All’s Well That Ends Well: The CFTC Amends Its Wells Notice Process and Other Rules of Practice for the Better
For years, the Commodity Futures Trading Commission (CFTC or Commission) has exercised broad discretion in investigating and prosecuting potential violations of the law, with its sanctions and penalties infrequently subject to challenge. The industry has long criticized this process as being opaque and lacking fairness. Joining the chorus of critics, CFTC Acting Chairman Caroline D. Pham has been vocal about her objections to the Commission’s prior enforcement practices, emphasizing the need for higher standards of integrity, diligence and excellence in enforcement actions to maintain public trust.
To address these longstanding criticisms, the CFTC published amendments to Rule of Practice and Rules Relating to Investigations (the Amendments) on December 1, 2025, to improve transparency, fairness and the preservation of constitutional rights in the Commission’s enforcement procedures.[1] By clarifying certain procedures, expanding response times and ensuring objectivity in internal recommendations, the CFTC is taking concrete steps to uphold the integrity of its enforcement program and restore public confidence in its oversight of US derivatives markets.
The following is Katten’s forward-looking analysis of the Amendments, which unpacks critical enhancements to the Commission’s Wells Process, extended response timelines and reinforced due process protections, as well as the internal process reforms designed to elevate transparency and objectivity in CFTC investigations and enforcement actions.
Key Amendments to the Rules of Practice
The Amendments represent a comprehensive effort to address the concerns noted above and to modernize the agency’s enforcement framework. The Amendments fall into five main categories:
revising procedures for notifying individuals or entities who may be named in enforcement actions, including the Wells process;
clarifying (and, in effect, materially broadening) the definition of adjudicatory proceedings to capture certain actions, including (a) Commission orders instituting proceedings pursuant to the Commodity Exchange Act, (b) Commission findings, and (c) Commission-imposed remedial sanctions;
establishing new requirements for the form and content of recommendation memoranda from the CFTC’s Division of Enforcement (Division);
removing references to outdated regulations and obsolete communication methods; and
clarifying the Commission’s authority to accept settlement offers by order.
Enhancements to the Wells Process
A central focus of the Amendments is the reform of the Wells process, which governs how the Division notifies individuals or entities that may be subject to enforcement action. The Amendments now require that notice of potential charges and the relevant facts supporting those allegations be provided in writing whenever possible, with oral notices to be promptly confirmed in writing. The written notice must identify the specific charges the Division has made a preliminary determination to recommend to the Commission and may refer to specific evidence supporting the recommendation. This change is intended to end the practice of “secret” charges and ensure that those potentially subject to enforcement action are fully informed of the allegations against them.
The Amendments also significantly expand the time allowed for recipients of a Wells notice to respond. Previously, individuals or entities had as little as two days — and in some cases, only 14 days — to make a Wells submission. Under the Amendments, a minimum of 30 days is provided for such responses, unless good cause is shown and approved by senior Division attorneys. This ensures that respondents have adequate time to prepare a thorough and meaningful submission.
Acting Chairman Pham highlighted the importance of this change. She noted that “[t]hese reforms ensure due process, such as providing a proper Wells notice and discontinuing the practice of ‘secret’ charges and providing a minimum of 30 days — instead of as little as 2 days in the past — to make a Wells submission that is shared with the Commission promptly”.[2]
Objective and Comprehensive Internal Memoranda
Another major reform is the requirement that the Division’s recommendation memoranda to the CFTC be objective, comprehensive and consistent with applicable rules of professional conduct. As a result of the Amendments, these memos must now provide a thorough explanation of the factual and legal basis for the recommendation, distinguish unfavorable facts or legal precedents and be supported by citations to evidence in the investigative record or stipulations by the parties. Legal arguments must be supported by points and authorities. This change is a significant departure from prior practice, which did not require the Division to preview or discuss unhelpful facts or law that may favor the recipient of a Wells notice. This change is intended to ensure an accurate and complete administrative record and to prevent bias in the CFTC’s decision-making process.
Transparency and Fairness in Enforcement Proceedings
The Amendments also require that all written statements submitted in response to a Wells notice be forwarded to the full Commission, not just upon the submitter’s request, as was previously the case. The Amendments also permit the recipient of a Wells notice to request that their response be “promptly” provided to the Commission, which could expedite the resolution of the matter and also inform the Commission of the pending matter, potentially before the Division makes a charging recommendation. These changes ensure that the CFTC has a complete and accurate record when considering whether to commence an enforcement action.
Impact on the Industry, Next Steps
The Amendments collectively aim to “end lawfare so that all are treated fairly with respect for basic rights in CFTC enforcement actions,” as Acting Chairman Pham put it. She further emphasized, “[t]he Commission must be an objective finder of fact and neutral arbiter of law that respects the Constitution and Constitutional rights. There must be no bias in the administration of justice and due process”.
The Amendments will become effective upon their publication in the Federal Register. In short, the Amendments are expected to benefit enforcement respondents by enhancing transparency, efficiency, and due process in the CFTC’s core enforcement activities.
Footnotes
[1] See CFTC Press Release Number 9144-25, “Acting Chairman Pham Announces Reforms to Wells Process, Amends Rules of Practice and Rules Relating to Investigations,” available at https://www.cftc.gov/PressRoom/PressReleases/9144-25.
[2] See CFTC Acting Chairman Caroline D. Pham’s Comments on her LinkedIn page, post dated Dec. 1, 2025, available at https://www.linkedin.com/posts/carolinedpham_acting-chairman-pham-announces-reforms-to-activity-7401370451618238465-mEWI?utm_medium=ios_app&rcm=ACoAAADQT1wBabWzk31dfuh0uI7P9vxmSvuXofg&utm_source=social_share_send&utm_campaign=mail.
Tax Consulting Firm Permitted to Challenge Final Micro-Captive Reporting Regulation
Ryan, LLC v. Internal Revenue Service[1] is the latest example of success in overcoming procedural hurdles to challenge the validity of a US Department of the Treasury (Treasury) regulation. In a recent opinion, the US District Court for the Northern District of Texas held that:
Ryan has standing to challenge the validity of the Treasury’s final regulations[2] that require disclosure of certain transactions engaged in by businesses and their “micro-captive insurance companies” (MCICs).
Ryan sufficiently pleaded its claim that the final regulations under challenge were “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” and must be set aside under the Administrative Procedure Act (APA).[3]
The court’s opinion confirms that nontaxpayer actors may have standing to challenge Treasury regulations. The case is also another example of a plaintiff reaching the merits stage of a challenge to a Treasury regulation in the aftermath of Loper Bright v. Raimondo.[4]
Background
Ryan is an advisor to businesses seeking to establish and maintain MCICs. “Captive” insurance companies are specialized insurance companies that exist to insure the entities that own them. When the owning entities make premium payments to the captive, the premiums do not need to include commissions or other fees associated with traditional insurers, making captives an attractive option especially when coverage is unavailable or costly through traditional insurers. Certain small captive insurance companies, commonly called MCICs, qualify for favorable tax treatment. Under section 831(b), MCICs are not taxed on the first $2.2 million in premiums paid by their owner-insured. The Internal Revenue Service (IRS) has increased its scrutiny of the captive insurance industry because of concerns that these arrangements may be exploited for fraud and abuse.
The Treasury’s new regulations
Section 6707A requires the disclosure of certain “reportable transactions,” defined as transactions that, in the IRS’s determination, have a “potential for tax avoidance or evasion.” A “listed transaction” is a type of reportable transaction in which the taxpayer is presumed to have engaged in the transaction for the purpose of tax avoidance or evasion.[5] A “transaction of interest” is a reportable transaction designated by the IRS as having a potential for abuse but is not presumed abusive.[6] These designations create heavy reporting requirements by taxpayers and their advisors (e.g., Ryan).
Under the Treasury’s new regulations, a micro-captive insurance transaction is defined based on a loss ratio factor and a financing factor. The loss ratio factor is the ratio of the captive insurance company’s cumulative insured losses to the cumulative premiums earned over a specified period, typically the most recent 10 taxable years (or all years if less than 10). The financing factor refers to whether the captive insurance company participated in certain related-party financing arrangements within the most recent five taxable years, such as making loans or other transfers of funds to insureds, owners, or related parties. A transaction is classified as a “listed transaction” if the MCIC’s loss ratio is below 30% for the previous 10 taxable years and it provided related-party financing during the previous five taxable years. A transaction is classified as a “transaction of interest” if the MCIC’s loss ratio is below 60% for the previous 10 taxable years or it provided related-party financing during the previous five taxable years.
A review of the Ryan, LLC v. IRS timeline
Ryan filed its complaint in January 2025, seeking to have the final regulations set aside on the grounds that they are substantively and procedurally invalid. On April 28, 2025, the government filed a motion to dismiss the complaint, contending that Ryan lacked standing to challenge the regulations’ validity and had otherwise failed to state a claim upon which relief could be granted.
On November 5, 2025, the district court denied in part the government’s motion to dismiss and issued an opinion. Therein, the court ruled that Ryan did have standing to challenge the regulations. The court rejected the government’s contention that Ryan lacked the “zone of interests” required to state a claim under the APA, in part because it found that the final regulations would discourage potential clients from engaging Ryan, thus hampering its profitability.
Following its ruling on standing, the court rejected the government’s contention that Ryan had failed to state a claim under section 706 of the APA. The crux of Ryan’s allegation was that the final regulations are arbitrary and capricious because the Treasury issued the rules without justifying to the interested public how the relevant facts and data supported its view that MCICs pose a heightened risk of tax avoidance or evasion. In Ryan’s view, the Treasury also neglected to explain why the criteria used for making its determinations that particular transactions should be “listed transactions” or “transactions of interest” (i.e., loss ratios and related-party financing) are effective in distinguishing abusive transactions from legitimate ones. Ryan will now have the opportunity to litigate its contention on the merits in the next phase of the litigation.
Practice point: In 2024, the Supreme Court of the United States overruled the doctrine of regulatory deference set forth in Chevron. Ryan is now the latest case since Loper Bright in which a federal court has permitted a regulatory challenge to proceed on its merits. The Northern District of Texas, like several other courts before it, has recognized the responsibility federal courts have under Loper Bright to exercise their independent judgment when deciding statutory meaning. Ryan also underscores how taxpayers and their allies who are negatively affected by a regulation should carefully consider whether the Treasury engaged in due reasoning and consideration, as such regulations may be susceptible to invalidation on the ground that they were issued without adherence to the procedural safeguards provided under the APA.
Suzanne Golshanara, a law clerk in the Washington, DC, office, also contributed to this post.
_________________________________________________________________________________
[1] No. 3:25-CV-0078-B, 2025 BL 396822 (N.D. Tex. Nov. 5, 2025).
[2] Treas. Reg. §§ 1.6011-10 and -11.
[3] 5 U.S.C. § 706(2)(A).
[4] 603 U.S. 369 (2024).
[5] See Treas. Reg. §§ 1.6011-4(b)(2).
[6] See Treas. Reg. §§ 1.6011-4(b)(6).
FinReg Monthly Update November 2025
Welcome to the FinReg Monthly Update, a regular bulletin highlighting the latest developments in UK, EU and U.S. financial services regulation.
Key developments in November 2025:
Asset Management / Wealth Management
17 November – Liquidity Management RTS: The European Commission has adopted Delegated Regulations containing regulatory technical standards (RTS) on liquidity management tools under the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) and the UCITS Directive (2009/65/EC).
17 November – Fund Valuation Standards: The International Organization of Securities Commissions (IOSCO) published a consultation report on updated recommendations on valuing collective investment schemes.
17 November – Depositary Supervision Review: ESMA published a report on the outcome of a peer review of the supervision of depositary obligations.
Sustainable Finance / ESG
20 November – SFDR 2.0 Legislative Proposal Launched: On 20 November 2025, the European Commission officially launched their legislative proposal for the updates to the Sustainable Finance Disclosure Regulation (“SFDR”). In a significant departure from the current SFDR disclosure regime, the European Commission proposes a categorisation regime for funds in its place. Please refer to our dedicated article on this topic here.
13 November – CSRD / CSDDD Simplification Mandate: On 13 November 2025, the European Parliament adopted its negotiating mandate on the European Commission’s Omnibus proposal to reduce the scope of the Corporate Sustainability Due Diligence Directive (EU) 2024/1760) and the Corporate Sustainability Reporting Directive ((EU) 2022/2464). Please refer to our dedicated article on this topic here.
13 November – NGFS Climate Scenario Guide: The Network for Greening the Financial System (NGFS) published an updated version of its guide to climate scenario analysis for central banks and supervisors.
11 November – Taxonomy Delegated Acts Review: The European Commission has published calls for evidence (CfEs) on two proposed Delegated Regulations amending the Taxonomy Climate Delegated Act ((EU) 2021/2139) and the Taxonomy Environmental Delegated Act ((EU) 2023/2486). Please refer to our dedicated article on this topic here.
10 November – ESRS ‘Quick Fix’ Regulation: Commission Delegated Regulation (EU) 2025/1416 amending Delegated Regulation (EU) 2023/2772 as regards the postponement of the date of application of the disclosure requirements for certain undertakings (referred to as the Quick Fix Regulation) was published in the Official Journal of the European Union, on 10 November 2025.
7 November – NGFS Climate Scenario Notes: The Network for Greening the Financial System (NGFS) published a series of explanatory notes to clarify and improve the usability of its long-term climate scenarios.
5 November – EBA Environmental Scenario Analysis: The EBA published a final report (EBA/GL/2025/04) on guidelines on environmental scenario analysis under the CRD IV Directive (2013/36/EU).
4 November – Updated SFDR Q&A: The Joint Committee of the European Supervisory Authorities (ESAs) published an updated version of its questions and answers (Q&A) (JC 2023 18) on the SFDR (EU) 2019/2088) and on Commission Delegated Regulation (EU) 2022/1288, which supplements the SFDR with regard to RTS on content and presentation of information (SFDR Delegated Regulation).
Securities / Capital Markets
28 November – Bond and Derivatives SI Regime: The FCA published a policy statement (PS25/17) on removing the systematic internaliser (SI) regime for bonds, derivatives, structured finance products and emission allowances.
27 November – Credit Builders and Data Collection: The FCA has published its regulation round-up for November 2025. Among other things, the FCA outlines its findings from a review of credit builder products, explains how it is standardising the way it collects financial data at the authorisation gateway and summarises its work on improved digital forms.
27 November – UK EMIR Margin Amendments: The PRA and the FCA published a joint policy statement on changes to the UK bilateral margin requirements for non-centrally cleared derivatives under UK EMIR (648/2012) (PRA PS23/25 / FCA PS25/16), which take the form of amendments to the binding technical standards (BTS) in the UK onshored version of Commission Delegated Regulation (EU) 2016/2251, supplementing UK EMIR.
21 November – FCA Fees and Levies Consultation: The FCA published a consultation paper on policy proposals for its regulatory fees and levies for 2026/27 (CP25/33).
21 November – UK Transaction Reporting Reforms: The FCA published a consultation paper (CP25/32) on proposed improvements to the UK transaction reporting regime.
20 November – Regulated Activities Amendment Order: The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2025 (SI 2025/1205) has been published on legislation.gov.uk.
19 November – Market Conduct Codes Recognition: The FCA published an updated version of its webpage on recognised industry codes to reflect the fact it has extended its recognition of the FX Global Code, the UK Money Markets Code and version 2 of the Global Precious Metals Code.
19 November – Equity Consolidated Tape Consultation: The FCA published a consultation paper on the proposed framework for introducing an equity consolidated tape (CT) in the UK run by a consolidated tape provider (CTP) (CP25/31).
12 November – Neo-Brokers Final Report: The IOSCO published its final report on neo-brokers.
5 November – FCA Intragroup EMIR Changes: The FCA published a consultation paper (CP25/30) proposing changes to its BTS on the intragroup exemption regime under UK EMIR (648/2012). The relevant BTS are the UK version of Commission Delegated Regulation (EU) 2016/2251 (BTS 2016/2251) and the UK version of Commission Delegated Regulation (EU) 149/2013 (BTS 2013/149).
5 November – UK EMIR Intragroup Amendments: HM Treasury published a draft version of the Over the Counter Derivatives (Intragroup Transactions) Regulations 2026, together with a policy note.
3 November – Overseas Recognition Regime Regulations: The Financial Services (Overseas Recognition Regime Designations) Regulations 2025 (SI 2025/1147) published on legislation.gov.uk.
3 November – Berne Agreement FCA Guidance: The FCA published guidelines for firms on the Berne Financial Services Agreement.
Financial Crime / Conduct / Sanctions
27 November – FOS 2026/27 Plans Consultation: The Financial Ombudsman Service (FOS) published a consultation paper on its proposed plans and budget for 2026/27.
26 November – SFO Compliance Programme Guidance: The Serious Fraud Office (SFO) published updated guidance on evaluating corporate compliance programmes in England, Wales and Northern Ireland. The guidance outlines six scenarios where the SFO assesses an organisation’s compliance programme, including decisions on prosecution, deferred prosecution agreements (DPAs), compliance terms or monitorships in DPAs, defences under the Bribery Act 2010 and the Economic Crime and Corporate Transparency Act 2023, and sentencing considerations.
21 November – Updated SARs Best Practice: The National Crime Agency published UKFIU SARs best practice guidance on how to use the SAR portal to submit a SAR to the UKFIU, how to help reporters submit a high-quality SAR and how to help reporters seek a defence under Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000.
17 November – JMLSG AML/CTF Consultation: The Joint Money Laundering Steering Group (JMLSG) published, for consultation, proposed revisions to Part I of its anti-money laundering (AML) and counter-terrorist financing (CTF) guidance for the financial services sector.
14 November – FCA Regulatory Failure Investigations Policy: The FCA published a statement of policy on statutory investigations into regulatory failure and producing reports.
11 November – FCA Financial Crime Review Findings: The FCA published the findings from a multi-firm review focused on firms’ business-wide risk assessment (BWRA) and customer risk assessment (CRA) processes. The firms involved in the review included building societies, platforms, e-money firms and wealth management firms.
5 November – Financial Inclusion Strategy: HM Treasury published its new financial inclusion strategy, which sets out a national plan aimed at removing barriers to financial participation and building financial resilience.
5 November – BNPL Credit Broking Exemption: The Financial Services and Markets Act 2000 (Regulated Activities, etc.) (Amendment) (No 2) Order 2025 (SI 2025/1154) has been laid before Parliament and published on legislation.gov.uk with an explanatory memorandum. The Order will exempt domestic premises suppliers from credit broking regulation when they offer certain buy-now-pay-later (BNPL) credit products to customers.
3 November – Central Sanctions Enforcement Hub: A new sanctions enforcement action collections page launched by the Foreign, Commonwealth and Development Office (FCDO), the Office of Financial Sanctions Implementation (OFSI), and the Office of Trade Sanctions Implementation (OTSI).
Cryptoassets / Payments
27 November 2025 – IRSG Response on Crypto Consultation: The International Regulatory Strategy Group (IRSG) published its response to the FCA’s September 2025 consultation paper on the application of its Handbook to regulated cryptoasset activities (CP25/25).
26 November – Stablecoin Sandbox Cohort: The FCA publisheda new webpage announcing the launch of a special cohort within its Regulatory Sandbox for firms issuing stablecoins.
25 November – EP Resolution on AI in Finance: The European Parliament adopted a resolution on the impact of AI on the financial sector.
20 November – Property (Digital Assets) Bill: On 19 November 2025, the Property (Digital Assets etc) Bill passedits third reading in the House of Commons with no amendments. It is now awaiting Royal Assent.
18 November – Confirmation of Payee Compliance Report: The Payment Systems Regulator (PSR) published a compliance report on Specific Direction 17, which relates to the confirmation of payee system.
12 November – Tokenised Asset Markets Report: The Investment Association, together with the Investment Management Association of Singapore, published a report examining the challenges and opportunities in tokenised asset markets across the UK and Singapore.
11 November – Tokenisation of Financial Assets Report: The IOSCO published a final report (FR/17/25) discussing observations from a monitoring exercise conducted by its Fintech Task Force to determine how tokenisation and distributed ledger technology (DLT) is being developed and adopted in capital markets products and services.
10 November – BoE Systemic Stablecoins Consultation: The Bank of England (BoE) published a consultation paper on regulating sterling-denominated systemic stablecoins for UK payments issued by non-banks.
7 November – Retail Payments Infrastructure Strategy: HM Treasury published an update on the work of the Payments Vision Delivery Committee.
Artificial Intelligence / Digital Regulation
18 November – DORA Critical ICT Providers List: The ESAs published a list of designated critical ICT third-party service providers under the Regulation on digital operational resilience for the financial sector ((EU) 2022/2554) (DORA).
12 November – ECON Report on AI in Finance: The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a report on the impact of AI on the financial sector.
5 November – HM Treasury AI Skills Commission: HM Treasury published a letter to the Financial Services Skills Commission (FSSC) from Lucy Rigby MP, Economic Secretary to the Treasury, commissioning the FSSC to research and produce a report on AI skills needs, training and innovation in financial services.
Prudential / Remuneration
28 November – PRA Credit Union Assessment: The PRA published a letter it has sent to directors of credit unions, setting out the key findings from its 2025 assessment of these firms and the actions it expects firms to take.
26 November – MIFIDPRU Reporting Quality Review: FCA published its finding following a review of MIFIDPRU Reporting Quality.
26 November – FCA Reviews Data Quality in MIFIDPRU Prudential Reporting: The FCA published its findings on the quality of prudential regulatory reporting by MIFIDPRU investment firms, identifying good practice as well as areas for improvement including inconsistent data, incorrect firm classification and errors in reporting units.
25 November – IAIS Global Monitoring Exercise: The International Association of Insurance Supervisors (IAIS) published an updated version of its global monitoring exercise (GME) document for the period 2026-28, as well as a new set of ancillary risk indicators for the individual insurer monitoring (IIM) assessment methodology within the GME.
21 November – ComFrame and ICS Consultation: The IAIS published a consultation on developing its common framework for the supervision of internationally-active insurance groups (IAIGs) (ComFrame) to reflect the international capital standard (ICS). The related materials are available on the IAIS consultation webpage.
21 November – Joint Internal Model Authorisations ITS: Commission Implementing Regulation (EU) 2025/2338, amending Commission Implementing Regulation (EU) 2016/100 which contains implementing technical standards (ITS) on the joint decision process for internal models authorisation under the Capital Requirements Regulation (575/2013) (CRR), has publishedin the Official Journal of the European Union.
20 November – FSB Global Stability Priorities: The Financial Stability Board (FSB)published a letter from Andrew Bailey, FSB Chair, to G20 finance ministers and central bank governors ahead of their meeting on 22 and 23 November 2025.
18 November – EIOPA Macroprudential RTS: EIOPA published two final reports (report 1and report 2) containing draft RTS on new macroprudential tools that have been introduced under the Solvency II Directive (2009/138/EC), as amended by the Solvency II Amending Directive ((EU) 2025/2).
12 November – PRA Leverage Ratio Threshold: The PRA published a policy statement (PS22/25) on changes to the retail deposits threshold for application of the leverage ratio requirement.
7 November – CVA Risk Supervision Peer Review: The EBA published a peer review follow-up report analysing the effectiveness of the supervisory practices of competent authorities regarding their assessment of credit valuation adjustment (CVA) risk of the institutions under their supervision.
6 November – Market Risk Framework Consultation: The European Commission published a targeted consultation on the application of the market risk prudential framework.
3 November – Third-Country Branches Authorisation Guidelines: The EBA published a consultation paper on draft guidelines relating to the authorisation of third-country branches (TCBs) under the CRD IV Directive (2013/36/EU), as amended by the CRD VI Directive ((EU) 2024/1619).
Commission Payments / Motor Finance
5 November – Motor Finance Redress Scheme Update: The FCA published a statement providing an update on the progress and timing of its consultation (CP25/27) on a possible motor finance consumer redress scheme. The consultation deadline has been extended to 12 December 2025.
EU Financial Markets
28 November – MiCA Data Standards Statement: ESMA published a statement (ESMA75-1303207761-6284) on technical specifications for implementing a number of data standards and format requirements under the Regulation on markets in cryptoassets ((EU) 2023/1114) (MiCA).
24 November – AI Act Implications Factsheet: The EBA published a factsheet on the implications of the Artificial Intelligence Act ((EU) 2024/1689) (AI Act) for the EU banking and payments sector.
20 November – SFDR and PRIIPs Amendments Proposal: The European Commission adopted a proposed Regulation amending Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector and Regulation (EU) 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs Regulation), and repealing Commission Delegated Regulation (EU) 2022/1288 (SFDR RTS) (COM(2025) 841 final) (2025/0361 (COD)).
19 November – CRR Market Risk Call for Evidence: The European Commission published a call for evidence on a delegated act on the own funds requirements for market risk under the Capital Requirements Regulation (575/2013) (CRR).
14 November – Gibraltar Market Access Extension: The Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2025 (SI 2025/1182) have been published on legislation.gov.uk, together with an explanatory memorandum.
U.S. Matters – Private Funds
20 November – CFTC: The US Senate Committee on Agriculture, Nutrition and Forestry advanced President Trump’s nominee for CFTC Chairman, Michael Selig, in his confirmation process. The nomination will now move to the full US Senate for consideration.
17 November – SEC Exams: The SEC’s Division of Examinations released its 2026 exam priorities. The SEC’s Division of Examinations’ priorities included adherence to fiduciary standards of conduct, particularly in business lines serving retail investors and focused on issues involving emerging technologies like artificial intelligence.
17 November – Rule 14a-8:The SEC’s Division of Corporation Finance published a statement that, during the 2025-2026 proxy season, it will generally not respond substantively to no-action requests from companies intending to rely on any basis for exclusion of shareholder proposals under Rule 14a-8, other than requests to exclude a proposal under Rule 14a-8(i)(1), which is typically used by companies seeking to exclude “ESG” related proposals.
12 November – U.S. Government Shutdown Ends:President Trump signed a bill to fund the government, ending the longest U.S. government shutdown in history and reopening the U.S. federal government. The SEC has resumed its operations, but SEC staff are currently working through a backlog of items received during the shutdown (e.g., reviewing new filings, resuming ongoing exams, etc.). The bill only funded the government until January 30, 2026, meaning the parties will need to reach agreement on an additional extension soon in order to avoid another shutdown.
Nathan Schuur, Robert Sutton, Rachel Lowe, Sasha Burger, Sulaiman Malik, and Michael Singh contributed to this article
“Ceci N’est Pas Une Indexation …”, Or Is It? Wage Indexation About to Get Quite Surreal in Belgium
We sighed a collective sigh of relief when the Belgian government finally reached the budget agreement last week. The negotiations had been really difficult, which is not surprising considering the challenges the government faces: €8 billion had to be found somewhere to keep Belgium’s debt at an acceptable level (acceptable as in not driving us Belgians straight to bankruptcy).
The relief was short-lived however, as details of some of the budgetary measures were released. One measure that has Belgian employers scratching their heads is the government’s decision that automatic wage indexation will not be fully implemented on two occasions during this legislative period.
Belgium indexes wages to inflation as part of its wage setting framework, on the basis of indexation mechanisms included in collective labour agreements that vary from sector to sector. This has created challenges in recent years, as high inflation levels have led to higher wages and this has been affecting Belgium’s international competitiveness.
January is traditionally the time when there are wage increases in a lot of sectors due to the automatic link to the index. The most notable sector in this regard is Joint Committee 200, which represents the largest number of employees in the country. However, under the new budget agreement, on both 1 January 2026 and 1 January 2028, only wages up to €4,000 will be indexed (the salary above €4,000 will not be increased). Companies will have to transfer half the benefit they derive from this measure to the state. This €4,000 ceiling will only apply to the first 2% of the index in a year. It will affect employees with a gross salary above €4,000, which is about 40% of Belgian employees.
The measure will only apply twice, but it will have a snowball effect on employees’ wages for the rest of their career with the same employer. In addition to the immediate impact, the measure will also have an indirect effect on subsequent indexations because these will be calculated on a lower gross salary each time.
While the measure may sound challenging enough to those of us who still have nightmares about their maths exams, things are about to get even worse if we zoom in on the fine print:
Timing: In Belgium, the principle of cost-of-living indexation is not laid down in legislation, but in collective labour agreements that vary from sector to sector. The majority of 1.2 million employees should receive their annual indexation on 1 January. Half of them are employees in Joint Committee 200 who, according to the latest forecasts, can expect 2.22% indexation. If the law introducing this measure is not in place on 1 January 2026, many employees will still receive the normal, full indexation of their wages in January. What happens then?
Diversity: Each sector applies indexation at different times: some annually in January, others whenever the index is exceeded, or even monthly. How will the measure be implemented in those sectors where salaries are index-increased at irregular intervals throughout the year?
Salary: How will the €4,000 be calculated? Monthly base salary only, or will holiday pay and thirteenth month pay also be included in the calculation of this amount? What about overtime pay?
The coming weeks should bring more clarity on this topic – or at least we hope so. One thing is certain though – and that is that this measure is a classic “compromise à la belge” – some political parties had entered the budget negotiations demanding that indexation be completely frozen for the coming years, which was unacceptable to others. And so we ended up with this compromise, which is a logistical nightmare waiting to happen …
NJ Assembly Bill 5894: Earned Income Access Service Provider Licensing Requirements and Regulatory Framework
New Jersey is on the cusp of a regulatory reset for “on-demand” pay services. Assembly Bill 5894 (the Bill or A. 5894), recently introduced and referred to the Department of Banking and Insurance (DOBI), would create a licensed, employer-integrated category for earned-income access providers, while categorically treating direct-to-consumer (D2C) wage-advance models as loans under state and federal lending laws and regulations.
Under this framework, only providers that deliver advances through a formal arrangement with an employer (or the employer’s service provider), verify wages, and withhold repayments from payroll would qualify for a new earned income access service provider (EIASP) license. Non-integrated providers (e.g., app-based or worker-led platforms that do not contract with employers) would be deemed lenders, subject to usury statutes, licensing oversight, and Truth in Lending Act (TILA) disclosures.
For start-ups, middle-tier growth companies, and national players alike, this would be a significant shift. The regulatory line drawn here may force companies to choose between building employer partnerships or taking on the full obligations of being a licensed lender. With the law’s 120-day inoperative period following enactment, forward-looking firms may wish to act quickly to avoid regulatory scrutiny in the state.
What A. 5894 Requires and Why It Matters
Narrow “Safe Harbor” for Licensed EIASPs
A. 5894 defines EIASP as someone who “delivers earned but unpaid income … through integration with an employer.” This is not a loose collaboration. The statute mandates a contractual relationship or similar service provider-to-employer arrangement. Because of this, widely used D2C models (i.e., where money is advanced without any formal employer agreement) are explicitly excluded.
Loan Recharacterization for Noncompliant Models
If a provider does not satisfy the integration, verification, and withholding structure, A. 5894 says the service “shall be considered a loan.” Importantly, the bill treats “voluntary payments” or tips as interest in that scenario. This is not a soft fallback. It means that D2C providers are being pushed into the same regulatory space as lenders, with usury risk, TILA disclosure obligations, and possibly the requirement to obtain a license before engaging in this business under applicable New Jersey lending laws and regulations.
Consumer Protections
Licensed EIASPs must offer clear, consumer-friendly protections:
Consumers can cancel at any time without a fee.
Disclosures must be provided in writing, in plain language, at least 12-point font if on paper (or easily legible if digital).
Providers may not force users to open a bank account at a particular institution.
No reliance on credit scores for granting advances.
Providers cannot share non-public consumer data without consent and must comply with data privacy requirements.
ACH withdrawals for repayment must follow NACHA rules. If a debit fails, only up to two retries are allowed within 180 days.
Providers must cap fees and voluntary payments based on a DOBI-established “average cap” and refund any excess after annual reconciliation.
Licensing and Supervision
DOBI must license any person offering an earned-income-access service (EIAS).
The license lasts one year, is non-transferrable, and there are clear grounds for suspension or revocation (e.g., fraud, consumer complaints, failure to comply, etc.).
Applicants must submit robust documentation, including, but not limited to, personal information for control persons, financial statements, and server architecture.
DOBI intends to use the Nationwide Multistate Licensing System (NMLS) to administer the license.
DOBI will have examination authority, reserving for itself free access to books/records and on-site examinations, with licensees bearing the costs.
DOBI must act on applications within 120 days of a completed application being submitted.
Enforcement, Penalties, and Reporting
First violation: Up to $5,000. Subsequent violations: Up to $15,000.
Providers must file an annual report, which may include the total number of transactions, total proceeds disbursed, fees collected, number of non-repayments, any uncollected amounts, and more.
The DOBI commissioner may adopt interim rules immediately upon filing, effective for up to 360 days, even before a full regulatory rulemaking process.
If adopted, the Bill would take effect 120 days after enactment.
Strategic Implications and Insights for Providers
A. 5894 is not simply a licensing requirement. Rather, it would reshape the business models that earned wage access (EWA) companies can use in the state. The practical impact is straightforward:
If companies are not integrated with employers, New Jersey would treat them as lenders. This might be the most important outcome of A. 5894. D2C and other non-integrated models fall outside the Bill’s definition of an EIASP. In this case, the product is automatically treated as a loan, and any fees, tips, or payments companies receive are treated as interest. Companies currently operating such models should consider either building employer integrations or operating as a loan product with all the compliance obligations that come along with acting as a lender.
Employer-integrated programs would need real infrastructure, not surface-level partnerships. The statute requires a contractual relationship with the employer (or an employer’s service provider), wage verification, and repayment through paycheck withholding. That means providers would need actual payroll integrations, reliable pre-payroll wage verification processes, and the ability to withhold and reconcile repayments through payroll. This is not something some D2C or non-integrated providers can pivot to quickly. Such companies may wish to begin evaluating whether they have the technical and operational capacity to support true employer-integrated delivery.
Pricing models must be revisited, especially fees and tips. Even integrated providers would face fee caps set by DOBI, and they would need to conduct annual reconciliations to refund consumers any excess charges. D2C and other non-integrated providers, meanwhile, must assume any payment from a consumer counts as “interest,” which creates usury exposure, TILA APR calculations, and potential concerns about deceptive or unfair pricing structures. Teams should consider starting to model revised pricing options for both integrated and D2C variants.
Compliance may wish to scale up quickly because the 120 days is a short lead time. Once enacted, the Bill gives a 120-day window before becoming operative. In that time, providers must prepare a license application, update consumer disclosures, redesign repayment flows, revise marketing language, implement data privacy changes, and build internal controls to withstand DOBI examinations. This is a tight timeline, especially for companies that have never gone through a state licensing process before.
National operators should assume other states may follow New Jersey’s lead. New Jersey is joining a growing list of states evaluating EWA frameworks, and it is among the first to explicitly separate employer-integrated services from D2C or other non-integrated models. Because of that, companies operating nationwide might treat New Jersey as a signal, not an outlier. Other states may consider similar distinctions.
Providers may expect closer scrutiny of marketing, hardship programs, and repayment practices. DOBI would have examination authority and would receive detailed annual reports. Providers should expect attention on whether advances are truly non-recourse, whether marketing materials overstate “free” access, how often repayment failures occur, how often consumers rely on multiple advances per pay cycle, and how tips or optional fees are suggested or presented in-app. This is an area where examiners may engage early.
Key Takeaways
5894 codifies a license category for employer-integrated earned-income access. Only those meeting the integration and withholding model qualify.
Non-integrated wage-advance models would be treated as loans, triggering usury limits, TILA and Regulation Z obligations, and other federal and state lending laws and regulations.
Providers must offer cancellation, clear disclosures, privacy protections, capped fees, and cannot require the consumer to open an account at a specific bank.
Each license lasts for a one-year period at a time and requires background checks and NMLS integration.
Licensees must file annual reports and renew their license annually, as well as keep up with any rulemaking by the New Jersey regulator.
120-day inoperative period offers a narrow but actionable runway to prepare.
The law may force a choice: Build employer integrations or become a regulated lender. Under either license, the provider is subject to regulatory examinations.
For companies operating or scaling into New Jersey, the bill is more than another compliance task—it is a strategic inflection point. Providers that adapt early may be better positioned as the state finalizes fee caps, forms, and supervisory expectations, and as other jurisdictions consider similar structures. Now is the time to evaluate model design, licensing strategy, and employer-integration readiness to satisfy these requirements when the Bill is enacted.
Tax Considerations in Insolvency Cases
Tax issues exist in most insolvency, bankruptcy, receivership, and debt workout cases (‘Insolvency Cases’). The failure to address and plan for tax issues can adversely affect multiple persons in an Insolvency Case and can completely undermine the success of the debtor’s debt or equity restructure plan, the debtor’s bankruptcy or non-bankruptcy plan of reorganization, or the debtor’s bankruptcy or non-bankruptcy plan of liquidation.
Tax mistakes can result in (1) increased tax liability to the debtor entity (or individual), to creditors, to owners of pass-through income tax entities discussed below (‘PTEs’) and other persons in an Insolvency Case, (2) imposition of tax penalties and interest, (3) loss of tax refunds, (4) loss or recapture of tax credits, (5) loss or reduction of valuable current or future tax benefits, and/or (6) reduced recoveries for creditors. In certain cases, a responsible person including but not limited to a fiduciary such as a trustee, receiver, assignee, or a disbursing agent, can be personally liable for the failure to pay current or delinquent taxes in an Insolvency Case.
“Even a well‑crafted restructuring can fail if the tax implications aren’t fully mapped,” notes Robert Richards of Dentons.
Although this article will primarily discuss certain federal income tax issues, debtors, creditors, fiduciaries and other parties in an Insolvency Case should also address the potential application of other federal, state, local, and foreign tax issues, including but not limited to employment/payroll taxes, sales and use taxes, property taxes, excise taxes, withholding taxes, transfer taxes, gross receipt taxes and fees, value added taxes, and tariffs.
What Is a Pass‑Through Entity?
Pass‑through entities (PTEs) are structures where business profits and losses are taken into account on the owners’ personal tax returns rather than at the entity level. This includes partnerships, most limited liability companies (LLCs), and S‑corporations. The approach provides flexibility and avoids double taxation but creates complex implications when the business becomes insolvent. For instance, an S‑corporation’s election or an LLC’s partnership status might seem like paperwork at startup, but can determine who ultimately bears the tax burden when debts are canceled or assets are sold.
Partnerships vs. S‑Corporations
While partnerships and S‑corporations share the pass‑through concept, their tax treatment in distress differs:
A partnership can dissolve automatically if it drops to a single owner, creating a disregarded entity and new tax implications. Equity contributions are generally tax‑free under Section 721, but the liquidation or reclassification of a partnership interest can trigger gain recognition.
S‑corporations, on the other hand, can have a single owner without losing their pass‑through status, but they face strict eligibility rules. If an ineligible shareholder, like a non‑resident alien or another corporation, acquires stock, the entity immediately becomes a C‑corporation. That reclassification can create double taxation just when liquidity is tight.
Entity‑Level Transactions
Transactions that occur at the entity level, like asset sales, recapitalizations, or debt modifications, ripple through to individual owners. Because each owner has a different tax profile, these effects can be uneven. Some may recognize gains, while others generate losses or lose the ability to use existing deductions.
“A restructuring lawyer must understand owner-level tax implications when planning entity‑level moves,” advises John Harrington of Dentons.
Even small adjustments, such as converting debt to equity or changing capital structure, can change owner basis and alter future tax liability. Net operating loss limitations, capital loss carryovers, and passive‑activity rules all influence how much tax relief each owner can claim. Before any restructuring is finalized, advisors should model the impact at both the entity and owner levels.
Cancellation‑of‑Indebtedness Income
Perhaps the single most under-appreciated concept in restructuring is cancellation‑of‑indebtedness income, or CODI. When a lender forgives, reduces, or modifies a borrower’s debt, the forgiven amount can be treated as taxable income. For example, if a business owes $1 million and a creditor agrees to accept $600,000 in full payment, the remaining $400,000 may create CODI.
“The impact of CODI can catch business owners off guard, creating unexpected and potentially significant tax liabilities,” warns Stephanie Drew of RubinBrown.
The Internal Revenue Code provides several exceptions under Section 108, including the bankruptcy and insolvency exclusions. In a bankruptcy case, debt discharge may be excluded from income. If the taxpayer is insolvent but not in bankruptcy, CODI can also be excluded up to the amount of insolvency. However, these rules apply differently for corporations and pass‑through entities. For partnerships and LLCs taxed as partnerships, the determination of insolvency happens at the partner level; for S‑corporations, it occurs at the entity level.
This phantom income problem underscores the need to evaluate CODI early in the process, ideally before any settlement or debt modification is finalized. Even when CODI is excluded, the taxpayer must often reduce tax attributes, such as net operating losses, credits, or asset basis, under Section 1017. That means today’s relief can limit tomorrow’s deductions.
A Word of Caution for Receivers, Trustees, and Officers
When a receiver, trustee, or assignee takes control of a business, they inherit not only its assets but also its tax responsibilities. Failing to file required returns or remit trust‑fund taxes, such as payroll withholdings or collected sales tax, can lead to personal liability. Courts have held fiduciaries liable for negligence or willful disregard in handling tax matters.
“Even well‑intentioned receivers can find themselves in the IRS’s crosshairs if filings fall through the cracks,” notes Richards.
Managing Tax Risk in Restructuring
The most effective restructuring plans are the ones that balance tax preservation with legal strategy. Doing so ensures not only compliance but also the preservation of value for owners and creditors alike.
When faced with a complicated case like those mentioned here, remember to:
Engage tax counsel early: Model the tax consequences of any debt workout or restructuring before documents are signed.
Model CODI exposure: Determine who bears the tax cost, i.e., the entity or the owners. Evaluate eligibility for bankruptcy or insolvency exclusions.
Confirm entity classification: Ensure elections are current and that ownership changes haven’t terminated S‑status or partnership treatment.
Document insolvency: Keep a contemporaneous record of assets and liabilities to support the insolvency exclusion under Section 108.
Review basis and at‑risk rules: Owner basis affects loss deductibility; liability reductions may lower basis and create unexpected income.
Coordinate with state tax rules: Many states have distinct treatment for CODI and pass‑through taxation, including special PTE taxes.
Avoid timing mismatches: Ensure that income and deductions align across tax years and owners.
Communicate with stakeholders: Lenders, accountants, and counsel should share models and assumptions to prevent conflicting tax outcomes and minimize tax leakage.
This article was originally published on December 1, 2025, here.
Europe- UK FCA Looks to Accelerate Fund Tokenisation and Direct Dealing
The FCA has published Consultation Paper CP25/28 with a view to accelerating the adoption of tokenisation by UK authorised funds. The consultation also proposes changes to allow direct dealing models, which would facilitate tokenisation as well as improve the operating environment for UK authorised funds generally.
The consultation sets out a broader vision for the tokenisation of portfolio management. It describes not just the tokenisation of fund interests, but also the tokenisation of assets in a way that would make it viable for investors to hold assets directly without the complexity and expenses of an intermediate fund.
The more immediately relevant aspects of CP25/28 are the confirmation that UK authorised fund tokenisation is permissible under the current law, and the FCA’s proposed guidance on how distributed ledger technology (DLT) might be used, which includes:
Confirmation that the firm responsible for maintaining a DLT register must be able to make unilateral changes to the register, and suggesting different approaches to achieve this;
Clarifying that firms must be able to aggregate information on the DLT register in order to identify the total units held by an investor; and
Emphasizing the need to ensure compliance with anti-money laundering requirements even when investors may transfer tokenized units to third parties, and proposing approaches.
The proposed changes to introduce direct dealing for UK authorised funds are equally welcome. The current arrangement in the United Kingdom, where investors buy shares from and sell shares to the AFM, is not consistent with other major fund jurisdictions and creates operational complexity. Whilst direct to fund dealing is currently permissible, the FCA sees benefit in prescribing requirements around how this should work in practice, including requiring the maintenance of an Issues and Cancellations (IAC) Account.
Final rules and guidance are expected in the first half of 2026.
IRS Failures Stall Efforts to Curb Offshore Tax Evasion
The Internal Revenue Service (IRS) estimated the gross tax gap for the 2022 fiscal year to be an astounding $696 billion. The IRS defines the gross tax gap as the difference between tax owed and the amount paid on time. While already grave on its own, the severity is even worse in context as the 2022 tax gap is up $200 billion from the $496 billion amassed between the years 2014 and 2016.
A major driver of the rise is offshore tax evasion, one of the most difficult forms of noncompliance to detect. An IRS case study found that such evasion among top earners “went almost entirely undetected,” underscoring how limited the agency’s current enforcement tools have become.
A 2021 report by the Department of Treasury estimated that, between 2006 and 2013, $33 billion of underreported income pervaded each year’s tax gap projections when taking offshore assets into consideration. The Committee for a Responsible Federal Budget concluded the value nears $46 billion for 2019. With tax evasion only worsening, an effective solution has never been more pressing.
The Swiss Bank Program
In 2013, the Department of Justice and the IRS joined forces to create the Swiss Bank Program, launched as a direct result of the “actionable information brought to the IRS” through its Whistleblower Program. Leveraging the fear of detection triggered by the Whistleblower Program, the program provided “a path for Swiss banks to resolve potential criminal liabilities in the United States” by disclosing their illicit activities and paying the ensuing penalties.
The program yielded substantial success: 84 banks came forward and over $1.36 billion in penalties were issued. With the last resolution taking place in 2015, however, the program has since closed. While some initiatives to prosecute offshore tax evasion live on, dedicated efforts are lacking. Notably, the DOJ’s Offshore Compliance Initiative has also been placed in the archives.
The Swiss Bank Program must not only be reinstated but expanded to other parts of the world in order to tackle the reality of tax evasion’s ubiquity.
The Progressing and Regressing of the IRS Whistleblower Program
Founded in 1867, it wasn’t until 2006, though, that the IRS Whistleblower Program was put into full force. Almost immediately after its revitalization, submissions “skyrocketed,” Dennis Ventry recalls – a proliferation which has only continued.
These steady advancements, however, are accompanied by deficiencies. Debilitating the program are conspicuous delays in decisions and significant cut-backs in awards. In an article entitled “Lost Opportunities: The Underuse of Tax Whistleblowers,” authors Webber and Davis-Nozemack underscore that, as of 2015, the IRS faced a backlog of more than 22,000 cases and awarded only about 100 whistleblowers each year. The underwhelming number of awards compared to the number of reports appears to remain as, in a 2024 report, the IRS issued only 105 awards. Webber and Davis-Nozemack concluded that the IRS “does not seek all available information and assistance from whistleblowers.” The IRS even recognizes its shortcomings, addressing processing times and increasing its “focus on improving the IRS Whistleblower Program.”
Although the Whistleblower Program time and again proves crucial in exposing corruption, the IRS’ sweeping disregard for its whistleblowers could disincentive future informants from coming forward.
With the Swiss Bank Program no longer in effect, the success of the IRS Whistleblower Program garners even greater importance. The IRS program should resolve its shortcomings and use tactics similar to those of the Swiss Bank Program to target offshore tax evasion.
IRS Whistleblower Program Improvement Act
In light of the program’s defects, both Republican and Democratic Representatives and Senators came together to draft the IRS Whistleblower Program Improvement Act of 2023. The bill, guided by an appreciation of the “essential role” whistleblowers play in uprooting “tax cheating schemes,” details the major features of the program that need reform. Notably, the bill enforces the use of De Novo reviews, in which courts can take a “fresh look at the record” on appeals, prohibits reductions in awards due to budget sequestration, ensures anonymity for whistleblowers, and mandates that whistleblowers receive their award within one year of filing.
Conceived over two years ago, however, the bill remains unfulfilled. What’s more, a previous bill, the “IRS Whistleblower Improvement Act of 2021,” equally awaits action. Stalling, and even turning a blind eye to, the implementation of a solution to the inefficiencies of the Whistleblower Program and, in turn, the tax evasion crisis is wholly unjustified.
The absence of programs like the Swiss Bank Program and the mounting delays in the IRS Whistleblower Program have left authorities with few tools to uncover offshore tax evasion. Despite bipartisan bills aimed at repairing these gaps, Congress has not advanced IRS Whistleblower reforms. Advocates caution that, without meaningful action, the United States risks forfeiting billions more each year as offshore tax evasion continues with little deterrence.
Second Circuit Undercuts Plaintiffs’ Threats of Mass Arbitration Fees, Often Used In Asserting Privacy Claims
Earlier this fall, the United States Court of Appeals for the Second Circuit undermined a strategy often used by the plaintiff’s bar in privacy claims: the threat of mass arbitration fees. In a decision reversing the district court, the Second Circuit held that the petitioners cannot use the Federal Arbitration Act (FAA) to compel arbitration on the basis that a business failed to pay arbitration fees. This decision adds to a growing body of precedent that courts cannot compel a business to pay arbitration fees, which as discussed previously here on Privacy World, can total in the thousands or millions of dollars in the event of mass arbitration.
Case Background
The case arose out of large-scale layoffs that took place at Twitter (now X Corp.) after its acquisition by Elon Musk in 2022. Thousands of terminated employees who had signed arbitration agreements as part of their contracts brought arbitration actions against Twitter.
The employee argued that, under the applicable JAMS guidelines, a respondent business like Twitter must pay all arbitration fees other than the initial filing fees. Twitter argued that the arbitration fees should be split pro rata under the terms of the employment contracts. JAMS sided with the employees and refused to appoint an arbitrator until the fees were paid. The employees then filed a petition in the Southern District of New York under section 4 of the FAA seeking “an order compelling Twitter to pay all ongoing fees for their arbitrations.” The district court sided with the employees and ordered Twitter to pay all of the disputed fees. Twitter appealed.
Second Circuit Reverses Lower Court’s Ruling on Fees, Finding That a Contrary Holding Would Undermine Purpose, Goals of Arbitration
The Second Circuit reversed the district court’s ruling. The Court started by recognizing that the FAA only allows a court to compel arbitration where there has been a “failure, neglect, or refusal” to arbitrate. 9 U.S.C. § 4. The Court then cited a body of caselaw holding that procedural issues beyond arbitrability—including waiver, delay, and forum-specific defenses—”are presumptively not for the judge, but for an arbitrator, to decide.” Putting these threads together, the Court reasoned that the payment of fees is merely a procedural issue that must be decided and enforced by an arbitration panel and not a “failure, neglect, or refusal” to arbitrate. In reaching this result, the court cited the Third, Fifth, Ninth, and Eleventh Circuits which have reached similar conclusions.
Supporting its reasoning, the Second Circuit stated that the employees’ position would undermine “the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation.” Without the FAA, the employees’ remedies for non-payment is “to [ask] JAMS to use the tools available to it to resolve the procedural [issue] as it sees fit – even if that ultimately means terminating the arbitrations.”
This case gives businesses in the Second Circuit an extra line of defense when facing large fees from mass arbitration—and offers persuasive authority for defendants litigating in other forums.
Even so, companies should stay vigilant and carefully review the language in existing arbitration agreements to make sure their potential exposure to mass arbitrations in the first place are minimized. This is particularly so given the recent abuse of mass arbitration as a procedural mechanism by the plaintiff’s bar to bring frivolous or unsupported claims, particularly in the area of consumer privacy.
IRS Guidance on Claiming the New Tax Deduction for Tips and Overtime Pay
Takeaways
For tax years 2025 -2028, the One Big Beautiful Bill Act (OBBBA) allows employees to take an above-the-line tax deduction on qualified overtime pay and qualified tips.
On November 21, 2025, the Internal Revenue Service (IRS) released IRS Notice 2025-69, which explains how individual taxpayers can calculate and claim these deductions for the tax year 2025, even if their employer does not provide any separate documentation identifying which portions of overtime or tip income may qualify for the deduction.
Related Links
IRS and Treasury Guidance
IR-2025-82 (IRS announces no changes to individual information returns or withholding tables for 2025 under the One, Big, Beautiful Bill Act)
IR-2025-92 (Treasury, IRS issues guidance listing occupations where workers customarily and regularly receive tips under the One, Big, Beautiful Bill)
IR-2025-110 (Treasury, IRS provide penalty relief for tax year 2025 for information reporting on tips and overtime under the One, Big, Beautiful Bill)
IRS Notice 2025-62 (Relief from Certain Penalties Related to Information Reporting Required in Connection with No Tax on Tips and Overtime)
IR-2025-114 (Treasury, IRS provide guidance for individuals who received tips or overtime during tax year 2025)
IRS Notice 2025-69 (Guidance for Individual Taxpayers who received Qualified Tips or Qualified Overtime Compensation in 2025)
Jackson Lewis Resources:
Federal OBBBA Round-Up: What Employers Need to Know Now – Jackson Lewis
OBBBA’s Tips + Overtime Tax Break: Reclassification Considerations, Reporting Requirements, Industry Impact + More – Jackson Lewis
IRS 2025 Penalty Relief: A Break for Employers under OBBBA’s Tax Reporting for Tips and Overtime
Background
Employer reporting obligations: The OBBBA requires employers to report on Form W-2 both
the portion of an employee’s pay that is qualified overtime compensation, and
the portion constituting qualified tips along with the employee’s qualifying tip-earning occupation.
However, under IRS Notice 2025-62, the IRS announced that it generally will not be enforcing these separate reporting obligations for the 2025 tax year. Formal W-2 reporting changes will begin in 2026.
Article
IRS Notice 2025-69 provides examples and calculation methods for determining deductible amounts of qualified tips and qualified overtime when the employer does not provide a separate accounting. Furthermore, the Notice grants transition relief from the restriction limiting the tip deductions to only those tips received in a “specified service trade or business.”
Even though separate reporting is optional in 2025 and the Form W-2 has not yet been revised for the new tax reporting obligations, the IRS still encourages employers to provide this information voluntarily, such as by posting on an online portal, providing additional written statements, or using Box 14 of Form W-2 to show qualified overtime pay. Employers that do not provide such additional information should anticipate employee inquiries during the 2025 tax filing season and consider proactive communication and support.
OCC Confirms Bank Authority to Hold Crypto-Assets as Principal for Paying Network Fees
On November 18, the OCC issued Interpretive Letter 1186 confirming that a national bank may, as an activity incidental to the business of banking, pay crypto-asset network fees to support otherwise permissible banking activities. The letter also states that a bank may hold, as principal, limited amounts of crypto-assets on its balance sheet when needed to cover these fees. In addition, the OCC confirmed that banks may hold small quantities of crypto-assets as principal for purposes of testing crypto-asset platforms.
The OCC framed these activities as a modern extension of established bank powers, emphasizing that limited principal holdings can support operational efficiency and customer transactions when tied to foreseeable network-fee needs. The agency noted that these activities must remain de minimis, risk-controlled, and integrated into existing compliance and oversight programs.
Putting It Into Practice: Federal regulators continue to clarify the scope of permissible digital-asset activities (previously discussed here and here). Banks considering distributed-ledger integrations should reassess network-fee dependencies, confirm that any crypto-asset holdings remain de minimis and purpose-driven, and update internal controls and governance frameworks accordingly. Financial institutions should continue monitoring federal and state supervisory developments as digital-asset requirements evolve.
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Title XVII- From Clean Energy Innovation to Energy Dominance – The Evolution of DOE Financing
On October 15, 2025, AEP Transmission LLC, a wholly owned subsidiary of American Electric Power Company (AEP), closed a $1.6 billion term-loan financing guaranteed by the US Department of Energy (DOE), marking the first DOE loan guaranteed financing to close since President Trump’s inauguration in January. AEP operates the nation’s largest electric transmission system, spanning more than 40,000 miles and serving over five million customers. The company sought DOE financing to rebuild and reconductor approximately 5,000 miles of transmission lines across five states – Indiana, Michigan, Ohio, Oklahoma and West Virginia – modernizing grid infrastructure and improving reliability for millions of consumers.
The credit facility was structured as a low-interest term loan advanced by the Federal Financing Bank and fully guaranteed by the DOE under its Energy Infrastructure Reinvestment authority. The federal financing backed by DOE’s guarantee will significantly reduce borrowing costs and allow AEP to accelerate capital deployment at a time when private financing for large-scale transmission upgrades may be constrained.
The AEP transaction may very well serve as an early model for subsequent electric power infrastructure financings under the DOE’s newly branded Energy Infrastructure Reinvestment and Energy Dominance Financing Programs.
A Program Built to Bridge Innovation and Capital
The DOE’s loan guarantee program was created under Title XVII of the Energy Policy Act of 2005 (then called “Incentives for Innovative Technologies”) to help finance innovative energy technologies that, at time of financing, wouldn’t meet market norms for “commercial technology.” By providing federal guarantees for loans provided by the Federal Financing Bank, or potentially private lenders, the program aimed to close the financing gap between innovative technology and market-tested (i.e., bankable) deployment.
Over the years, the DOE’s Loan Program Office (LPO), created to administer the loan guarantee program, financed projects that redefined the US energy landscape: utility-scale solar farms, advanced vehicle manufacturing, and more recently, next-generation carbon-capture facilities among them. Through these investments, DOE has been perhaps the principal actor in the US helping to move new-generation clean energy technologies from the margin to the mainstream.
Following the inauguration of President Biden, the loan guarantee program received a boost from both the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), which among other things increased the funds authorized for the program. The IRA also created a new category of projects eligible for funding under Section 1706 of Title XVII named the Energy Infrastructure Reinvestment Financing program (EIRF). In its guidance, the Biden era LPO described the new funding as aiming to provide a “bridge to bankability,” especially for new projects that contribute to the reduction of greenhouse gas pollution that may have trouble arranging financing from commercial lenders.
A New Mandate: Financing Energy Dominance
The new Trump Administration has significantly shifted US energy policy, rejecting the concept of climate change, and emphasizing instead fossil fuels as the means to achieving energy security and dominance.
The new Congress reflected President Trump’s pivot in passing the One Big Beautiful Bill Act (OBBBA). The OBBBA revised Section 1706, rebranding it as the “Energy Dominance Program” and changing its emphasis from promoting clean energy generation to facilitating projects using fossil resources, as well as mining projects, for the sake of national security. The OBBBA rescinded the unobligated funds inked by the IRA for Section 1706 but at the same time appropriated $1 billion to DOE to “carry out activities” under section 1706 (of which not more than 3 percent is to be used for administrative expenses) and authorized $250 billion in new loan guarantees for the revised Energy Dominance program through September 30, 2028.
Consistent with the policy shift to encompass fossil resources, Section 50403 of the OBBBA removed a Section 1706 eligibility criterion that a project must “avoid, reduce, utilize, or sequester air pollutants or anthropogenic emissions.” Additionally, program eligibility is expanded to include projects that will “increase capacity or output” or “support or enable the provision of known or forecastable electric supply at time intervals necessary to maintain or enhance grid reliability or other system adequacy needs.” The OBBBA also revised the definition of “Energy Infrastructure” to become a facility (and associated equipment), used to enable “production, processing, transportation, transmission, refining and generation needed for energy and critical minerals.”
On October 28, DOE published an Interim Final Rule which amends the DOE’s loan guarantee regulations to implement the Energy Dominance Financing provisions of the OBBBA. Among other provisions it will add a requirement that an electricity utility infrastructure project applying for funding from the 1706 program demonstrate that the financial benefits from a DOE guarantee will be shared with its customers, or the associated community served by it. Significantly, no similar requirement is made in the Interim Final Rule with respect to other types of Energy Infrastructure covered by the Energy Dominance program. While it is “effective” as of October 28, the period for public comment on the Interim Final Rule expires on December 29, 2025. The text of he rule and information on how to provide comments can be found here.
The above notwithstanding, Title XVII survived mostly unchanged, except for the revised Section 1706. As an important example, the OBBB did not change Section 1706 (a)(1) under which the AEP financing was closed, and which contemplates guarantees for projects to “retool, repower, repurpose or replace energy infrastructure that has ceased operations.” Moreover, the OBBBA did not amend Section 1703 of the Energy Policy Act, which authorizes DOE loan guarantees for projects that “avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued”, including, among others, Renewable Energy Systems, carbon capture projects and those projects that increase the domestically produced supply of critical minerals. However, the OBBBA in practice defunded the innovative energy program (among other programs) for future projects.
The AEP Transmission Financing: A Case Study in Transition
Bracewell’s representation of AEP in this transaction provides some unique insights into how DOE’s pre-existing loan guarantee framework will evolve to operate effectively within the new energy-dominance policy environment. AEP, like several utilities in the DOE queue, applied for funding and executed a preliminary term sheet before President Trump’s second inauguration in January.
The AEP deal advanced under challenging conditions – not only the change in administration after term sheet signing, but also the longest ever federal government shutdown that halted some agency operations. Despite these challenges, the transaction closed smoothly in October, aided by a pragmatic and flexible approach implemented by both the AEP and DOE teams to navigate the DOE’s existing procedural complexities, while balancing the policies and interests of DOE in following governmental norms with the commercial interests of AEP in achieving a resilient and administratively manageable financing structure under its 30-year tenure.
The willingness of both parties to overcome challenges within existing statutory and policy constraints was essential. The transaction helped establish a working model for balancing regulatory compliance with project-level realities. It provides a roadmap for future DOE-guaranteed financings, not only for the small group of forthcoming utility-oriented financings already in the queue, but also for new projects under the OBBBA’s expanded eligibility scope.
Looking Forward
Under the energy-dominance framework and its expanded reach, the DOE loan guarantee program is poised to continue to be a strategic financing platform encompassing the full spectrum of US energy infrastructure, with an emphasis on innovation, reliability, security and independence, and agnostic on type of fuel or feedstock. To prove this point, in late October DOE closed a second loan, a $1.5 billion loan to Wabash Valley Resources to finance the restart and repurposing of a coal to ammonia fertilizer facility in Indiana that was idled since 2016. The revamped facility will produce 500,000 mtpy of anhydrous ammonia from coal from a nearby mine and pet coke as feedstock. And, on November 18, Constellation Energy announced a $1 billion loan from DOE to restart Three Mile Island nuclear facility.
For utilities and other project investors, the lesson is clear: US federal credit support remains one of the most powerful tools for accelerating capital into a changing environment for the energy infrastructure that underpins US economic strength.