also that the recently adopted HSR filing requirements for nonbank acquisitions will remain in effect.
Lower Interest Rates. Acquisition financing should become more attractive if the Federal Reserve moderates its rate cutting, so that long-term rates might stabilize. Because acquisition financing tends to be longer term in duration, long term rates are much more important. If Department of Government Efficiency (DOGE) is truly effective in cutting spending or at least the pace of increased spending, then long-term rates might actually come down. Private equity financing of corporate debt has taken bank market share. This competition has lead to greater availability of deal funding. An open issue is whether private credit will continue to play as large a role in corporate financing if the cost of traditional bank debt goes down.
For bank buyers, the Federal Reserve may maintain the current Fed Funds rate. As a result, NIMs may continue to widen as the yield curve steepens. Short term deposit rates have declined while the bond market expects long term rates to increase from inflationary tariffs, government spending and tax policy. Wider NIMs lead to higher bank valuations.
Tax Policy. If Congress pursues tax cuts, the resulting savings could generate more cash flow to pursue acquisitions and make exit transactions even more attractive to selling shareholders. Another issue to watch is whether the Tax Cuts and Jobs Act (TCJA), which expires at the end of 2025, is extended and/or modified.
Deregulation. Dealmaking could be impacted if the new administration carries out its goal of deregulation, although it is not clear how quickly that impact might be felt. Deregulation is most likely to open M&A doors not just in banking but for fintech, crypto, and financial services generally. The nominations of Scott Bessent for Treasury, Kevin Hassett for the National Economic Council, and Paul Atkins for the Securities and Exchange Commission all indicate a more hospitable banking environment.
While we expect a significant uptick in M&A activity, we may see particular volume from the following:
Private Equity Exits. It has been widely reported that many private equity funds need to sell their interests in portfolio companies in order to wind-up and return profits to their investors. Exit transactions have been delayed for a variety of reasons, including valuation gaps and a lack of sponsor-to-sponsor M&A activity (largely due to the increased cost of capital associated with leveraged acquisitions caused by higher interest rates).
Strategic Divestments. Banks will continue to explore divesting branches, non-core assets and business lines, especially insurance, to simplify their organizations and footprints and possibly to ward off threats from activist shareholders.
Credit Unions. While we have started to see pushback on credit union and bank tie ups from state regulators, it is likely that the NCUA will continue to permit such combinations. The rise in bank stock valuations may add competition in 2025 that was not available for many deals in 2024. Nonetheless, the lack of credit union taxation or comparable tangible equity requirement and risk-based capital rules should enable credit unions to continue to compete effectively for deals.
Higher Long-term Rates. Certain banks continue to suffer AOCI pressure from the run-up in long-term rates that accompanied recent Federal Reserve rate cuts. Increasingly, national banks with less than 2% tangible capital and all banks with poor NIMs may be pushed by their regulators to sell or at least engage in a dilutive capital raise.
Purchase Accounting/Stock Valuations. For over 40 years, economies of scale have led to vibrant annual results for bank M&A transactions. The punishing accounting marks (AOCI, loan mark-to-market and core deposit intangibles) from M&A have held back such pent up need for growth. Buyers need to use stock consideration to replace the capital from purchase accounting. Higher stock prices are allowing more buyers to do so with less dilution to their shareholders.
Countervailing Factors and Uncertainties
Of course, M&A activity in 2025 may fall short of expectations, particularly if economic conditions deteriorate. Various factors that could adversely impact M&A in 2025 include:
Trade Wars / Tariffs. President Trump has made clear his goal to negotiate trade agreements and expressed his willingness to impose tariffs, which would necessarily impact borrowers in affected industries as well as inbound/outbound investment involving certain countries. As with most government policies, tariffs invariably have winners and losers. To the extent tariffs allow businesses to raise prices, the higher returns could impact creditworthiness, while other businesses will suffer if their supply chain falls apart or they are unable to pass along higher costs to consumers. There may also be bipartisan support for some tariffs, particularly on China.
Politics. Uncertainty over important government policies could hold M&A back. There is the constant specter of disfunction in Washington, D.C., and a thin Republican majority. In addition, proposed cuts in government spending—perhaps led by DOGE—could impact the economy. Staffing or other budget cuts at key governmental agencies (e.g., banking regulators) could also delay the ability to consummate M&A transactions.
Near-Term Transition Issues. Compared to his first term, President Trump is acting more quickly in naming key appointees. Nonetheless, the people who need to run the various important government agencies must obtain Senate approval, where a successful confirmation is not guaranteed and there is a backlogged Senate calendar. Delayed appointments may also stall President Trump’s high-priority items such as border security and tax policy.
Inflationary Pressures. Ongoing inflation will impact markets and economic conditions generally. There are also particular government policies under discussion (e.g., immigration) that could contribute to inflationary pressures. If the Federal Reserve reverses recent accommodation, banks may again suffer shrinking NIMs. This would revive the negative spiral of reduced valuations and impact whether there can be a meeting of the minds on price.
State Attorneys General/State Bank Regulators. A more business-friendly antitrust posture from the federal government could be offset by state attorneys general or state level bank regulators. This could be led by more localized concerns about competition or by state officials who see political upside in challenging transactions.
Geopolitical Risks. Numerous geopolitical risks could escalate in 2025, including the spread of war in the Middle East, Europe or elsewhere, acts of terrorism, sanctions, and the worsening of diplomatic and economic relations with certain countries, any of which could adversely affect markets.
[1] Bank Director survey indicated that almost 75% of bankers viewed regulatory risk as one of the top three risk areas.
Carleton Goss, Michael R. Horne, Lucia Jacangelo, Nathaniel “Nate” Jones, Jay Kestenbaum, Marysia Laskowski, Abigail M. Lyle, Brian R. Marek, Joshua McNulty, Betsy Lee Montague, Alexandra Noetzel, Sumaira Shaikh, Jake Stribling, and Taylor Williams also contributed to this article.