Navigating the Changing Landscape of Corporate Transparency Act Compliance
Both the U.S. Department of the Treasury and FinCEN, a bureau within the Treasury Department, have issued statements, which, taken together, indicate a significant reduction in the enforcement of the Corporate Transparency Act (CTA) beneficial ownership information (BOI) reporting requirements against U.S. citizens and domestic reporting companies. Specifically, the Treasury Department has indicated its intent to narrow, via forthcoming rule changes, the scope of the BOI reporting requirements to foreign reporting companies only and to halt any penalties or fines against U.S. citizens and domestic reporting companies following implementation of these rule changes.
The Treasury Department has yet to issue the proposed rulemaking reflecting these changes to the scope of BOI reporting requirements, and it will be important to see the proposed rulemaking to better understand how the Treasury Department and FinCEN plan to effect these changes. Items to look out for in any proposed rulemaking include:
Whether U.S. citizens who are beneficial owners of foreign reporting companies will need to comply with BOI reporting efforts of foreign reporting companies.
Whether domestic reporting companies with foreign beneficial owners will be subject to any BOI reporting requirements.
How the language regarding ending enforcement of penalties and fines against U.S. citizens and domestic reporting companies for non-compliance is worded (i.e., eliminating altogether enforcement against all U.S. citizens and domestic reporting companies or a general, discretionary pause by FinCEN).
In addition, the validity or legality of any proposed rulemaking regarding the narrowed scope of the CTA may be challenged in the courts. And, as noted in our previous alert, there are still a number of court cases pending, and Congress is also considering bills that would affect the CTA. Accordingly, this is unlikely to be the last update in the CTA enforcement saga.
The U.S. Department of the Treasury issued the following release regarding enforcement of the CTA:
Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies
The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.
“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”
In addition, FinCEN issued the following release regarding enforcement of the CTA:
FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines
WASHINGTON––Today, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines. No fines or penalties will be issued, and no enforcement actions will be taken, until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed. This announcement continues Treasury’s commitment to reducing regulatory burden on businesses, as well as prioritizing under the Corporate Transparency Act reporting of BOI for those entities that pose the most significant law enforcement and national security risks.
No later than March 21, 2025, FinCEN intends to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.
FinCEN also intends to solicit public comment on potential revisions to existing BOI reporting requirements. FinCEN will consider those comments as part of a notice of proposed rulemaking anticipated to be issued later this year to minimize burden on small businesses while ensuring that BOI is highly useful to important national security, intelligence, and law enforcement activities, as well to determine what, if any, modifications to the deadlines referenced here should be considered.
Unfair Competition Defense- Episode 16: An Increased Interest in Credit Card Surcharges [Podcast]
In this episode, Greenberg Traurig shareholder Ed Chansky joins Greg Nylen to explore the evolving landscape of credit card surcharges in the U.S. From state-level quirks and disclosure requirements to recent regulatory developments, this episode delves into the legal complexities surrounding merchants’ ability to pass credit card processing fees onto consumers.
Greenberg Traurig’s Unfair Competition Defense Podcast focuses on consumer protection statutes at the state and federal levels. Claims under these laws frequently are brought as proposed consumer class action litigation across many different industries. Each episode addresses key principles under these laws, new developments and, most importantly, defense strategies.
US Treasury Announces That the Corporate Transparency Act Will Not Be Enforced Against Domestic Companies, Their Beneficial Owners or US Citizens
As noted in our previous Corporate Advisory, the Financial Crimes Enforcement Network (FinCEN) announced on February 27, 2025, that it will not take enforcement action against a Reporting Company that fails to file or update a Beneficial Ownership Information Report (BOIR) as required by the Corporate Transparency Act (CTA), pending the release of a new “interim final rule.”
On March 2, 2025, the US Department of the Treasury (Treasury) issued a press release expanding on FinCEN’s announcement. The Treasury release states that even “after the forthcoming rule changes take effect[,]” the Treasury will not enforce fines and penalties under the CTA against domestic Reporting Companies, beneficial owners of domestic Reporting Companies or US citizens.
The release also outlines Treasury’s intention to propose additional rulemaking that would limit CTA reporting obligations solely to foreign Reporting Companies. Under the CTA, a foreign Reporting Company is defined as any entity that is formed under the laws of a foreign country and registered to do business in the United States by filing a document with a secretary of state or a similar office under the laws of a State or Indian tribe. As a result, the proposed rulemaking would significantly narrow the CTA’s application.
Given the Treasury’s announcement, non-exempt domestic Reporting Companies and their beneficial owners may wish to consider ceasing CTA compliance efforts until there are further developments in this space. Non-exempt foreign Reporting Companies should continue preparing CTA filings in anticipation of forthcoming guidance regarding extended filing deadlines.
Alexander Lovrine contributed to this article.
New Leader At The California Department Of Financial Protection & Innovation
Last month, Governor Gavin Newsom appointed Khalil “KC” Mohseni, as Commissioner of the California Department of Financial Protection and Innovation. Commissioner Mohseni is not an entirely new to the DFPI. He served as Chief Deputy Director of the DFPI since 2023. He has previously served as the Chief Operating Officer at the State Controller’s Office and the Deputy Director of Administration at the California Department of Housing and Community Development. Commissioner Mohseni earned a Juris Doctor degree from the University of California, Davis School of Law, and a Bachelor of Arts degree in Political Science from the University of California, Irvine.
Although Commissioner Mohseni assumed office immediately, he will lose his position if the California Senate fails or refused to confirm his appointment within 365 days after the day on which he first began performing the duties of the office. Cal. Gov’t Code § 1774(c).
How much will Commissioner Mohseni make in his new position? $224,868 per year.
SEC Expands Confidential Review Process for Draft Registration Statements
Go-To Guide:
SEC expands confidential review process for draft registration statements, now available for all Securities Act and Exchange Act registrations.
New policy removes “initial filing” limitation, allowing both private and public companies to submit draft registration statements confidentially.
The policy clarifies accommodation for de-SPAC transactions.
Underwriter details may now be omitted from initial draft submissions, but must be included in later drafts and public filings.
On March 3, 2025, the Securities and Exchange Commission’s Division of Corporation Finance issued new guidance expanding the availability of confidential (nonpublic) review of draft registration statements (DRS).
Background
A DRS is a confidential draft of a registration statement submitted to the SEC for review before a public filing is made, granting issuers flexibility to avoid alerting the public market of the planned offering and sharing sensitive information until a more advanced stage of the offering process, if at all.
The confidential submission process was originally established only for foreign private issuers but was introduced in 2012 under the Jumpstart Our Business Startups Act (JOBS Act) for emerging growth companies (EGCs), allowing them to submit draft registration statements for nonpublic SEC review under Section 6(e) of the Securities Act of 1933, as amended (Securities Act), in order to encourage smaller companies to enter the public markets and streamline the initial public offering (IPO) process.
In 2017, the SEC extended this benefit to all companies—whether or not they qualified as EGCs—when filing:
an IPO registration statement under the Securities Act;
an initial registration statement under Section 12(b) of the Securities Exchange Act of 1934, as amended (Exchange Act), when seeking to list securities on a national securities exchange for the first time; or
an initial submission of a registration statement under the Securities Act during the twelve-month period following the effective date of the IPO registration statement or an issuer’s Exchange Act Section 12(b) registration statement.
The March 2025 guidance extends the benefits of non-public review to all issuers by removing the “initial filing” limitation. Now, both private and public companies can submit a DRS for confidential SEC review in connection with any Securities Act or Exchange Act registration—regardless of whether they are first-time registrants. Affected companies may now forestall market scrutiny of contemplated capital markets transactions triggered by a public SEC filing and, in some cases, during the pendency of the SEC review process, which may offer an advantage for planning and marketing the transaction.
Key Enhancements
1.
Expanded Eligibility for Nonpublic Review
a.
IPOs and Initial Exchange Act Registrations
The confidential review process now applies to initial Exchange Act registrations under both Section 12(b) (exchange listings) and Section 12(g) (required registration for companies exceeding $10 million in assets with a class of equity securities held by either 2,000 shareholders or 500 non-accredited investors), broadening access to the confidential review process.
Previously, companies filing on Forms 10, 20-F, or 40-F to go public outside the traditional IPO registration statement were not permitted to request non-public review.
b.
Subsequent Offerings and Registrations
Previously, the SEC would only accept subsequent DRSs for nonpublic review if they were submitted within the 12-month period following the effective date of either (i) the issuer’s IPO registration statement under the Securities Act, or (ii) the issuer’s initial Exchange Act registration statement under Section 12(b).
Under the SEC’s new policy, issuers may now submit DRSs for confidential review in connection with any Securities Act offering or any registration of a class of securities under Section 12(b) or Section 12(g) of the Exchange Act, regardless of how much time has passed since the issuer became public.
2.
Accommodation for de-SPAC Transactions
Under rules adopted in July 2024, target companies in de-SPAC transactions (where a SPAC, which is a public company, merges with a private company) must be co-registrants when the SPAC files the registration statement.
The SEC has now clarified that these registration statements—where the SPAC is the surviving entity—are eligible for confidential submission if the target company would itself qualify for non-public review under existing policies.
3.
Foreign Private Issuers (FPIs)
FPIs may rely on this expanded non-public review process. Alternatively, if the FPI qualifies as an EGC, it can follow the EGC-specific DRS procedures. FPIs that do not qualify as EGCs may also continue to rely on the separate confidential submission policy the SEC outlined in its May 30, 2012, guidance for FPIs.
4.
Omission of Underwriter Information
Issuers are now permitted to omit underwriter names from initial draft submissions, which is consistent with a practice that has developed when an issuer has not yet selected an underwriter. However, underwriter details must still be included in subsequent confidential draft submissions and in the publicly filed registration statement.
Submitting a Draft Registration Statement
The SEC expects a substantially complete submission—meaning the draft should be as close to final as possible. However, the SEC recognizes that some financial information may not be ready (for example, if a fiscal period has not yet ended), and commented that if the issuer reasonably expects that the missing information will not be required at the time of public filing (e.g., due to permitted reporting accommodations), the SEC will proceed with its review despite the omissions, an accommodation previously limited to EGCs.
Issuers can also continue to request relief under Rule 3-13 of Regulation S-X, which allows them to omit or modify certain financial statement requirements if the omitted information is immaterial and providing it would be unduly burdensome. The SEC will assess these requests based on the issuer’s particular facts and circumstances.
Public Availability and Timing
DRS submissions remain confidential until the issuer publicly files its registration statement. At that point, previously submitted DRS submissions, along with the SEC’s comment letters and the issuer’s responses, become publicly available via EDGAR.
For IPOs and initial Exchange Act registrations, the initial public filing must be made at least 15 days before any road show or, in the absence of a road show, at least 15 days prior to the registration statement’s requested effective date. This 15-day requirement is not new and mirrors the timeline previously applied to EGCs.
For subsequent public offerings and Exchange Act registrations (regardless of how much time has passed since the company became public), the initial public filing must be made at least two business days prior registration statement’s requested effective date. However, unlike the non-confidential registration process for IPOs and initial Exchange Act registrations, the SEC indicated that an issuer responding to staff comments on a DRS will need to do so on a public filing and not in a revised DRS.
Additionally, submissions of Exchange Act registration statements on Form 10, 20-F, or 40-F will need to be publicly filed with the SEC to ensure that the required 30-day or 60-day period runs before effectiveness, in accordance with existing rules.
Coordinating with the SEC
Issuers should consider communicating directly with SEC staff regarding their anticipated transaction timelines—particularly for filings tied to specific pricing windows or deal milestones. The SEC will consider reasonable requests for expedited review for both confidential and public filings.
The SEC staff indicated that for subsequent public offerings and Exchange Act registrations it may consider reasonable requests to expedite the two-business day period that the registration statement has to be public.
Takeaways
This expanded confidential submission process provides issuers with greater flexibility, particularly companies that were previously excluded from confidential review (such as seasoned issuers).
In particular, for seasoned issuers that are unable to access shelf-registrations (due to, for example, baby-shelf limitations), the new guidelines allow issuers seeking to raise capital in a registered offering to file a DRS on Form S-1 or F-1 confidentially, and if there is a no review, to quickly pivot to pricing the deal when market conditions are ripe.
By allowing more issuers to engage in a nonpublic review process with the SEC, the new policy may facilitate more capital formation while preserving key investor protections.
David Huberman also contributed to this article.
NYDFS Annual Compliance Submissions Due April 15, 2025 and New Compliance Requirements Effective on May 1, 2025
As we previously reported, in 2023 the New York State Department of Financial Services (NYDFS) amended its cybersecurity regulation, 23 NYCRR 500 (or Part 500). As of November 1, 2024, Class A Companies and Covered Entities were required to comply with numerous Part 500 compliance obligations outlined here.
April 15, 2025 Compliance Certification Deadline
Covered Entities have been required to submit annual compliance with Part 500 since the regulation’s adoption; however, since 2024, Covered Entities now have the option to submit either a Certification of Material Compliance (certifying they materially complied with the regulation requirements that applied to them in the prior year) or an Acknowledgement of Noncompliance (identifying all sections of the regulation with which they have not complied and providing a remediation timeline).
The deadline for Covered Entities to submit annual compliance notifications for the 2024 calendar year is April 15, 2025. Submissions can be submitted through the NYDFS Portal. Covered Entities that qualify for full exemptions from Part 500 do not have to submit annual compliance notifications. For more information on the April 15 compliance deadline, guidance on which form to file, and step-by-step instructions, see NYDFS’s Submit a Compliance Filing section in the Cybersecurity Resource Center or contact your Katten attorney.
May 1, 2025 Compliance Obligations
On May 1, 2025, Covered Entities are required to meet additional requirements under Part 500, including:
Access Privileges and Management
Implement enhanced requirements regarding limiting user access privileges, including privileged account access.
Review access privileges and remove or disable accounts and access that are no longer necessary.
Disable or securely configure all protocols that permit remote control of devices.
Promptly terminate access following personnel departures.
Implement a reasonable written password policy to the extent passwords are used.
Covered Entities and Class A Companies must also address the below items:
Vulnerability Management: conduct automated scans of information systems, and a manual review of systems not covered by such scans” to discover, analyze, and report vulnerabilities at a frequency determined by their risk assessment and promptly after any material system changes.
Mailicious Code: Implement controls to protect against malicious code.
Class A Companies must further update their information security programs to include:
Monitoring and Training: Implement (1) endpoint detection and response solution to monitor anomalous activity and (2) centralized logging and security event alert solution. CISOs can approve reasonably equivalent or more secure compensating controls, but approval must be in writing.
Ping-Pong Match Appears Over: US Companies Apparently Definitively Relieved of Compliance Obligations Under the Corporate Transparency Act
The Corporate Transparency Act (the CTA) requires a range of entities, primarily smaller, unregulated companies, to file reports with FinCen, and arm of the Treasury Department, identifying the entities’ beneficial owners, and the persons who formed the entity. The purpose of the CTA was to aid in the detection of terrorism, money-laundering, and tax evasion.
As previously reported, the federal courts in Texas preliminarily enjoined the enforcement of the CTA. When a court recently lifted the last such injunction, FinCen set a new deadline for compliance, but on March 2nd FinCen announced that it would not enforce the CTA pending its issuance of new rules that would make the CTA applicable only to “foreign reporting companies,” as outlined in our client alert.
While we don’t expect any of this to change materially, we advise that you continue to watch this space as the status of the CTA has been quite volatile. We also recommend that you take into account that the CTA is technically effective, just not being enforced. Thus, pending the anticipated adoption of new rules, failure to comply is technically a violation for the purposes, for example, of reps and warranties in transaction documents.
ESG Update: Texas Federal Court Cites Loper Bright in Upholding Biden-Era ESG 401(k) Investing Rule
A Biden-era US Department of Labor (DOL) Rule permitting consideration of environmental, social, and governance (ESG) factors when choosing investments as a “tiebreaker” was recently upheld by Texas federal Judge Matthew Kacsmaryk. This decision applied the US Supreme Court’s 2024 ruling in Loper Bright v. Raimondo, revisiting three topics lost in 2025’s Department of Government Efficiency-era drama.
With a February 14 decision, Judge Kacsmaryk upheld the Biden-era Rule allowing retirement plan fiduciaries to consider ESG factors when choosing investments as a “tiebreaker.” In other words, when all other considerations for competing investments are equal. The court held that the Rule was in accordance with a strict reading of the Employment Retirement Income Security Act of 1974 (ERISA). The decision is available here.
Below, we break down the court’s decision and answer four questions on the minds of regulatory decisionmakers.
But first, some background. Until President Trump took office in January, ESG litigation, Loper Bright, and indeed, Judge Kacsmaryk were among our most chronicled topics:
Past content referencing ESG litigation is here, here, and here.
Here and here are discussions of the impact of the Supreme Court’s decision in Loper Bright v. Raimondo.
We last discussed Judge Kacsmaryk here, here, and here.
What Is in the Rule?
The Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights Rule (Investment Duties Rule) was adopted in late 2022 and became effective on January 30, 2023. The DOL intended this rule to permit consideration of “climate change and other environmental, social, and governance factors” by plan investors “as they make decisions about how to best grow and protect” retirement savings, clarifying the duties of fiduciaries to ERISA employee benefits plans. The Biden Administration’s Rule neutralized a Trump-era Rule forbidding retirement plan fiduciaries from considering nonpecuniary factors — generally considered as factors that do not have a material effect on financial risk, financial return, or both — when making investment decisions.
In Texas federal court, 26 states and several other parties challenged the DOL’s Investment Duties Rule. After the case was filed, defendants moved to transfer the case to the US District Court for the District of Columbia or a district court where a plaintiff resided. The plaintiffs in turn amended their complaint to add the State of Oklahoma and Alex L. Fairly, an Amarillo, Texas, resident, as plaintiffs. After this amendment, a Texas federal court determined that the venue was proper.
What Is in the Decision?
The Valentine’s Day decision in Utah v. Micone, which began as Utah v. Walsh then Utah v. Su, came after a 2024 Fifth Circuit remand for reconsideration after the Supreme Court’s decision in Loper Bright, which overruled precedent giving rise to “Chevron deference.” Chevron deference used to require a court to defer to the relevant agency’s interpretation of an ambiguous statute so long as the agency interpretation of the statute was reasonable. In Loper Bright, the Supreme Court overruled Chevron and held that courts must “exercise their independent judgment” when interpreting federal statutes and may not defer to agency interpretations simply because they determine that a statute is ambiguous.
Earlier, the initial Northern District of Texas ruling upheld the Biden-era Rule relying, in part, on Chevron deference, holding that the DOL’s interpretation of fiduciary duty provisions in ERISA was reasonable. On remand, the Fifth Circuit instructed the District Court to reconsider whether the Rule violated ERISA under a post-Chevron, Loper Bright analysis.
To some’s surprise (particularly considering another Northern District of Texas ruling issued days earlier, read more here), Judge Kacsmaryk again upheld the Rule as being in accordance with ERISA following remand. The opinion rejected Republican-state (and other) plaintiffs’ claim that the Investment Duties Rule’s nonpecuniary factor or tiebreaker provision violates ERISA’s text. The opinion explained that ERISA’s fiduciary provisions require that “a fiduciary must always discharge his duties in the interest of the beneficiary alone and only for the purpose of gaining financial benefit.” However, the provisions do not explicitly limit what a fiduciary may consider while discharging his or her duty.
Does Loper Bright Indicate the Executive Branch Always Loses?
The court stated that, under a strict textual reading, “ERISA’s text does not invalidate” tiebreaker provisions. In conclusion, Judge Kacsmaryk warns fiduciaries against letting impermissible considerations taint their decisions but further notes it is not the province of the court to decide the “wisest” outcome, ultimately holding that the Investment Duties Rule “does not permit a fiduciary to act for other interests than the beneficiaries’ or for other purposes than the beneficiaries’ financial benefit. For that reason, under the Loper Bright standard, it is not contrary to law.”
Despite the court’s cautioning and explicit reference to the replaced Trump-era Rule as potentially wise guidance, the decision remains significant. While narrow, the decision acts as a considerable example of a court approving the use of ESG principals and stands as a potential case study for the limited impact Loper Bright may have on agency deference decisions.
What Happens Next?
It is no secret that the Trump Administration does not support ESG investment considerations. Republicans have consistently stated that embracing ESG considerations ignores fiduciary duties, and both Florida and Texas have enacted laws prohibiting ESG considerations and banning money managers that engage in climate-action causes.
With the Biden-era Rule now affirmed at the District Court level, we see three paths forward for the Trump Administration: (1) stand back while plaintiffs potentially appeal the decision to the Fifth Circuit, allowing another bite at the apple for overturning the Rule without executive action; (2) begin a DOL formal notice-and-comment rulemaking process to issue a new Rule, revoking and replacing the Investment Duties Rule promulgated in 2022; or (3) work through a less formal process, allowing agencies like the DOL’s Employee Benefits Security Administration to use their sub-regulatory power to interpret law and make enforcement recommendations.
While the regulations do not carry legal weight in the same way a formal rule would, they can impact the actions and decisions those regulated take. There is certainly precedent for such an approach, provided by the 2022 DOL compliance assistance release, which warned against 401(k) investments into cryptocurrency and was upheld after a federal court challenge.
Whichever route is taken, we think it is unlikely the Trump Administration will allow the Rule to remain on the books into perpetuity.
How to Report Anti-Money Laundering Violations and Earn a Whistleblower Award
The Department and Justice (DOJ) and Financial Crime Enforcement Network (FinCEN) actively take enforcement actions against individuals and companies that violate anti-money laundering (AML) laws and Bank Secrecy Act (BSA) regulations. To strengthen these efforts, Congress included a robust whistleblower reward program in the Anti-Money Laundering Act (AMLA) of 2020. The AMLA Whistleblower Reward Program requires the Department of the Treasury (Treasury) to provide monetary awards to whistleblowers who voluntarily provide original information that leads to successful enforcement actions for AML violations.
The AMLA whistleblower law is posed to be a game changer in AML enforcement, enhancing national security by combating illicit financing, including money laundering through banks and cryptocurrency companies. Under the AMLA Whistleblower Reward Program, whistleblowers may receive awards of between 10% and 30% of the monetary sanctions collected in successful enforcement actions. Given the potential for significant fines in AML enforcement actions, whistleblowers have a strong incentive to report AML violations. Additionally, whistleblowers can submit tips anonymously if represented by an attorney.
This article outlines recent enforcement actions for AML violations and explains how whistleblowers can report AML violations and qualify for whistleblower awards.
Recent Enforcement Actions for AML Violations
TD Bank Agrees to Pay $1.8 Billion for Violations of the BSA and Money Laundering
On October 10, 2024, the DOJ and FinCEN announced that TD Bank agreed to pay over $1.8 billion in penalties to resolve investigations into BSA and money laundering violations. This penalty marks the largest-ever fine under the BSA and the largest penalty against a depository institution in U.S. Treasury and FinCEN history.
The DOJ and FinCEN’s investigations revealed that TD Bank failed to maintain an adequate AML program for nearly a decade, allowing criminals to launder hundreds of millions of dollars through its systems. TD Bank neglected to update its compliance measures, prioritizing cost-cutting and customer convenience over legal obligations. Between 2018 and 2024, nearly 92% of TD Bank’s transaction volume went unmonitored, totaling about $18.3 trillion. Consequently, three major money laundering networks moved more than $670 million through TD Bank accounts from 2019 to 2023, with employees even accepting bribes to facilitate illegal transactions.
OKX Crypto Exchange Pays More Than $504 Million for AML Violations
On February 24, 2025, OKX, a major cryptocurrency exchange, pleaded guilty to operating an unlicensed money-transmitting business and agreed to pay over $504 million in penalties.
In the DOJ’s press release announcing the enforcement action, the Acting U.S. Attorney said:
For over seven years, OKX knowingly violated anti-money laundering laws and avoided implementing required policies to prevent criminals from abusing our financial system. As a result, OKX was used to facilitate over five billion dollars’ worth of suspicious transactions and criminal proceeds. Today’s guilty plea and penalties emphasize that there will be consequences for financial institutions that avail themselves of U.S. markets but violate the law by allowing criminal activity to continue.
The DOJ’s investigation found that since 2017, OKX had:
Facilitated over $1 trillion in transactions involving U.S. customers.
Enabled more than $5 billion in suspicious and illicit financial activity.
Failed to implement AML laws, including Know-Your-Customer (KYC) measures.
Allowed customers to bypass verification through VPNs and false information.
Emphasizing the consequences for financial institutions that disregard U.S. regulations, the FBI Assistant Director stated:
Blatant disregard for the rule of law will not be tolerated, and the FBI is committed to working with our partners across government to ensure that corporations that engage in this type of conduct are held accountable for their actions.
How to Report Anti-Money Laundering Violations and Earn a Whistleblower Award
Under the AMLA, the Treasury shall pay an award to whistleblowers who voluntarily provide original information to
their employer,
the Secretary of the Treasury, or
the Attorney General,
and their information leads to a successful enforcement action with monetary sanctions exceeding $1 million. Whistleblower awards range from 10% to 30% of the monetary sanctions collected in the enforcement actions.
Prior to submitting a tip, whistleblowers should consult with an experienced whistleblower attorney and review the AMLA whistleblower law to, among other things, understand eligibility rules and consider the factors that can significantly increase or decrease the size of a future whistleblower award.
SEC Staff Issues New Guidance on Shareholder Proposals With SLB 14M
On February 12, 2025, the Staff of the SEC Division of Corporation Finance released Staff Legal Bulletin No. 14M (SLB 14M), which addresses various aspects of the Rule 14a-8 shareholder proposal process. Going forward, public companies navigating proxy season will have more flexibility in excluding certain shareholder proposals, especially those related to environmental and social issues. Most notably, SLB 14M rescinds Staff Legal Bulletin No. 14L (SLB 14L), issued in 2021, which imposed a higher burden on public companies seeking to exclude shareholder proposals. SLB 14M also reinstates guidance that was previously rescinded by SLB 14L.
What SLB 14M Means for Companies
The new guidance highlights a significant shift in the SEC Staff’s approach to shareholder proposals under the Trump Administration. SLB 14M reasserts a more company-friendly approach and eliminates guidance that, in practice, led to an increase in shareholder proposals and fewer requests for no-action relief.
Looking back, under the now-rescinded SLB 14L, the SEC Staff imposed a series of restrictions on public companies attempting to disqualify shareholder proposals from going to a vote. The 2021 guidance tightened some exemptions and allowed the Staff to go beyond the enumerated exclusions to consider a proposal’s “broad societal impact” when deciding whether to grant an exemption request. Following its issuance, shareholder proposals, particularly those on environmental and social issues, surged, while the success rate for no-action letters declined.
Now, SLB 14M is expected to lower the threshold for excluding shareholder proposals, particularly under Rules 14a-8(i)(5) and (i)(7). Companies will now have more leeway in requesting no-action relief from the SEC Staff as the guidance for omitting certain proposals has broadened.
This new guidance comes at a time when many companies have already submitted no-action requests for 2025 annual meetings in which they set forth an argument under SLB 14L’s prior framework. However, companies that submitted no-action requests prior to the publication of SLB 14M do not need to resubmit. If a company wishes to raise new legal arguments in light of SLB 14M, it may still file a supplemental set of arguments. The SEC Staff will also consider the publication of SLB 14M to be “good cause” for companies making a late no-action request, as long as the legal arguments in the request relate to the new SEC Staff guidance.
A Brief Summary of the New Staff Guidance
As explained in more detail below, SLB 14M:
Reinstates a company-specific approach to evaluating whether the subject matter of a shareholder proposal transcends ordinary business. The Staff will assess whether a specific policy issue raised in a proposal is significant to a particular company, rather than evaluating whether the proposal addresses issues with broad societal impact or universal significance. This approach allows a company to more easily exclude broad social policy shareholder proposals if the proponent does not establish that the issues are significant in relation to the company.
Broadens the application of the micromanagement exemption by expanding the circumstances under which a proposal would be considered to micromanage a company. Therefore, companies will now have more flexibility in excluding certain proposals that require the company to adopt a specific method for implementing a complex policy.
Refocuses the Staff’s “economic relevance” analysis. As a result, shareholder proposals that raise social and ethical issues must tie those matters to a significant effect on the company’s business, and the mere possibility of reputational or economic harm alone will not suffice. This change affords companies a greater ability to exclude proposals related to social and ethical matters unless they are significantly related to the company.
Advises that companies submitting no-action requests under Rules 14a-8(i)(5) and 14a-8(i)(7) are not required to include an analysis from the board of directors regarding the significance of the policy issue raised in a shareholder proposal. However, a company may still provide a board analysis if it believes it would be beneficial.
Provides additional guidance stating:
companies may exclude graphics or images from shareholder proposals if they make the proposal materially false or misleading;
companies no longer have to send a second deficiency letter to specifically identify proof of ownership defects that were already addressed in an initial deficiency letter;
the Staff’s views on the use of email confirmation receipts for submission of proposals, delivery of deficiency notices and responses; and
companies should adopt a plain meaning approach, rather than being overly technical, when interpreting the language of the proof of ownership letters.
In Light of SLB 14M, Companies Should Consider the Following
Companies should consider revisiting the shareholder proposals they previously determined were not excludable under the old guidance and re-evaluate them in light of the new guidance.
Companies should not feel the need to resubmit any no-action requests in light of SLB 14M unless they want to address new legal arguments. SLB 14M confirms that the Staff will apply SLB 14M when reviewing pending no-action requests.
For companies that have not yet submitted no-action requests, even if the deadline has passed, consideration should be given to whether exclusionary arguments can be made in light of SLB 14M guidance, especially for proposals related to environmental or social issues.
Companies should consider whether to re-engage with certain shareholder proposals. In light of SLB 14M, shareholder proponents may be more willing to engage and agree on a basis to withdraw their proposals, since the new guidance is more favorable to companies.
A Detailed Summary of SLB 14M
A Refresher on the Ordinary Business Exemption
Exchange Act Rule 14a-8(i)(7), often referred to as the ordinary business exemption, allows a company to exclude a shareholder proposal that “deals with a matter relating to the company’s ordinary business operations.” The policy underlying the ordinary business exemption rests on two key considerations. One is that it allows a company to exclude a shareholder proposal from a company’s proxy materials if the proposal deals with a matter that is “so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight.” However, shareholder proposals that pertain to ordinary business matters, but focus on a significant policy issue, cannot be excluded under this first consideration if they transcend the company’s day-to-day business matters. The other consideration is the micromanagement prong, which provides that a shareholder proposal should not seek to “micromanage” the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment. SLB 14M does not upend this approach, but rather changes the Staff’s analysis of these considerations as they relate to no-action requests.
The Ordinary Business Exemption Under SLB 14M: A Return of the Company-Specific Approach and Broadened Micromanagement Exclusions
As explained above, the SEC Staff rests the ordinary business exemption on two considerations: the proposal’s “subject matter” and whether the shareholder proposal “micromanages” the company.
Under the “subject matter” consideration, SLB 14M rescinds and replaces the SLB 14L guidance with a company-specific approach.
Again, under the ordinary business exemption, shareholder proposals that deal with a company’s ordinary business matters can be excluded. But, shareholder proposals that focus on “sufficiently significant” policy issues that transcend ordinary business typically do not fall under the exemption. Traditionally, the SEC would consider the nexus between the policy issue and the company when determining whether the issue transcends ordinary business.
SLB 14L had the effect of making it more difficult for companies to exclude certain social policy proposals by not requiring them to demonstrate their particular significance to the company’s business. Instead, the SEC Staff focused on whether the social policy proposal raised issues with broad societal impact, such that they transcended the ordinary business of the company, regardless of whether there was a direct connection between the policy issue and the particular company seeking to exclude the proposal.
The new SLB 14M guidance returns to a company-specific approach, where SEC Staff will evaluate significance based on the individual company, rather than focusing on whether a proposal raises an issue with broad societal impact. Essentially, companies will likely not have to include as many shareholder proposals in their proxy materials that raise issues of broad societal importance, such as environmental or ethical issues, unless there is a specific nexus between the issue and the company. The change broadens companies’ ability to exclude a wider range of shareholder proposals that address policy issues of societal significance only.
Under the “micromanagement” consideration, SLB 14M reinstates past guidance that is stricter on proposals that “micromanage” the company.
SLB 14M reinstates parts of several other SLBs, Staff Legal Bulletin Nos. 14I, 14J and 14K, that were overridden by SLB 14L. Under SLB 14L, the micromanagement exclusion had been interpreted more narrowly. SLB 14L took the approach that proposals seeking detail or seeking to promote timeframes or methods would not necessarily constitute micromanagement, so long as the proposals afforded discretion to management as to how to achieve such goals. For example, proposals that requested companies to adopt timeframes and targets for addressing climate change were not excludable if they allowed management the discretion to achieve these targets.
The reinstated guidance, under SLB 14M, takes a much stricter approach in favor of companies and will evaluate whether the shareholder proposal “involves intricate detail, or seeks to impose specific timeframes or methods for implementing complex policies,” such as a proposal that seeks an intricately detailed study or report. Therefore, a proposal may be excludable if it prescribes specific actions without providing the company enough flexibility or discretion to address the issue. SLB 14M also confirms that the micromanagement standard can apply to proposals addressing executive compensation or corporate governance topics.
Revitalizing the Economic Relevance Exemption Under Rule 14a-8(i)(5)
SLB 14M now requires a shareholder proposal that raises social and ethical issues to demonstrate its significance to the company, otherwise, it may be excluded. The analysis is now dependent on the specific circumstances of the company to which the proposal is submitted.
Economic relevance, under Rule 14a-8(i)(5), is another basis for the exclusion of shareholder proposals. It permits a company to exclude a proposal that “relates to operations which account for less than 5 percent of the company’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business.” Historically, the SEC Staff and courts have interpreted this rule as not allowing for the exclusion of a proposal related to social and ethical issues, regardless of its economic relevance to the company, and as a result, this rule has been infrequently used.
SLB 14M redirects the focus on Rule 14a-8(i)(5) and the shareholder proposal’s significance to the company’s business. Under SLB 14M, the analysis is now viewed as “dependent upon the particular circumstances of the company to which the proposal is submitted.” The SEC Staff explains that a matter significant to one company may not be significant to another. Thus, if a proposal’s significance to a company is not apparent on its face, the proposal may be excludable unless the proponent demonstrates that it is “otherwise significantly related to the company’s business.” However, the SEC Staff generally views substantive governance matters as significantly related to most companies.
Additionally, the mere possibility of reputational or economic harm alone will not demonstrate that a proposal is “otherwise significantly related to the company’s business.” In evaluating whether a proposal is “otherwise significantly related to the company’s business,” the SEC Staff will now consider the proposal in light of the “total mix” of information about the company.
This exclusion is also viewed as more favorable to companies because it allows shareholder proposals on social and ethical issues related to operating, which account for less than 5 percent of total assets, net earnings and gross sales, to be more easily excluded, unless the proponent can demonstrate its particular significance to the company’s business.
No Requirement for Board Analysis Simplifies No-Action Request Preparation
SLB 14M also confirms that the SEC Staff will not expect a company’s no-action request to include a discussion of the board’s analysis of whether a particular policy issue is significant to the company when arguing for exclusion of a shareholder proposal under Rule 14a-8(i)(5) and/or Rule 14a-8(i)(7).
The prior SLBs had encouraged companies seeking to exclude proposals under Rule 14a-8(i)(5) or Rule 14a-8(i)(7) to include a discussion in their no-action requests setting forth an analysis by the company’s board of directors as to whether or not the particular issue raised by a shareholder proposal was significant to the company’s business.
Under SLB 14M, preparing a no-action request will be simpler for companies, as the SEC Staff will no longer expect a no-action request to include a discussion reflecting the board’s analysis. While companies are still permitted to submit such an analysis, it is no longer required.
Additional Topics Addressed by SLB 14M
SLB 14M also provides further guidance on several other shareholder proposal topics, including the following:
Shareholder proposals may contain graphics or images, and their exclusion may be appropriate if: (1) images make the proposal materially false or misleading; (2) the images used in the proposal would make it inherently vague or indefinite; (3) images would impugn the character, integrity or personal reputation of someone without a factual basis; (4) the images are irrelevant to a consideration of the proposal’s subject matter; or (5) the total number of words in a proposal (plus the words in any graphics) exceed 500 words.
Companies are not required to send a second deficiency notice if the company previously sent an adequate deficiency notice and believes the proponent’s response to the initial deficiency notice contains a defect.
Proponents and companies should request acknowledgment from the recipient to confirm the receipt of emails for submitting shareholder proposals, sending deficiency notices and responding to deficiency notices. The SEC Staff encourages both parties to provide such confirmation replies.
Companies should avoid an overly technical interpretation of proof of ownership letters and instead adopt a plain meaning approach to understanding the language of the letters. However, proponents must still provide clear and adequate evidence of their eligibility to submit a shareholder proposal.
Michigan Federal Court Holds CTA Reporting Rule Unconstitutional, Enjoins Enforcement Against Named Plaintiffs
On March 3, 2025, a Michigan federal district court in Small Business Association of Michigan v Yellen, Case No. 1:24-cv-413 (W.D Mich 2025) (SBAM), held that the CTA’s reporting rule is unconstitutional under the Fourth Amendment (unreasonable search) and entered a judgment permanently enjoining the enforcement of the CTA reporting requirements against the named plaintiffs and their members only. The district court did not find it necessary to, and did not, rule on the plaintiffs’ separate Article 1 and Fifth Amendment constitutional claims, instead leaving them “to another day, if necessary.”
The SBAM plaintiffs include (a) the Small Business Association of Michigan and its more than 30,000 members, (b) the Chaldean American Chamber of Commerce and its more than 3,000 members, (c) two individual reporting company plaintiffs, and (d) two individual beneficial owner plaintiffs owning membership interests in reporting companies.
We are not aware as of the date of this Alert whether the defendants have, or intend to, appeal the SBAM judgment to the Sixth Circuit Court of Appeals.
Treasury May Be Shifting CTA Reporting Rule Away from Domestic and Toward Foreign Reporting Companies
On March 2, 2025, the United States Department of Treasury announced that it will not enforce fines or penalties based on the existing deadlines for reporting beneficial ownership information under the CTA beneficial ownership reporting rule.[1] This follows earlier guidance issued by FinCEN.[2]
Treasury further announced that it will be engaging in proposed rule-making to limit the CTA reporting rule to foreign reporting companies, noting that even after the new rules are in effect, it will not enforce any fines or penalties on any U.S. citizens, domestic reporting companies or their beneficial owners. No other details of the proposed rule-making or its timing were announced, including whether any changes might be proposed as to the definitions of domestic[3] or foreign[4] reporting companies under the reporting rule or any exemptions.
Treasury noted that this action is “in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.”
[1] See Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies | U.S. Department of the Treasury.
[2] On February 18, 2025, the Financial Crimes Enforcement Network of the Department of Treasury (FinCEN) issued a notice extending beneficial ownership reporting deadlines for most reporting companies to March 21, 2025. See FinCEN Notice, FIN-2025-CTA1, FinCEN Extends Beneficial Ownership Information Reporting Deadline by 30 Days; Announces Intention to Revise Reporting Rule (February 18, 2025) and an updated FinCEN Alert (February 19, 2025) Beneficial Ownership Information Reporting | FinCEN.gov. Subsequently, on February 27, 2025, FinCEN announced that it was suspending enforcement of the CTA reporting rule, including any fines or penalties, pending its further extension of reporting deadlines in an interim reporting rule to be issued not later than December 21, 2025. See FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines | FinCEN.gov.
[3] A “domestic reporting company” is currently defined under the CTA and the reporting rule as any entity that is formed by filing a document with a secretary of state or similar office under the laws of a State or Indian tribe (including, for example, most LPs, LLPs and statutory, business and other trusts if the laws of a state or tribal jurisdiction require such filing to create the entity), subject to exemptions from the definition included in the CTA and the reporting rule. See 31 U.S.C. § 5336(a)(11)(A)(i) and 31 CFR 1010.380(c)1(i)).
[4] A “foreign reporting company” is currently defined under the CTA and the reporting rule as any entity that is formed under the laws of a foreign country and registered to do business in the United States by the filing of a document with a secretary of state or similar office under the laws of a State or Indian tribe subject to exemptions from the definition included in the CTA and the reporting rule. See 31 U.S.C. § 5336(a)(11)(A)(ii) and 31 CFR 1010.380(c)(1)(ii).