Statutes of Repose: Protecting the Pantheon’s Builders After Nearly 2,000 Years
Even though construction cases often involve colorful facts, legal opinions are often quite boring. When a judge writes a colorful opinion about an otherwise boring case, we tip our hat. This week we tip our hat to Judge Brandon Harrison and colleagues on the Arkansas Court of Appeals for their opinion in Thompson Thrift Construction v. Modus Studio et al., 2025 Ark. App. 193 (2025), a construction defect case arising out of a student housing project in Fayetteville. The issue was whether the Arkansas statute of repose – which cuts off a builder’s liability for defects after a certain number of years have passed following substantial completion – defeated the plaintiff’s claim.
Here is how Judge Harrison’s opinion introduced this otherwise boring issue of statutory interpretation:
The Pantheon in Rome has stood for more than 1,900 years. If it collapsed tomorrow, the claim-accrual and statute-of-limitations principles that apply in Arkansas to ordinary negligence claims would give an injured person three additional years to sue those who were alleged to have negligently designed or constructed it. That’s a long time to stay on the legal hook. So in the 1960s, like legislatures in a number of other states, the Arkansas General Assembly changed the accrual and limitations principles that apply to tort or contract claims for damages “caused by any deficiency in the design, planning, supervision, or observation of construction or the construction and repairing of any improvement to real property” against a person “performing or furnishing the design, planning, supervision, or observation of construction or the construction and repair of the improvement.” Ark. Code Ann. § 16-56-112. With a few express exceptions, for those architectural or construction-type claims “no action … shall be brought” more than five years from the date of substantial completion of the improvement, even if the limitation period for that kind of claim has not run—and even if no claim exists yet because no damage or injury has yet occurred.
As the above-quoted passage indicates, other states passed similar statutes of repose around the same time. Today, 48 states and the District of Columbia have one. The wording of those statutes varies from state to state. For example, in many states the period of repose begins to run upon substantial completion. In others, the period begins with final completion or the acts or omissions at issue. Many states allow an extension if the injury occurs in the final year of the repose period, while others do not. Some states apply different periods depending on the nature of the injury (property damages v. personal injury) or the identity of the plaintiff (private v. government). All are subject to change at any time at whim of the state legislature. None should be confused with statutes of limitation, which have a similar effect but generally begin to run only when the injury or damage occurs (which in the Pantheon example may not occur for some 1,900 years after construction).
The only two states without a statute of repose are New York and Vermont. Potential claimants against the contractors and architects of ancient Rome would do well to start there. Just know that Judge Harrison and his colleagues on the Arkansas Court of Appeals “would take the defense side of that case” (Thompson, 2025 Ark. App. 193 n. 1).
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Best Practices for Employers When Implementing a Reduction in Force (US)
Laying off employees – also referred to as a reduction in force or a RIF – is one of the most difficult decisions an employer can make. Whether driven by economic conditions, organizational restructuring or pivots in business strategy, RIFs inherently create legal risks and significantly impact workplace morale. Although RIFs come with many challenges and pitfalls, employers who approach the process thoughtfully and strategically can mitigate legal risk while treating affected employees fairly and with respect. The following are some best practices for private employers to consider when implementing a reduction in force.
Clearly Document Business Reasons for the RIF
RIFs can be spurred by several reasons such as cost savings, elimination of redundant roles or operational restructuring. When the need for a RIF arises, employers should identify the legitimate business reasons driving the reduction and clearly document these reasons. This step will be critical if decisions are later challenged. Further, when selecting individuals or departments impacted by the RIF, employers should develop objective selection criteria (such as skills, performance, seniority) that align with the business rationale driving the layoffs. Employers should avoid using subjective or inconsistent criteria that could give rise to allegations of bias or discrimination.
Conduct a Thorough Adverse Impact Analysis to Avoid Discrimination
Before finalizing selections, an employer should conduct a statistical adverse impact analysis to assess whether the proposed RIF disproportionately affects employees in protected categories, such as age, race, gender and disability, as well as identify whether any selected employee is currently on or has recently taken a job-protected leave. If disparities are identified, consideration should be given to whether adjustments are warranted or if business justifications for selections are defensible.
Ensure Compliance with WARN Act Obligations and Other Notice Requirements
The federal Worker Adjustment and Retraining Notification (WARN) Act requires advance notice of mass layoffs or plant closings, depending on the size of the employer and number of affected employees. Whenever conducting a RIF (or a complete closure of the business), employers should assess whether WARN is triggered, and if WARN is applicable, the employer should take steps to ensure compliance with its timing and notice requirements. Further, it is important to remember that several states (including California, Hawaii, Illinois, Iowa, Maine, Massachusetts, New Hampshire, New Jersey, New York, Tennessee and Wisconsin) have their own state “mini-WARN” Acts that may have lower thresholds for employee and employer coverage and impose additional or different requirements than under the federal WARN Act. In addition, employers must comply with group health insurance continuation notice and coverage requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for impacted employees.
Prepare Legally Compliant Communications and Documentation
Once a list of impacted employees has been finalized, the employer must communicate the RIF to its workforce, ensuring that the messaging to employees is clear, accurate and compliant with applicable federal, state and local laws. Although not required, many employers choose to provide laid off employees with some version of an exit agreement, typically offering severance pay and sometimes benefits in return for the employee’s execution of a waiver and release of claims against the employer. If exit agreements are offered, employers should tailor them to comply with the Older Workers Benefit Protection Act (OWBPA) (for employees 40+) as well as state-specific release language restrictions and requirements. Transparent but compassionate communication with employees, both affected and remaining, will help maintain trust, salvage employee morale and reduce the risk of litigation.
Managers are frequently the face of the organization during a RIF. Accordingly, it is advisable to provide them with clear scripts or talking points, FAQs and appropriate training to ensure they deliver communications regarding the RIF accurately and with consistency while avoiding legally problematic statements. When in doubt, managers should direct employees with questions or concerns to Human Resources or legal.
Manage Potential Post-RIF Morale Dips
After a RIF, the remaining workforce may experience decreased morale, increased workloads and/or anxiety about their own job security. To the extent possible, employers should communicate openly about the future direction of the organization and offer support resources for the retained employees. In addition, employers should pay close attention to employee engagement and retention issues and address any concerns that arise in a timely and effective manner.
Every RIF is unique and will be shaped by operational needs, workplace culture and legal considerations. Employers that engage in thorough planning, maintain supporting documentation, provide transparent communication and do their legal due diligence will be better positioned to navigate the challenges of workforce reductions while protecting their organization and supporting their workforce.
Regulatory Update and Recent SEC Actions: April 2025
Recent SEC Administration Changes
Senate Confirms Paul Atkins as SEC Chairman
The Senate, on April 9, 2025, confirmed Paul Atkins as the Chairman of the Securities and Exchange Commission (“SEC”). Atkins takes over the Chairman role from the current Acting Chair, Mark T. Uyeda, who was appointed in January 2025 to serve in the interim until Atkins was confirmed. Atkins previously served as a Commissioner from 2002 to 2008, and most recently served as CEO and founder of risk-management firm Patomak Global Partners. He also served as co-chairman of the Digital Chamber’s Token Alliance, where he led industry efforts to develop best practices for digital asset issuances and trading platforms.
Recent SEC Staff Departures
In addition to the departures of SEC Chairman Gary Gensler and Commissioner Jaime Lizarriga on January 20 and January 17, respectively:
Paul Munter, Chief Accountant;
Jessica Wachter, Chief Economist and Director of the Division of Economic and Risk Analysis;
Sanjay Wadhwa, Acting Director of the Division of Enforcement;
Scott Schneider, Director of the Office of Public Affairs;
Amanda Fischer, Chief of Staff;
YJ Fischer, Director of the Office of International Affairs; and
Megan Barbero, General Counsel.
SEC Restructuring and Hiring Freeze
The Trump administration, on January 20, 2025, issued a memorandum that implemented a federal hiring freeze across the executive branch, including the SEC. Further, the SEC plans to restructure the Enforcement and Exams divisions by removing the top leaders at its 10 regional offices across the country and replace them with deputy directors, Katherine Zoladz, Nekia Jones, and Antonia Apps, who will oversee one of three regions–West, Southeast, and Northeast. There will also be a deputy director for specialized units. Additionally, the SEC announced the closures of Los Angeles and Philadelphia offices and a review of the lease for the SEC’s Chicago Regional Office.
SEC Rulemaking
SEC Issues Temporary Exemption from Exchange Act Rule 13f-2 and Related Form SHO
The SEC announced on February 7, 2025, it was providing a temporary exemption from compliance with Rule 13f-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and from reporting on Form SHO, which generally requires certain institutional investment managers to report short positions and daily trading activity for equity securities exceeding certain thresholds. The effective date for Rule 13f-2 and Form SHO was January 2, 2024, and the compliance date for such rule and form was January 2, 2025, with initial Form SHO filings originally due by February 14, 2025. The exemption, for certain institutional investment managers that meet or exceed certain specified thresholds, pushes the due date for the initial Form SHO reports to February 17, 2026.
SEC Announces Exemption from Reporting of Certain Personally Identifiable Information to Consolidation Audit Trail
The SEC, on February 10, 2025, announced it was providing an exemption from the requirement to report certain personally identifiable information (“PII”) – names, addresses, and years of birth – to the Consolidated Audit Trail (“CAT”) for natural persons. CAT was established by the SEC to track trading activity for National Market System securities including stocks and options, allowing regulators to monitor trading activity. The SEC has justified the exemption because the inclusion of this information may allow bad actors to impersonate a customer or broker-dealer and gain access to a customer’s account.
SEC Extends Compliance Dates for Funds Name Rule Amendment and Updates FAQ
The SEC announced, on March 14, 2025, a six-month extension of the compliance dates for amendments adopted in September 2023 to the “Names Rule” (Rule 35d-1) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The compliance date for larger fund groups is extended from December 11, 2025 to June 11, 2026, and the compliance date for smaller fund groups is extended from June 11, 2026 to December 11, 2026. The SEC indicated that the extension is designed to balance the investor benefit of the amended Names Rule framework with funds’ needs for additional time to implement the amendments properly, develop and finalize their compliance systems, and test their compliance plans. The Commission further indicated that the compliance dates have been aligned with the timing of certain annual disclosure and reporting obligations that are tied to the end of a fund’s fiscal year in order to help funds avoid additional costs when coming into operational compliance with the Names Rule amendments.
Additionally, the SEC has updated the Names Rule FAQ, releasing a new 2025 Names Rule FAQ on January 8, 2025. Key clarifications include:
Shareholder approval is not required for a fund to add or revise a fundamental 80 percent investment policy unless the change would permit a “deviation from the existing policy or some other existing fundamental policy;”
The 2025 FAQ expanded the SEC staff’s note that the term “tax-sensitivity” indicates a fund’s strategy instead of a focus on particular types of investments to terms “similar” to tax-sensitive (such as “tax-advantaged” or “tax-efficient”); and
The use of the term “income” in a fund’s name does not refer to “fixed-income” securities, and instead is used to emphasize an investment goal of generating current income. As such, the use of the term “income” in a fund’s name would not alone require the adoption of an 80 percent investment policy.
SEC Votes to End Defense of Climate Disclosure Rules
The SEC, on March 27, 2025, voted to end its defense of the rules requiring disclosure of climate-related risks and greenhouse gas emissions. The rules, adopted by the SEC on March 6, 2024, required registrants to provide certain climate-related information in their registration statements and annual reports. Following the SEC’s vote, the SEC staff sent a letter to the Eighth Circuit (who was hearing Iowa v. SEC, No 24-1522 (8th Cir.) evaluating the legality of the rules) stating that the SEC withdraws its defense of the rules and that the SEC counsel are no longer to authorized to advance the arguments in the brief filed on behalf of the SEC. SEC Acting Chairman Mark T. Uyeda stated that “[t]he goal of today’s Commission action and notification to the court is to cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”
The SEC did not, however, withdraw the actual climate disclosure rules. Commissioner Caroline Crenshaw issued a statement challenging the decision, that if the SEC chose not to defend the rules, then it should ask the court to stay the litigation while the agency comes up with a rule that it is prepared to defend and that if not, the court should hire counsel to defend the rules. Although the SEC is no longer defending the rules, 20 democratic attorney generals (the “AGs”) have intervened in the lawsuit to defend them. In April 2025, the court ruled that the AGs, led by those from Massachusetts and the District of Columbia, can themselves defend the rules.
SEC Enforcement Actions and Other Cases
Airline Faulted for ESG Focus in 401(k) Plan
A Texas judge issued a 70-page finding of fact and conclusion of law that an international airline company (the “Defendant”) violated federal benefits law by emphasizing environmental, social, and governance factors (“ESG”) in its 401(k) plan decisions. The judge found that the Defendant’s corporate commitment to ESG, the influence and conflicts of interests with the investment manager, and the lack of separation between the corporate and fiduciary roles all attributed to the fiduciary lapse. Despite finding the Defendant breached the Employee Retirement Income Security Act’s (“ERISA”) duty of loyalty, the judge determined the Defendant had not breached ERISA’s fiduciary duty of prudence because the practices fell within the prevailing industry standards.
12 Firms to Pay More Than $63 Million Combined to Settle SEC’s Charges in Connection with Off-Channel Communications
In its continued focus on off-channel communications, the SEC announced charges against nine investment advisers and three broker-dealers (each a “Firm” and collectively, the “Firms”) on January 13, 2025. The charges are for failures by the Firms and their personnel to maintain and preserve electronic communications, in violation of recordkeeping provisions of the federal securities laws. The Firms admitted to the facts set out in their respective SEC orders and have begun implementing improvements to their compliance policies and procedures to address these violations. One Firm self-reported and, as a result, paid significantly lower civil penalties.
“In order to effectively carry out their oversight responsibilities, the Commission’s Examinations and Enforcement Divisions must, and indeed do, rely heavily on registrants complying with the books and records requirements of the federal securities laws. When firms fall short of those obligations, the consequences go far beyond deficient document productions; such failures implicate the transparency and the integrity of the markets and their participants, like the firms at issue here,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement. “In today’s actions, while holding firms responsible for their recordkeeping failures, the Commission once more recognized and credited a registrant’s self-report, demonstrating yet again that there are tangible benefits to be gained from proactive cooperation.”
SEC Charges Advisory Firm with Misrepresenting its Anti-Money Laundering Procedures to Investors
The SEC charged a Connecticut-based investment adviser (the “Adviser”) with making misrepresentations about its anti-money laundering (“AML”) procedures and related compliance failures. The SEC’s order finds that the Adviser’s offering documents stated that the Adviser was voluntarily complying with AML due diligence laws despite those laws not applying to investment advisers. However, according to the order, the Adviser did not always conduct due diligence with respect to an entity owned by an individual who was publicly reported to have suspected connections to money laundering activities. The order further found that the Adviser failed to adopt and implement written policies and procedures reasonably designed to ensure the accuracy of offering and other documents provided to prospective and existing investors.
“This case reinforces the fundamental duty of investment advisers to say what they do and do what they say,” said Tejal D. Shah, Associate Regional Director of the SEC’s New York Regional Office. “Here, [the Adviser] failed to follow the AML due diligence procedures that it said it would, thus misleading investors about the level of risk they were undertaking.”
SEC Charges Two Affiliated Investment Advisers for Failing to Address Known Vulnerabilities in its Investment Models
The SEC announced, on January 16, 2025, that it had settled charges against two affiliated New York-based investment advisers (the “Advisers”) for breaching their fiduciary duties by failing to reasonably address known vulnerabilities in their investment models and for related compliance and supervisory failures, as well as violating the SEC’s whistleblower protection rule. According to the SEC’s order, around March 2019, the Advisers’ employees identified and recognized vulnerabilities in certain investment models that could negatively impact clients’ investment returns, but did not take any action to remedy the situation until August 2023. The Advisers failed to adopt and implement written policies and procedures to address these vulnerabilities and failed to supervise an employee who made unauthorized changes to more than a dozen models. Further, the Advisers required departing individuals to state as a fact—in separate written agreements—that they had not filed a complaint with any governmental agency. The SEC’s order finds that the Advisers willfully violated the antifraud provisions of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), the Advisers Act’s compliance rule, as well as Rule 21F-17(a) under the Exchange Act.
SEC Charges Advisory Firms with Compliance Failures Relating to Cash Sweep Programs
The SEC, on January 17, 2025, settled charges against two affiliated registered investment advisers and a third unaffiliated investment adviser (collectively, the “Advisers”) for failing to adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder relating to the Advisers’ cash sweep programs. According to the SEC’s order, the Advisers offered their own bank deposit sweep programs as the only cash sweep options for most advisory clients and received a significant financial benefit from advisory client cash in the bank deposit program. The order finds that the Advisers failed to adopt and implement reasonably designed policies and procedures (1) to consider the best interest of clients when evaluating and selecting which cash sweep program options to make available to clients and (2) concerning the duties of financial advisors in managing client cash in advisory accounts.
SEC Charges Dually Registered Broker-Dealer/Investment Adviser with Anti-Money Laundering Violations
The SEC announced charges against a firm that is registered as both a broker-dealer and investment adviser (the “Firm”) with multiple failures related to its AML program. According to the SEC’s order, from at least May 2019 through December 2023, the Firm experienced longstanding failures in its customer identification program, including a failure to timely close accounts for which it had not properly verified the customer’s identity. Furthermore, the Firm failed to close or restrict thousands of high-risk accounts that were prohibited under the Firm’s AML policies.
Financial Institution to Pay More than $100 Million to Resolve Violations Related to Target Date Funds
The SEC announced on January 17, 2025, that an institutional investment management company (the “Company”) has agreed to settle charges for misleading statements related to capital gains distributions and tax consequences for retail investors who held the Company’s Investor Target Retirement Funds (“Investor TRFs”) in taxable accounts. The SEC’s order finds that in December 2020, the Company announced that the minimum initial investment amount of the Company’s Institutional Target Retirement Funds (“Institutional TRFs”) would be lowered from $100 million to $5 million. A substantial number of plan investors redeemed their Investor TRFs and switched to Institutional TRFs due to the latter having lower expenses. The retail investors of the Investor TRFs who did not switch and continued to hold their fund shares in taxable accounts, faced historically large capital gains distributions and tax liabilities due to the large number of redemptions. The order also finds that the Investor TRFs’ prospectuses, effective and distributed in 2020 and 2021, were materially misleading because they failed to disclose the potential for increased capital gains distributions resulting from redemptions of fund shares by newly eligible investors switching from the Investor TRFs to the Institutional TRFs.
“Materially accurate information about capital gains and tax implications is critical to investors saving for their retirements,” said Corey Schuster, Chief of the Division of Enforcement’s Asset Management Unit. “Firms must ensure that they are accurately describing to investors the potential risks and consequences associated with their investments.”
SEC Charges Investment Adviser and Two Officers for Misuse of Fund and Portfolio Company Assets
The SEC filed settled charges on March 7, 2025, against a registered investment adviser (the “Adviser”), former managing partner (the “Managing Partner”) and its former chief operating officer and partner (the “COO”) for breaches of the fiduciary duties for their misuse of fund and portfolio company assets. According to the SEC’s orders, from at least August 2021 through February 2024, the COO misappropriated approximately $223,000 from portfolio companies of a private fund managed by the Adviser. This included transactions for vacations, personal expenses, and the payment of compensation in excess of the COO’s salary. The SEC order states that the Managing Partner failed to reasonably supervise the COO despite red flags of misappropriation and that they caused the fund to pay a business debt that should have been paid by an entity the Managing Partner and COO controlled, resulting in an unearned benefit to the entity of nearly $350,000. Additionally, the order finds the Adviser failed to adopt and implement adequate policies and procedures and to have the fund audited as required.
SEC Charges New Jersey Investment Adviser and His Firm with Fraud and Other Violations
The SEC, on March 17, 2025, announced it filed charges against an individual investment adviser and his advisory firm (collectively, the “Adviser”) for misconduct and for investing more than 25 percent of a mutual fund’s assets in a single company over multiple years, causing losses of $1.6 million. In November 2021, the Adviser settled charges that the Adviser violated its policy by investing more than 25 percent of a fund’s assets in one industry between July 2017 and June 2020, committing fraud and breaching its fiduciary duties. Despite being ordered to stop the conduct, the Adviser continued violating its 25 percent industry concentration limit and making associated misrepresentations about it between November 2021 and June 2024. The SEC’s complaint alleges the defendant Adviser engaged in further misconduct during this same period by operating the fund’s board without the required number of independent trustees and misrepresenting the independence of one board member in filings. The complaint also alleges that the Adviser failed to provide or withheld key information from the board and hired an accountant for the fund without the required vote by the board.
“As alleged, the defendants not only ran the fund contrary to its fundamental investment policies, but they actively misled investors and the fund’s board about their conduct,” said Corey Schuster, Chief of the Division of Enforcement’s Asset Management Unit. “Undeterred by their prior SEC settlement involving these very same issues, we allege that the defendants repeatedly violated fundamental rules designed to protect investors in mutual funds.”
Business Development Company and Directors Sued for Causing Fund’s Value to Decline
Directors of a business development company (the “BDC”) have been sued for allegedly approving fraudulent valuations, and the BDC’s investment adviser (the “Adviser”) is accused of extracting millions of dollars in fees from the BDC while its assets dipped. According to the complaint, the Adviser caused the BDC’s $200 million portfolio to decline while extracting nearly $30 million in fees and concealed the decline from shareholders through fraudulent, inflated asset valuations that the directors repeatedly approved before the fund went into liquidation in 2023. When shareholders proposed ways for the shareholders to realize value (such as a tender offer or merger), the complaint alleges that the Directors amended the BDC’s bylaws to illegally restrict shareholder voting powers. The lawsuit seeks a trial and alleges violations of Section 10(b) and Section 20 of the Exchange Act, breach of fiduciary duty by the directors, aiding and abetting a breach of fiduciary duty, and breach of contract.
Revenue Sharing Ruling Struck Down by First Circuit Court of Appeals
In 2019, the SEC initiated an enforcement action against a dually registered broker-dealer and investment adviser (the “Adviser”). The SEC alleged that, from July 2014 through December 2018, the Adviser failed to adequately disclose that its revenue sharing agreement with a national brokerage and custody service provider (the “Provider”) created a conflict of interest by incentivizing the Adviser to direct its clients’ investments (through client representatives) to mutual fund share classes that produced revenue-sharing income for the Adviser. At the close of evidence, the district court granted partial summary judgment for the SEC which included an order for the firm to pay $93.3 million (including disgorgement of nearly $65.6 million in revenue-sharing related profits), which the Adviser appealed. On April 1, 2025, the United States Court of Appeals for the First Circuit, finding that there was a material issue of fact to be decided by a jury, reversed the order and remanded it back to district court to be heard by a jury. Applying the “total mix” test from Basic Inc. v. Levinson, the Court of Appeals concluded that a “reasonable jury could find” that the additional disclosure about the Adviser’s conflict of interest would not have “so significantly altered the ‘total mix’ of information made available, that summary judgment was appropriate.” Importantly, the Court of Appeals noted that the district court relied on cases predating the U.S. Supreme Court’s decision in SEC v. Jarkesy, decision which held that the Seventh Amendment right to a jury trial applies to SEC enforcement actions of its administrative orders. Additionally, the Court of Appeals found that the SEC failed to adequately show a reasonable approximation or casual connection sufficient to support the district court’s disgorgement award.
Other Industry Highlights
SEC Announces Record Enforcement Actions Brought in First Quarter of Fiscal Year 2025
The SEC announced on January 17, 2025, that, based on preliminary results, it filed 200 total enforcement actions in the first quarter of fiscal year 2025, which ran from October through December 2024, including 118 standalone enforcement actions. This is the most actions filed in the respective period since at least 2000. The SEC filed more than 40 enforcement actions from January 1, 2025, through January 17, 2025, indicating that the Division’s high level of enforcement activity continues into the second quarter of fiscal year 2025.
DRAO Issues Observations Relating to Website Posting Requirements
The Division of Investment Management’s Disclosure Review and Accounting Office (“DRAO”) is responsible for reviewing fund disclosures. As part of this effort, the staff recently observed several issues relating to the website posting requirements under various Commission rules and certain exemptive orders, including those related to the use of summary prospectuses, exchange-traded funds (“ETFs”), and money market funds (“MMFs”). Some of the DRAO’s observations include:
Summary Prospectuses
Some summary prospectuses did not include a website address that investors could use to obtain the required online documents, while other addresses were generic links to the registrant’s homepage.
A number of registrants did not include any links from the summary prospectus to the statutory prospectus and the Statement of Additional Information, or only partially satisfied the linking requirement.
ETFs
Some ETFs failed to include their daily holdings information, expressed their premiums and discounts as a dollar figure rather than as a percentage, or used alternative terminology when referring to premiums and discounts that have potential to confuse investors.
Some ETFs did not disclose timely historic premium and discount information on their websites, or the information was not easily accessible on the website.
Some ETFs used alternative terminology when referring to the 30-day median bid-ask spread, by omitting the term “30-day,” such that the nature of the figure presented may be unclear to investors.
MMFs
Several MMFs did not post on their websites the required link to the Commission’s website where a user may obtain the most recent 12 months of publicly available information filed by the MMF on Form N-MFP.
Acting Chairman Uyeda Announces Formation of New Crypto Task Force
SEC Acting Chairman Mark Uyeda, on January 21, 2025, launched a crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets. The SEC announced that Commissioner Hester Peirce will lead the task force with a focus on drawing clear regulatory lines, providing realistic paths to registration, crafting disclosure frameworks, and deploying enforcement resources. With the disbandment of the Crypto Asset and Cyber Unit, the task force will be the Commissioners’ primary adviser on matters related to Crypto. On March 3, 2025, Commissioner Peirce announced the members of the Crypto Task Force staff.
Executive Order Halts All Pending Regulations
The Trump administration issued an executive order on January 20, 2025, freezing all pending regulations. The order also suggests that agencies should postpone the effective date for any regulations that have been published in the Federal Register for 60 days. Additionally, the order states that federal agencies should withdraw any regulations that have been sent to the Office of the Federal Register but have not yet been published. Finally, the order recommends that agencies should consider reopening comment periods for pending regulations and should not propose or issue any new regulations until a department or agency head appointed by President Trump has reviewed and approve such regulations.
New Executive Order Imposes Increased Presidential Oversight and Control of Independent Regulatory Agencies
The Trump administration, on February 18, 2025, issued a new Executive Order, “Ensuring Accountability for All Agencies,” (the “Executive Order”) that seeks to increase presidential oversight of independent regulatory agencies. The Executive Order imposes new constraints on independent regulatory agencies, like the SEC, including:
The independent regulatory agencies must submit “significant regulatory actions” to the White House’s Office of Information and Regulatory Affairs before publication in the Federal Register;
The Director of the White House’s Office of Management and Budget (“OMB”) will establish performance standards and management objectives of independent agency heads, like the Commissioners of the SEC, and for OMB to report to the President on the agencies’ performance and efficiency;
The Director of OMB will review the agencies’ obligations for “consistency with the President’s policies and priorities” and will change an agencies’ activity or objective, as necessary, to advance the “President’s policies and priorities;”
Chairs of independent regulatory agencies must now meet with and coordinate policies and priorities with the White House, including establishing a position of White House Liaison and submitting strategic plans to OMB for clearance; and
Members of independent regulatory agencies cannot “advance an interpretation of the law” that vary from the president and the attorney general’s authoritative interpretation of the law including, but not limited to, interpretations of regulations, guidance, and positions advanced in litigation (which may include enforcement actions).
SEC Announces Cyber and Emerging Technologies Unit
The SEC announced, on February 20, 2025, the creation of the Cyber and Emerging Technologies Unit (“CETU”) to focus on combatting cyber-related misconduct and to protect retail investors from bad actors in the emerging technologies space. Specifically, the CETU will focus on the following priority areas:
Fraud committed using emerging technologies, such as artificial intelligence and machine learning;
Use of social media, the dark web, or false websites to perpetrate fraud;
Hacking to obtain material nonpublic information;
Takeovers of retail brokerage accounts;
Fraud involving blockchain technology and crypto assets;
Regulated entities’ compliance with cybersecurity rules and regulations; and
Public issuer fraudulent disclosure relating to cybersecurity.
CETU replaces the SEC Enforcement Division’s Crypto Asset and Cyber Unit, which brought more than 100 enforcement actions. CETU’s establishment is a part of a series of initiatives highlighting the SEC’s new, more positive, approach to crypto products. See Acting Chairman Uyeda Announces Formation of New Crypto Task Force above.
ICI Issues Recommendations for Reform and Modernization of the 1940 Act
The Investment Company Institute (“ICI”), on March 17, 2025, issued key recommendations for the reform and modernization of the 1940 Act, titled Reimagining the 1940 Act: Key Recommendations for Innovation and Investor Protection. The ICI worked closely with its members and Independent Directors Council members over three years to develop their “blueprint” to reform the 1940 Act. The 19 recommendations focus on fostering ETF innovation, expanding retail investors’ access to private markets, eliminating unnecessary regulatory costs and burdens, and leveraging the expertise and independence of Fund directors. The ICI has called for the SEC to address these recommendations, including to:
Enable a new or existing fund to offer both mutual fund and ETF share classes;
Allow closed-end funds to more flexibly invest in private funds;
Create more flexibility for closed-end funds to provide repurchase opportunities to their investors;
Adopt electronic delivery of information as the default delivery option;
Update requirements for in-person voting by directors;
Permit streamlined board approval of new sub-advisory contracts and annual renewals;
Revise the “interested person” standard;
Permit fund boards to appoint a greater number of new independent directors; and
Update fund board responsibility with respect to auditor approval.
Navigating the New DOJ Data Security Program Compliance
On January 8, 2025, the U.S. Department of Justice (“DOJ”) issued its final rule to implement Executive Order 14117 aimed at preventing access to Americans’ bulk sensitive personal data and government-related data by countries of concern, including China, Cuba, Iran, North Korea, Russia, and Venezuela (the “Data Security Program” or “DSP”). The DSP sets forth prohibitions and restrictions on certain data transactions that pose national security risks. The regulations took effect on April 8, 2025, with additional compliance requirements for U.S. persons taking effect by October 6, 2025.
On April 11, 2025, the DOJ issued a compliance guide, along with a list of Frequently Asked Questions (FAQs) to assist entities with understanding and implementing the DSP. The DOJ also announced a 90-day limited enforcement period from April 8 to July 8, 2025, focusing on facilitating compliance rather than enforcement, provided that entities are making good faith efforts as outlined in the 90-day policy.
By July 8, 2025, entities must be fully compliant with the DSP, as the DOJ will begin enforcing the provisions more rigorously. By October 6, 2025, compliance with all aspects of the DSP, including due diligence, audit requirements, and specific reporting obligations, will be mandatory.
SCOPE OF THE DSP
The DSP applies to U.S. persons and entities engaging in transactions that provide access to Covered Data to Countries of Concern or Covered Persons.
Countries of Concern: The DSP has initially listed China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia and Venezuela as countries of concern. The Attorney General, along with the Secretary of State and the Secretary of Commerce, may amend such countries based on guidelines in the DSP.
Covered Persons: The DSP defines Covered Persons as entities or individuals associated with a Country of Concern, including those who are substantially owned, organized, or primarily operating within these countries, as follows:
An entity that is 50% or more owned by a Country of Concern
An entity that is organized or chartered under the laws of a Country of Concern
An entity that has its primary place of business in a Country of Concern
An entity that is 50% or more owned by a Covered Person
A foreign person, as an individual, who is an employee or contractor of a Country of Concern
A foreign person, as an individual, who is primarily a resident in the territorial jurisdiction of a country of concern
Any entity or individual that the Attorney General designates as a Covered Person subject to broad discretion set forth in the DSP
Covered Data: The DSP regulates transactions involving two primary categories of data: U.S. sensitive personal data and U.S. government-related data.
U.S. Sensitive Personal Data – applies to data that meets the “bulk” thresholds, including:
Human ‘omic Data: This includes human genomic, epigenomic, proteomic, and transcriptomic data.
Biometric Identifiers: These are measurable physical characteristics or behaviors used to recognize or verify an individual’s identity, such as facial images, voice prints, retina scans, and fingerprints.
Precise Geolocation Data: This identifies the physical location of an individual or device to within 1,000 meters.
Personal Health Data: This includes data that indicates, reveals, or describes an individual’s physical or mental health condition, healthcare provision, or payment for healthcare.
Personal Financial Data: This includes data about an individual’s financial accounts, transactions, and credit history.
Covered Personal Identifiers: These are combinations of listed identifiers, such as government ID numbers, financial account numbers, device identifiers, demographic or contact data, advertising identifiers, account authentication data, network-based identifiers, and call-detail data.
Bulk Thresholds – The “bulk” threshold is calculated from a collection or set of U.S. Sensitive Personal Data, in any format, regardless of whether the data is anonymized, pseudonymized, de-identified, or encrypted, over a 12-month period, whether it is one data transfer or over multiple transfers.
100+ U.S. persons
1,000+ U.S. persons
10,000+ U.S. persons
100,000+ U.S. persons
Human genomic data
– Biometric Identifiers – Human ‘omic data (other than human genomic data) – Precise geolocation data (1,000 US devices)
– Personal health data – Personal financial data
Covered personal identifiers
U.S. Government-Related Data – The DSP applies to the following categories of government related data:
Precise Geolocation Data: For locations designated by the Attorney General as posing a heightened risk of exploitation by a country of concern.
Sensitive Personal Data Linked to Government Employees: Data marketed as linked or linkable to current or former U.S. government employees or officials, including military and intelligence personnel.
COVERED TRANSACTIONS
Transactions are categorized as Prohibited, Restricted, or Exempt and receive varying degrees of restrictions.
Prohibited Transactions: Fully banned transactions include:
Data Brokerage: The sale, licensing, or similar commercial transactions involving the transfer of data from a provider to a recipient who did not collect or process the data directly is prohibited.
Human ‘Omic Data: Transactions involving access to bulk human ‘omic data (genomic, epigenomic, proteomic, and transcriptomic data) or human biospecimens from which such data could be derived are prohibited.
Restricted Transactions: Subject to the exemptions below, these transactions are types of agreements, which are allowed under the DSP subject to stringent security and compliance requirements:
Vendor Agreements: Agreements where a person provides goods or services to another person, including cloud-computing services, in exchange for payment or other consideration. These transactions must comply with security requirements to prevent unauthorized access to covered data.
Employment Agreements: Agreements where an individual performs work directly for a person in exchange for payment or other consideration. This includes board service and executive-level arrangements.
Investment Agreements: Agreements where a person gains direct or indirect ownership of a U.S. legal entity or real estate. Passive investments, such as publicly traded securities, are excluded. These transactions must adhere to security measures and due diligence requirements.
Exempt Transactions: categories exempt from regulation under the DSP include:
Personal communications
Information or informational materials
Travel
Official business of the U.S. Government
Financial services
Corporate group transactions
Transactions required or authorized by U.S. federal law or international agreements, or necessary for compliance with federal law
Investment agreements subject to CFIUS action
Telecommunications services
Drug, biological product and medical authorizations
Other clinical investigations and post-marketing surveillance data
90-DAY LIMITED ENFORCEMENT PERIOD AND “GOOD FAITH EFFORTS” TO COMPLY
During the DOJ’s 90-day limited enforcement period from April 8 to July 8, 2025, the DOJ will focus on facilitating compliance rather than prioritizing enforcement actions, provided entities are making good faith efforts to comply. Good faith efforts include compliance activities described in this first 90-day policy, including:
Conducting internal reviews of sensitive data access.
Reviewing datasets for DSP applicability.
Renegotiating vendor agreements.
Transferring products to new vendors.
Conducting due diligence on new vendors.
Negotiating transfer provisions with foreign counterparts.
Adjusting employee roles or locations.
Evaluating investments from countries of concern.
Renegotiating investment agreements.
Implementing CISA Security Requirements.
LIABILITY
Violations of the DSP can lead to significant civil and/or criminal penalties, including fines up to $377,700 (adjusted for inflation) or twice transaction’s value. Intentional or willful violations can result in fines up to $1,000,000, imprisonment for up to 20 years, or both.
COMPLIANCE TIMELINE
April 8, 2025: DSP regulations take effect.
July 8, 2025: Full compliance with DSP required.
October 6, 2025: Compliance with all DSP aspects, including audits and reporting, as may be required.
ACTIONABLE ITEMS
Companies should complete the following:
Assess Data Holdings: Conduct thorough audits to identify sensitive personal data and government-related data and determine if it meets the DSP’s bulk thresholds (this includes information collected and transferred via online tracking technologies).
Review and Update Contracts: Amend contracts to cease prohibited transactions and ensure compliance with restricted transaction terms. This includes including provisions prohibiting unauthorized data brokerage.
Develop Compliance Programs for Restricted Transactions: Establish a comprehensive data compliance program by October 6, 2025.
Implement Security Measures: Apply organizational, system, and data-level security measures, using technologies like data minimization, encryption, masking, and privacy-enhancing technologies.
Conduct Annual Audits: Perform annual audits to assess DSP compliance, in line with the DSP requirements, and retain them for at least 10 years.
Prepare for Annual Reporting: Ensure records are being generated in anticipation of providing timely submission of annual reports for entities engaged in restricted transactions involving cloud-computing services in which 25% or more of its equity is owned, directly or indirectly, by a country of concern or a covered person,
Monitor Transactions: Regularly monitor data transactions and report any violations to the DOJ within 14 days.
Train Employees: Implement training programs to ensure understanding and compliance with DSP regulations.
CONCLUSION
The DSP signifies a significant effort to protect U.S. sensitive personal and government-related data from foreign threats. Compliance is a legal necessity and a strategic measure to safeguard business operations and reputation. By understanding the DSP’s scope and implementing the steps outlined in this alert, businesses can ensure they are well-prepared to meet compliance requirements.
Executive Order Targets State Climate Laws, But Existing GHG Permit Requirements Remain Enforceable
On April 8, 2025, President Donald J. Trump issued an executive order titled Protecting American Energy From State Overreach. The order directs the U.S. attorney general to identify and take action against state and local laws “burdening” domestic energy development, especially laws addressing climate change, environmental, social, and government (ESG) initiatives, and environmental justice. The order highlights New York, Vermont, and California climate laws as examples of state actions that may be “beyond their constitutional or statutory authorities” and should be targeted by the Justice Department.
Key Provisions of the Executive Order
Identification of State Laws: The attorney general is tasked with identifying “all State and local laws, regulations, causes of action, policies, and practices:
–
That interfere with domestic energy development, and
–
That “are or may be unconstitutional, preempted by Federal law, or otherwise.
Of these, the attorney general is directed to prioritize identification of climate change, ESG, environmental justice, and carbon or greenhouse gas laws and regulations, as well as lawsuits brought under nuisance or other tort theories, such as those brought against fossil fuel producers.
Legal Action: The attorney general is directed to take “expeditious action,” including legal action, to halt the enforcement of such laws and policies and to prevent the continuation of related civil actions deemed illegal.
Reporting Requirement: By June 7, 2025 (within 60 days of the executive order), the attorney general must submit a report to the president detailing the actions taken and recommending additional “Presidential or legislative action” necessary to stop the enforcement of state laws burdening domestic energy development.
Implications for State Energy Regulations
The executive order reinforces the administration’s policy to “unleash American energy,” and targets state-level climate (and other) initiatives that the administration regards as ideological and contrary to federal policy initiatives to expedite domestic energy production. In furtherance of the order, the attorney general may pursue lawsuits challenging state and local laws on grounds such as the Commerce Clause, federal preemption, or other legal theories.
Additionally, based on other recent initiatives from the Trump administration, the Justice Department may attempt to use non-litigation tools such as the withholding federal funding from states that refuse to abandon laws and policies deemed objectionable to the administration.
State-Level Responses
The executive order has elicited swift responses from states with climate-focused laws. New York Gov. Hochul and New Mexico Gov. Michelle Lujan Grisham, co-chairs of the Climate Alliance, have pledged on behalf of the Alliance’s member states continue advancing their energy policies.
New York, in particular, has implemented some of the nation’s most ambitious climate policies, including requiring a net zero-emissions power grid by 2040 and limiting statewide GHG emissions to 15% of 1990 levels by 2050. Notably, the executive order specifically referenced legislation recently enacted in New York that would require compensatory payments by the fossil fuel industry to fund various climate initiatives, which is already being challenged by industry. New York and other similarly situated states are almost certainly preparing to defend their climate agendas, and the outcomes of these legal challenges could have far-reaching implications.
GT Insights
The attorney general faces a 60-day deadline to:
Identify burdensome state and local laws and policies in all 50 states;
Take action against laws deemed illegal; and
Prepare a report documenting such actions and recommending further actions to the president and Congress.
The attorney general may initially prioritize high-profile states and laws explicitly referenced in the executive order, such as New York, Vermont, and California. Litigation is inevitable, both to defend against Justice Department attempts to invalidate state climate programs and to challenge non-litigation measures the department might employ in furtherance of the order.
These legal battles are expected to test the boundaries of the U.S. Supreme Court’s landmark case, California Coastal Commission v. Granite Rock Co., 480 U.S. 572 (1987), which clarified that state law can be preempted if Congress demonstrates an intent to occupy the field or if the state law conflicts with federal law, making compliance with both impossible. At this time, however, state climate initiatives remain in effect until courts say otherwise or states move to revise their approaches.
EUON Publishes Nanopinion on Enhancing the Regulatory Application of NAMs to Assess Nanomaterial Risks in the Food and Feed Sector
On April 8, 2025, the European Union (EU) Observatory for Nanomaterials (EUON) published a Nanopinion entitled “A Qualification System to Accelerate Development and Regulatory Implementation of New Approach Methodologies (NAMs)” by Andrea Haase, Ph.D., German Federal Institute for Risk Assessment (BfR), Shirin M. Usmani, Ph.D., BfR, Irene Cattaneo, European Food Safety Authority (EFSA), Maria Chiara Astuto, EFSA, and Francesco Cubadda, Ph.D., National Institute of Health (ISS). The authors explain how the NAMs4NANO project, funded by EFSA, enhances the regulatory application of NAMs for assessing nanomaterial risks in the food and feed sector. The authors propose to establish three qualification programs, covering NAMs for nanomaterial physicochemical characterization; characterization of nanomaterials in relevant biological fluids; and toxicity screening. According to the authors, the proposed system has been tested initially for one selected model as an example that can be applied to investigate nanomaterial uptake and transport across intestinal barrier, and to evaluate the nanomaterial effects on barrier integrity. The authors note that more case studies are currently ongoing to qualify selected NAMs in the forthcoming implementation plan of the qualification system. The authors invite key stakeholders to collaborate on relevant case studies that can be used to test the qualification system.
Portland City Council Member Proposes Increase to Clean Energy Surcharge Rate
On April 10, 2025, Portland’s Climate, Resilience, and Land Use Committee reviewed a proposal from City Council Member Steve Novick to increase the Clean Energy Surcharge (CES) rate from 1% to 1.33%. The additional revenue from this increase would be redirected into Portland’s general fund, instead of the voter-approved Portland Clean Energy Fund (PCEF). This proposal raises questions regarding Portland’s authority to modify a voter-approved tax.
The CES, which voters approved in November 2018 and took effect Jan. 1, 2019, is a 1% gross receipts tax to “retail sales” that “large retailers” make. All revenues from this tax were specifically earmarked for the PCEF. While the 2018 ballot initiative did not define “retail sales” or “large retailers,” Portland has generally imposed the tax on nearly all businesses with more than $1 billion in worldwide receipts and $500,000 in Portland receipts, with only a few exceptions.
Faced with budget shortfalls, at least one Portland council member is now considering the CES as a potential source of additional general fund revenue. However, Portland’s city charter does not specifically authorize the imposition of taxes without voter approval.1 Furthermore, Portland’s current administration of the CES, as it applies to non-retailers, is facing legal challenges. Considering these limitations on Portland’s taxing authority, the city council’s ability to increase the CES rate and divert those funds from the PCEF will warrant further legal analysis.
1 City of Portland v. HomeAway Inc., 240 F. Supp. 3d 1099, 1107, (D. Or. 2017).
Post‑Chevron Spotlight: Federal Court Nixes FDA Rule Reclassifying Laboratory Services as Medical Devices
In another rebuke to federal regulatory overreach, the U.S. District Court for the Eastern District of Texas (“District Court”) has vacated the Food and Drug Administration’s (“FDA”) 2024 final rule that sought to bring laboratory‑developed test services (“LDTs”) within the scope of the agency’s medical device regulatory framework. The case, American Clinical Laboratory Association et al. v. FDA, Nos. 4:24 CV 479 and 4:24 CV 824, marks a watershed moment for clinical laboratories and diagnostic providers in a post‑Chevron landscape and underscores the judiciary’s growing willingness to police the limits of agency authority in the wake of Loper Bright Enterprises v. Raimondo.
The Regulatory Framework Governing LDTs
LDTs are diagnostic services developed, validated, and performed by professionals within a single clinical laboratory, often in response to individual physician orders. These services, which range from standard pathology tests to advanced genomic sequencing, have long been regulated under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), which are administered by the Centers for Medicare & Medicaid Services (“CMS”). CLIA’s framework—developed after its predecessor law, the Clinical Laboratories Improvement Act of 1967—was designed to govern services, not products. It imposes requirements on laboratory staffing, quality control, methodology validation, and proficiency testing. Laboratories are certified under CLIA and must meet rigorous federal and accreditation‑based standards.
By contrast, the Federal Food, Drug, and Cosmetic Act (“FDCA”), enacted in 1938 and amended in 1976 by the Medical Device Amendments (“MDA”), grants the FDA authority to regulate products—specifically, drugs, devices, foods, and cosmetics. The FDCA’s definition of a “device” encompasses physical items such as instruments, machines, and reagents—not intangible services performed within clinical settings. Notably, Congress’s enactment of CLIA in 1988, more than a decade after the MDA, reaffirmed this division of regulatory labor: the FDA governs devices while CMS governs services. Since then, Congress has repeatedly declined to legislate FDA oversight of LDTs, instead preserving CLIA as the operative statute governing the field.
The Final Rule: A Costly Expansion of Authority
The FDA’s final rule, issued May 6, 2024, would have upended this regulatory equilibrium by reclassifying LDTs as medical devices. Specifically, the rule, as amended, sought to clarify that in vitro diagnostic products “are devices . . . including when the manufacturer of these products is a laboratory.” In effect, the rule would have treated LDTs as manufactured devices, requiring laboratories to obtain premarket authorization for each test and to comply with the FDA’s Quality System Regulation. This dramatic shift would have affected more than 79,000 existing tests and over 10,000 new tests annually. The FDA further estimated that compliance costs would have exceeded $1 billion per year, with total implementation costs ranging from $12.5 billion to $79 billion over twenty years, potentially forcing some LDTs off the market and suppressing future innovation.
Judicial Review in a Post‑Chevron Era: Loper Bright Takes Center Stage
In response to the FDA’s proposed expansion of its authority, a coalition of plaintiffs—including the American Clinical Laboratory Association, the Association for Molecular Pathology, HealthTrackRX, and a practicing clinical pathologist—filed suit in the Eastern District of Texas, arguing that the final rule exceeded the agency’s statutory mandate and moved for summary judgment under the Administrative Procedure Act. On summary judgment, the Court’s analysis turned on Loper Bright, which overturned Chevron deference and restored the task of interpreting statutes to the courts. Applying this new standard, the District Court declined to defer to the FDA’s interpretation of the FDCA, instead undertaking its own statutory analysis.
In its analysis, the District Court found that the term “device” under the FDCA referred to tangible articles—not professional services. It emphasized that none of the listed terms in the FDCA’s definition section (“instrument,” “machine,” “in vitro reagent,” etc.) could be read to encompass laboratory services. The Court also rejected the FDA’s argument that laboratories’ use of devices during diagnostic testing somehow converted those services into devices subject to the FDA oversight. The District Court further held that Congress clearly intended to treat laboratory services separately from devices when it enacted CLIA in 1988, reaffirming a services‑based regulatory regime administered by CMS.
Importantly, the District Court also noted that Congress had multiple opportunities to legislate FDA oversight of LDTs—and yet declined to do so. On the contrary, the District Court observed, the statutory framework governing LDTs has remained unchanged since 1988, and the FDA’s rule was an impermissible attempt to rewrite that framework through regulation. As a result, the District Court granted summary judgment for the plaintiffs, vacated the final rule, and denied the FDA’s cross‑motion, concluding that remand without vacatur was inappropriate given the final rule’s legal defects and the absence of any persuasive justification from the agency.
What’s Next? Another Brick in the Post‑Chevron Wall
This decision is the latest in a growing line of federal court rulings reining in agency authority in the wake of Loper Bright. As with recent invalidations of other federal agency rules across multiple courts, this decision reflects a reshaped judicial posture that demands clear congressional authorization before agencies can regulate new areas or expand their reach. Providers and regulated entities should, thus, take note: in this evolving legal landscape, agency interpretations of rules may no longer suffice. Courts are now scrutinizing regulatory assertions with fresh eyes and heightened textual rigor. For diagnostic labs and other stakeholders in particular, this ruling marks not only a reprieve, but also a call to vigilance as Congress and agencies revisit regulatory pathways for diagnostics and digital health.
Former U.S. Department of Labor Officials Pen Open Letter to Contractor Community Addressing Executive Order 14173 and the Current Administration’s Stance on Diversity, Equity and Inclusion
Ten former Department of Labor Officials, including former EEOC Commissioner and past OFCCP Director Jenny Yang, sent an open letter to federal contractors responding to President Trump’s issuance of Executive Order 14173 and newly appointed OFCCP Director Catherine Eschbach’s recent statements about OFCCP.
The letter is aimed to
“help federal contractors and other employers navigate this complex environment, providing clarity about their options and obligations under the law.”
The 14-page letter details how the current administration’s actions are in contravention of established law, explains compliance with Executive Order 11246 did not require the unlawful use of preferences or quotas, and describes how continued proactive practices, including self-assessments and data analysis to remove discriminatory barriers remain lawful and are essential to prevent discrimination.
The letter concludes reiterating that “America’s enduring promise is that talent and effort – not background or origin – should determine one’s path” and encourages the federal contracting community to “stand firm in your commitments to lawful diversity, equity, inclusion, and accessibility practices that promote civil rights compliance, true merit, and a strong economy.”
Sustainability-Related Governance, Incentives and Competence – FCA Confirms No New Rules for Now
Background
In February 2023, the United Kingdom Financial Conduct Authority (“FCA”) published a discussion paper (DP23/1) to encourage an industry-wide dialogue on firms’ sustainability-related governance, incentives, and competence (the “Discussion Paper”).
On 2 April 2025, the FCA published a summary of the feedback received on the Discussion Paper, as well as its own responses and planned next steps. The FCA is not currently considering introducing new rules on the themes in the Discussion Paper.
Industry Feedback
The responses received by the FCA were generally positive about the importance of sustainability matters and the role of the themes outlined in the Discussion Paper. The feedback covered several areas, including:
Objectives, purpose, business model, and strategy;
Board and senior management roles;
Accountability structures;
Incentives and remuneration practices;
Investor stewardship; and
Training and competency development.
The FCA noted that a common theme across the responses was the need for new regulations (such as the Consumer Duty and Sustainability Disclosure Requirements (“SDR”)) to “bed in” before determining whether any additional rules would be needed.
In addition, some respondents cited the existing rules at the time as sufficient and some also mentioned the role of the International Sustainability Standards Board (“ISSB”) standards, and previously the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations, in establishing a global baseline for sustainability disclosures.
FCA’s Response
The FCA welcomed the level of engagement from respondents and the importance with which they generally regarded the themes and issues in the Discussion Paper. The FCA also noted that the insights gained from the feedback have been important to assist their understanding of the current market.
The FCA drew attention to the recent introduction of rules relating to some of the themes, which many respondents recognised the importance of – in particular:
The Consumer Duty;
SDR and related labelling requirements; and
The Anti-Greenwashing Rule.
The FCA also recognised the importance of allowing time for new measures to be implemented before introducing further rules in these areas. For themes in the Discussion Paper not captured by the measures above, the FCA will continue to work with the industry to enable market-led solutions and guidance – for example, through the Climate Financial Risk Forum (CFRF) and the Adviser’s Sustainability Group (ASG).
Next Steps
Although the FCA is not currently considering introducing new rules on sustainability-related governance, incentives, and competence, it will continue to monitor market developments and promote these themes to help the sustainable finance market grow responsibly, as well as to continue to promote the UK as a leading financial centre.
Raising the Bar: SEC Evaluating an Increase in Minimum AUM Threshold for Investment Adviser Registration
On April 8, 2025, Acting SEC Chairman Mark T. Uyeda gave a speech signaling that the SEC may revisit the current minimum assets under management (“AUM”) threshold for federal registration, potentially reducing the number of investment advisers required to register with the SEC. Though Uyeda’s time as Acting Chair has now ended due to the confirmation of Paul Atkins as SEC Chair, Uyeda’s willingness to raise the issue publicly suggests he expects Atkins will carry the initiative forward.
In his remarks at the Annual Conference on Federal and State Securities Cooperation, Uyeda stated that he had directed SEC staff to evaluate whether this threshold — unchanged since 2012 — remains appropriate given the current market and the SEC’s regulatory priorities. The specificity of the speech, and in particular the statement that he had asked the staff to evaluate the current framework, likely indicates that the proposal process has already begun.[1]
An increase in the minimum threshold could mean that currently SEC-registered investment advisers falling below the new threshold would withdraw their SEC registrations and register with state regulators or, alternatively, claim exemptions at the state level (if available). The prospect of state-level registration may be bittersweet for some investment advisers. While some advisers may be eager to escape from SEC jurisdiction, state regulators may be less familiar with the complex transactions, fund structures and terms and other market practices that are the norm across private funds. This could pose challenges, and an adviser’s experience can vary widely depending on the regulators with which it is registered.
Key Takeaways for Investment Advisers
Currently, investment advisers with more than $100 million in AUM[2] must register with the SEC unless an exemption applies (for example, exemptions are available for private fund advisers with AUM below $150 million, as well as for advisers to venture capital funds).
If the SEC were to increase the AUM threshold at which an adviser is required to register with the SEC (which it could accomplish through its current rulemaking authority under the Advisers Act), affected advisers that are currently SEC-registered or are claiming exemptions from SEC registration, but that have AUM below such new threshold, would be required to withdraw their SEC registrations or exemption filings and, if required, would register with applicable state regulatory authorities (unless an exemption applies at the state level, such as the state-level equivalents of the SEC’s “exempt reporting adviser” exemptions that have been adopted in many states).
This development is consistent with the broader theme in recent months of the SEC seeking to recalibrate certain rules to ease burdens on smaller firms.
Why the SEC may revisit the $100M AUM Threshold
Uyeda suggested that he believes that the current threshold may no longer reflect the intent behind the threshold, which aimed to reserve SEC oversight for larger investment advisers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”)[3] increased the AUM-based registration threshold to its current level.[4] The purpose, as expressed at the time, was to decrease the number of advisers registered with the SEC. As a result of the law and associated rule changes, more than 3,000 investment advisers withdrew their SEC registration.
In his recent speech, Uyeda noted the number of SEC‑registered advisers has grown by approximately 45 percent since the last adjustment.[5] Uyeda suggested that it would be consistent with Congressional intent for certain “mid-sized” firms to be subject to registration at the state level instead of with the SEC.
Additional Proposal: Streamline Interplay of Federal and State Laws in Regulation of Securities Transactions
Uyeda also suggested re-evaluating the current system of federal pre-emption of state securities laws in connection with securities issuances, resales and other securities transactions. As he noted, the question of whether federal laws pre-empt state laws — which affects, among other things, whether an offering of securities by a private issuer must comply with state securities laws in addition to federal law — can be complicated, which can hinder capital formation. His suggestion is consistent with the theme of recalibration that has been emerging from the SEC over the past several months.[6]
Uyeda’s Remarks in Broader Context
Uyeda’s remarks are not a formal proposal but are a clear indication that this area is ripe for regulatory reform. This adds to a growing list of developments that investment advisers and issuers alike will be monitoring closely as the new administration continues to build momentum.
[1] While nothing is guaranteed, similar statements by previous Chairs have presaged later SEC actions. For example, in a 2021 speech to the Institutional Limited Partners Association, then-Chair Gensler stated that he had “asked the staff to consider” various recommendations that closely tracked the framework of the now-voided Private Fund Adviser Rules, and made similar statements that tracked the 2022 amendments to Form PF. Prior to that, Acting Chair Lee gave a speech signaling the beginning of the rulemaking process on the SEC’s Climate Rule, as well as amendments to Form N-PX that were later adopted and a proposal relating to fund and adviser ESG metrics.
[2] Or more than $25 million, for advisers whose home state would either not require them to register with the state or, if registered at the state level, would not be subject to examination by the state.
[3] There were, and remain, other reasons beyond AUM that can cause or permit an investment adviser to register with the SEC. For example, an investment adviser that would be required to register in numerous states is permitted to register regardless of AUM, and an investment adviser to a registered investment company is required to register regardless of AUM.
[4] The Dodd-Frank Act also removed the private adviser exemption, which exempted advisers with fewer than 15 clients from registration regardless of AUM. Advisers to private funds frequently were able to rely on this exemption from registration because the adviser’s clients are its funds and not the underlying investors.
[5] Though not directly noted in the speech, Uyeda has been associated with previous efforts by the SEC to update thresholds that result in additional regulatory oversight or obligations. For example, he was listed as a senior member of the team that drafted the 2020 proposal that would have raised the threshold to file Form 13F.
[6] The SEC is not the only financial regulator considering recalibration; in the UK, the Treasury Ministry recently called for input on a proposal that would significantly increase the threshold for full scope AIFM registration, as well as several related reforms.
What Legal Services Providers Need to Learn from OFSI’s Legal Services Threat Assessment
In its first-ever threat assessment of the UK legal sector, the UK’s Office of Financial Sanctions Implementation (OFSI) has raised red flags with regards to suspected sanctions breaches involving UK legal services providers since February 2022 (the Assessment).
Why Did OFSI Focus on Legal Services Providers?
Legal services providers play a crucial role in ensuring UK and international clients (including UK Designated Persons (DPs)) comply with UK financial sanctions. All legal services providers must ensure compliance not only with the Russian sanctions regime but also other threats to compliance relevant to the United Kingdom, including the UK’s sanctions regimes applicable to Libya, Belarus, Iran and South Sudan, amongst others.
OFSI’s Key Findings
The Assessment sets out four key findings relevant to UK legal services providers from February 2022 to present.
1. Underreporting of Breaches
OFSI found it was highly likely that UK trust and company services providers (TCSPs) may not fully disclose suspected breaches due to inconsistent detection policies and the failure to monitor clients’ sanctions status.
Since the reporting time frame of February 2022 until the publishing of this Assessment, OFSI identified that 16% of the total number of suspected breach reports received have come from the legal services sector (compared with 65% submitted by the financial services sector). 98% of these were submitted by law firms and barristers, while TCSPs and other types of legal services providers submitted only 2%. OFSI considered this as strongly suggestive that TCSPs were under-reporting.
2. Compliance Failures
OFSI stated that it was almost certain that most non-compliance by UK legal services providers has occurred due to the following:
Improper maintenance of frozen assets.
All DPs accounts, funds and resources, including those held by entities owned or controlled by DPs, must be operated in accordance with asset freeze prohibitions and OFSI licence permissions. OFSI observed legal services providers failing to adhere to asset freeze prohibitions, including delays in freezing funds belonging to DP clients and transferring frozen funds into accounts other than those specified in OFSI licences.
Breaches of specific and general OFSI licence conditions.
Receiving payment for legal services rendered to DPs, including services provided on credit, requires an OFSI licence. Specific compliance issues included billing sanctioned DPs more than the value limits set in the relevant licence or receiving payments after the relevant licence has expired.
Reporting.
OFSI encourages legal services providers to review licence reporting requirements, including making a report within 14 days of receiving payment under a general licence and providing relevant documentation that sets out the obligation under which the payment has been made.
Wind-down of Russia related operations.
Many UK legal services providers, including law firms, wound down their operations in Russia following its invasion of Ukraine and advised clients regarding the same. OFSI identified that legal services providers must ensure these activities were conducted in line with general and specific licence permissions and to report any suspected breaches which may have occurred as a result. The recent financial penalty imposed on HSF by OFSI in relation to the activities of HSF Moscow highlights these risks.
3. Complex Ownership and Control Structures
OFSI considered it was almost certain that complex corporate structures, including trusts, linked to Russian DPs and that their family members have concealed the ownership and control of assets which should have been frozen under UK financial sanctions. The Assessment encourages legal service providers to identify and report any suspected breaches, including those arising from non-designated individuals or entities dealing with frozen assets held through these complex structures.
4. Post-designation Ownership and Control Transfers
OFSI considered it likely that Russian DPs have sought to recoup frozen assets and even dissipate them beyond the reach of UK financial sanctions to non-designated individuals and entities. This generally requires the involved of other parties enabling these activities, including:
Professional enablers which provide professional services that enable criminality.
Non-professional enablers, such as family members, ex-spouses or associates.
Legal service providers need to ensure that they are not, directly or indirectly, enabling such activity by DPs or by non-professional enablers acting in support of DPs.
Intermediary Countries
Approximately 23% of the suspected breach reports identified by OFSI as involving UK legal services providers are connected to intermediary jurisdictions. The Assessment highlights a series of red flags for lawyers to look out for when dealing with jurisdictions such as: the British Virgin Islands, Guernsey, Cyprus, Switzerland, Austria, Luxembourg, United Arab Emirates and Turkey, as well as the Isle of Man, Jersey and the Cayman Islands.
Practical Steps
Legal services providers are obliged to make Suspicious Activity Reports to the National Crime Agency (NCA) under Part 7 of the Proceeds of Crime Act 2002 and the Terrorism Act 2000 if money laundering or terrorist financing activities are known or suspected. Further information about reporting to the NCA and OFSI can be found here and here.
Legal service providers should take the following steps, amongst others, to ensure compliance with the UK sanctions regime:
Monitor and identify any red flags;
Update client due diligence beyond basic ID checks to check beneficial owners and connected parties;
Screen every transaction against OFSI’s consolidated list (see here);
Complete a tailored risk assessment, incorporating the above findings, and undertake any remedial activities; and
Identify and comply with any applicable licence requirements.
Conclusion
OFSI’s Assessment builds on previous and related publications issued by OFSI and UK government partners, including the Financial Services Threat Assessment published by OFSI in February 2025 (see our corresponding alert here). OFSI encourages legal services providers to both report now and retrospectively, where appropriate and proportionate, if they suspect a breach linked to the content of this Assessment.