Captive Power Projects: A Summary of the Western Africa Regulatory Environment
Recent increases in construction and financing costs are directly affecting the development of energy projects across Africa. Captive power projects (CPPs) offer the possibility of mitigating this challenging landscape for both the developers themselves and those funding them. For those unfamiliar with the concept, CPPs are a type of power plant which provide a localised source of power to the end consumer. They are typically used in power-intensive industries for which a continual and consistent energy supply is paramount. In West Africa, CPPs are of particular interest to mining companies looking for reliable sources of energy. However, the successful development of CPPs in the region will be largely determined by the level of liberalisation in the country’s energy sector, and the right of non-state entities to develop, construct, operate and maintain these projects.
The energy sector across Western Africa has traditionally been restricted to a public monopoly closely associated with the sovereignty of a country, designed to protect the national utility company. When this type of regulatory framework prohibits or inhibits the production, transport and supply of electricity, two structures are usually considered:
where the development, construction, operation, and maintenance of a CPP serves the company’s own needs and this is permitted by the state’s regulation, the project falls under the self-production model (SPM) and the company can, as is often the case, subcontract with energy companies to ensure the supply of energy; or
where the relevant regulation permits development, construction, operation, and maintenance of a CPP for the purpose of supplying electricity to a separate private company, the project falls under the independent producer model (IPM) and can supply energy via off-grid infrastructure.
Bracewell has prepared a report summarising the applicable regulations for the two models outlined above which covers the following 11 countries: Benin, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Democratic Republic of Congo, Guinea (Conakry), Mali, Mauritania, Sénégal and Togo.
This report provides a high-level overview of existing and proposed regulation based on available sources. It is not a substitute for bespoke legal advice from lawyers in the jurisdictions concerned. Due to the nature of the region, the relatively recent development of the CPP landscape, and the inherent uncertainty in the interpretation of these regulations, we recommend a thorough technical and legal analysis of projects which should consider specific location and bankability issues prior to committing to a CPP project.
As the report illustrates, the energy sector of several countries — such as Burkina Faso, Mali and Togo — remains largely monopolised by the national electricity company, even where the company’s monopoly has been officially terminated by new legislation. In other counties — such as the Republic of Guinea — the legislation remains under development, so while the current framework gives limited guidance, there are no prohibitions laid down either. In contrast, many regions in West Africa have renovated the structure and essence of their energy legislation, demonstrating an intentional and welcome movement away from state-governed monopolies. Countries including Mauritania, Benin, Cameroon and Côte d’Ivoire have all implemented (to varying degrees) a legal framework or, as often called, electricity or energy codes, that allow freedom of energy production. These enable the development of CPPs via either of the two models outlined above. However, it is worth noting that the transmission (rather than production) of the electricity is often still state-regulated. In some countries, such as Chad, while the transmission is under state monopoly, the distribution and construction of CPPs can be carried out by private actors.
In several regions, the relevant authorisations, concessions and/or licences for off-grid production in relation to IPMs are dependent on power purchase agreements being entered into with entities that constitute “Eligible Clients,” a term usually defined in the relevant energy code which shows a maintained, albeit reduced, level of control on the part of the state. The authorisation of SPMs is largely dependent on the installed capacity of the CPP, where sale of surplus is authorised, but the amount is capped by reference to a restricted percentage of the project’s installed capacity. The identity of the buyer is also often restricted, as above, to an entity constituting an “Eligible Client” or, in some jurisdictions, such as Togo, the grid operator. The various authorisations and concessions are granted by the relevant ministerial committees responsible for the state’s energy sector.
For the sake of comprehensiveness, references in the report are occasionally made to regimes with installed capacity thresholds that are likely too low to support the development of a CPP project.
While the report has outlined some of the trends we are seeing as regulations develop, the details for each state vary, with some requiring further investigation with the relevant administration. It is therefore important to ensure that each CPP proposal is tailored and considered in line with the relevant state’s particular legislation and restrictions.
White House Policy Aims to Reshape Foreign Investment in the United States
What Happened
On February 21, 2025, President Trump issued a National Security Memorandum on America First Investment Policy (the Foreign Investment Memo) outlining the administration’s foreign direct investment policy, including initiatives for a regulatory “fast track” process, additional scrutiny for Chinese investors, and key changes to reviews by the Committee on Foreign Investment in the United States (CFIUS), including CFIUS’s use of national security agreements.
The Bottom Line
The Foreign Investment Memo represents an explicit shift in how the United States regulates foreign direct investment. Going forward, partners and allies are likely to see some regulatory burdens ease while investors from China and other countries identified as adverse will see significantly expanded restrictions. Federal agencies have been directed to establish new rules that will specifically target Chinese investment in the United States and new or expanded restrictions on US outbound investment in China in sensitive or emerging technologies. The memo also suggests that the government may reconsider Chinese companies’ access to US capital markets.
The Foreign Investment Memo calls for expanding CFIUS jurisdiction over real estate and greenfield projects. At the same time, the Foreign Investment Memo directs the US Environmental Protection Agency (EPA) and others to reduce barriers to foreign investment from countries that are not identified as foreign adversaries and specifically directs CFIUS to limit the use of national security agreements, which has grown in recent years. Companies and other investors from outside of the United States should carefully consider these changes, which will impact foreign direct investment in the United States going forward.
The Full Story
Upon taking office on January 20, 2025, President Trump issued a Memorandum on America First Trade Policy calling for, among other things, “a robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation’s industrial and technological advantages, [and] defends our economic and national security.” The issuance of the February 21, 2025, Foreign Investment Memo builds on the January 20 statement by aiming to both promote investment from US allies while at the same time preserving and expanding regulatory controls on investment in the United States from, and investment by US persons in, “foreign adversary” countries—defined in the Foreign Investment Memo as the People’s Republic of China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region; the Republic of Cuba; the Islamic Republic of Iran; the Democratic People’s Republic of Korea; the Russian Federation; and the regime of Venezuelan politician Nicolás Maduro.
Inbound Investment Promotion for Non-Adverse Countries
The Foreign Investment Memo aims to promote investment from countries that are US allies or other friendly countries in the ways described below, with a number of open questions as to how the policy will manifest for foreign investors.
The Foreign Investment Memo directs federal agencies to implement a “fast track” investment process consisting of expedited national security reviews in some cases and expedited environmental reviews for large investments.
Who is eligible for the “fast track” for national security reviews?
This “fast track” process will apply for “specified allies and partner sources” in US businesses involved with US advanced technology and other important areas. The Foreign Investment Memo does not detail which “specified allies and partner sources” will be eligible for this “fast track” process. The existing CFIUS rules exempt investors from Australia, Canada, New Zealand and the United Kingdom from certain mandatory filing requirements (but maintain CFIUS jurisdiction to review controlling investments from these investors on a non-mandatory basis). Whether these countries will be the starting point for a list of “specified allies and partner sources” or whether government policy will be something else entirely will ultimately be answered by federal agencies’ implementation of these principles.
What will the “fast track” mean for national security reviews?
The current CFIUS rules already provide a less onerous filing option for foreign investors known as a “declaration.” This process has been available for filers since 2020 under the CFIUS rules promulgated under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). In practice, declarations are used for less complex reviews with limited national security implications. At present, the decision of whether to make a filing with CFIUS as a short-form declaration or long-form notice depends on the foreign investor’s own assessment of whether obtaining CFIUS clearance is likely through the declaration process. The Foreign Investment Memo directs the US Secretary of the Treasury (Treasury), in consultation with the US Secretary of State, the US Secretary of Defense, the US Secretary of Commerce, the United States Trade Representative, and the heads of other executive departments and agencies as deemed appropriate by Treasury and in coordination with other members of CFIUS, to take actions to implement the “fast track,” including the promulgation of new rules and regulations. Accordingly, significant implementation of the “fast track” will likely be detailed in forthcoming rulemakings by the US Department of the Treasury. In the meantime, the Foreign Investment Memo is likely to inform CFIUS reviews within the existing regulatory framework. Additionally, the Foreign Investment Memo directs that the “fast track” will be conditioned on requirements that the specified foreign investors avoid partnering with foreign adversaries.
What about the “fast track” for environmental reviews?
The Foreign Investment Memo directs the Administrator of the US Environmental Protection Agency to carry out expedited environmental reviews for any investment over $1 billion in the United States. Although included in the Foreign Investment Memo, environmental reviews are not traditionally a part of foreign direct investment regulation in the United States and the inclusion of this element in the Foreign Investment Memo appears to be a part of the administration’s broader policy to reduce environmental regulatory and permitting requirements.
The Foreign Investment Memo calls for an end to certain CFIUS practices with respect to mitigation agreements.
CFIUS has the authority to negotiate, enter into or impose any agreement, condition or order with any party to mitigate national security risk arising from a covered transaction or covered real estate transaction. In recent years, CFIUS has increasingly relied on these “mitigation agreements” to address perceived national security risks with open-ended obligations for investors. As of 2023 year-end, CFIUS was engaged in the ongoing monitoring 246 mitigation agreements and had begun to assess civil monetary penalties on investors for alleged violations of mitigation agreement conditions. CFIUS practitioners have anecdotally observed that the increasing use of mitigation agreements may in some cases dissuade foreign investors from making non-mandatory filings with CFIUS. Our prior coverage tracking the increasing reliance on mitigation agreements through CFIUS’s annual reports to Congress is available here.
The Foreign Investment Memo acknowledges that the increasing use of mitigation agreements creates uncertainty and administrative burdens for investors and directs that mitigation agreements going forward should consist of concrete actions that companies can complete within a specific time, rather than perpetual compliance obligations.
Inbound Investment Restrictions for China
The Foreign Investment Memo reaffirms and expands on existing US foreign direct investment policy and regulation with respect to investors from “foreign adversaries.” Given that the “foreign adversary” countries identified in the Foreign Investment Memo (other than China) are generally subject to significant economic sanctions that in practice render investment in the United States illegal or impractical, the most significant changes under the Foreign Investment Memo concern China as described below.
Expanding CFIUS jurisdiction over real estate and greenfield investments.
The Foreign Investment Memo announces that the new administration will take steps to protect US farmland and real estate near sensitive facilities such as military, ports and shipping terminals, as well as expand CFIUS authority over “greenfield” investments in order to restrict foreign adversary access to US sensitive technologies, including artificial intelligence and “emerging and foundational” technologies. This announcement aligns with recent actions to expand the scope of real estate under CFIUS jurisdiction, including a rule making late last year that expanded the list of sensitive facilities triggering CFIUS jurisdiction, and efforts by the US Congress and several US states to limit Chinese investments in US agricultural real estate. Notably, the Foreign Investment Memo calls for Treasury to expand CFIUS authority regarding “greenfield” investments to restrict access to US sensitive technologies indicates that the current exception for “greenfield” investments may be limited by a future rulemaking to provide CFIUS with additional authority over investments in potential new businesses that involve US sensitive or emerging and foundational technologies.
Expanding restrictions on investments in US critical infrastructure.
The Foreign Investment Memo provides as a general policy that the United States should not allow China to “take over” US critical infrastructure and states that “for investment in US businesses involved in critical technologies, critical infrastructure, personal data, and other sensitive areas (referred to under the current CFIUS rules as ‘TID US businesses’), restrictions on foreign investors’ access to United States assets will ease in proportion to their verifiable distance and independence from the predatory investment and technology-acquisition practices of [China] and other foreign adversaries or threat actors.” The Foreign Investment Memo specifies that the administration will use CFIUS to restrict China-affiliated persons from investing in US technology, critical infrastructure, healthcare, agriculture, energy, raw materials or other strategic sectors.
In practice, the explicit targeting of China with respect to foreign direct investment does not represent a deviation from current CFIUS practice. CFIUS has historically aggressively scrutinized Chinese investment in US critical infrastructure and technology. Under current CFIUS rules, mandatory filings are required for certain investments in TID US businesses involved in “emerging and foundational” technologies as identified by the US Department of Commerce. In implementing the Foreign Investment Memo, it is likely that Treasury will promulgate rules to expand mandatory filing requirements and potentially promulgates the first CFIUS rules that call out foreign investors from specific countries, crystallizing existing practice into regulations for Chinese investors.
Expanding barriers for Chinese investors.
As noted above, CFIUS has increasingly relied on mitigation agreements in recent years to allow foreign investment to move forward while limiting national security concerns. In practice, investors from China came to expect mitigation agreements in many circumstances where CFIUS was willing to consider mitigation and accepted such conditions as a palatable alternative to having the transaction blocked. Although anecdotal reports indicate that CFIUS has been less willing to rely on mitigation agreements with Chinese investors in recent years, the Foreign Investment Memo’s policy of ending mitigation agreements with ongoing monitoring compliance obligations may remove this option altogether if risks cannot be mitigated by concrete actions within set times.
Outbound Investment Restrictions
The Foreign Investment Memo also addresses US outbound investment in China and Chinese owned entities. Announcing that the administration will use all necessary legal instruments to further deter US persons from investing in China’s military-industrial sector, the Foreign Investment Memo lays out four tools to discourage US investment in China:
Sanctions. Currently, US sanctions on China restrict equity investment in publicly traded companies identified by Treasury as comprising part of China’s military-industrial complex. The Foreign Investment Memo states that the administration will consider actions to deter US investment in China through the imposition of sanctions under the International Emergency Economic Powers Act (IEEPA) through the blocking of assets of identified individuals or entities or through expanding the existing sanctions on China. The Foreign Investment Memo does not itself impose sanctions or announce that sanctions will be imposed. Nonetheless, the administration is signaling that it will consider expanded economic sanctions as a viable means to deter US investment in China’s military-industrial sector.
Outbound Investment Rules. On January 2, 2025, new regulations promulgated by Treasury in accordance with Executive Order 14105 went into effect that regulate US outbound investment in China’s semiconductors and microelectronics, quantum information technologies and artificial intelligence sectors (the Outbound Investment Rules). Our prior coverage of the Outbound Investment Rules is available here. The Foreign Investment Memo states that the new administration is reviewing Executive Order 14105 (as directed in the January Memorandum on America First Trade Policy) and indicates that the purpose of this review will be to expand the Outbound Investment Rules to restrict investment in additional sectors such as biotechnology, hyper-sonics, aerospace, advanced manufacturing, directed energy and other areas implicated by China’s national “Military-Civil Fusion” strategy. The administration considers that the sectors covered by the Outbound Investment Rules should be regularly reviewed and updated and that additional investment types should be addressed by the rules. The Foreign Investment Memo specifically calls out private equity, venture capital, greenfield investments, corporate expansions and investments in publicly traded securities, from sources including pension funds, university endowments and other limited-partner investors. Accordingly, it is reasonable to anticipate that the Outbound Investment Rules will expand under this policy.
US Capital Markets. Notably, the current Outbound Investment Rules include exceptions for certain publicly traded securities. The Foreign Investment Memo appears to target this exception where it states that Chinese companies “raise capital by: selling to American investors securities that trade on American and foreign public exchanges; lobbying United States index providers and funds to include these securities in market offerings; and engaging in other acts to ensure access to United States capital and accompanying intangible benefits.” The Foreign Investment Memo further directs Treasury, in consultation with other federal agencies and law enforcement, to provide a written recommendation on the risk posed to US investors based on the auditability, corporate oversight, and evidence of criminal or civil fraudulent behavior for all foreign adversary companies currently listed on US exchanges.
Trade. The Foreign Investment Memo announces that the administration will review whether to suspend or terminate the 1984 United States-The People’s Republic of China Income Tax Convention, which the memorandum states is partly responsible, along with China’s admission to the World Trade Organization, for offshoring resulting in the deindustrialization of the United States and the technological modernization of China’s military. This appears to align the Foreign Investment Memo within the new administration’s broader trade policy toward China and signals further efforts by the administration to incentivize the de-linking of US firms from China.
Notably, although the Foreign Investment Memo mentions protecting US personal data, it does not mention the new restrictions related to cross-border data transfers (the Bulk Data Transfer Rules) scheduled to go into effect on April 8, 2025, which restrict or in some cases prohibit sharing certain US personal data with Chinese companies.
Considerations
The implementation of the steps outlined in the Foreign Investment Memo will have the greatest impact on Chinese investors and other foreign investors with ties to China seeking to invest in the United States. However, these steps will generally lead to expanded diligence and related compliance obligations on both foreign and US investors broadly.
Staff Statement on Meme Coins Signals Significant Shift in SEC Position on Digital Assets
In an action that could have broad implications, U.S. Securities and Exchange Commission Staff (Staff) issued a statement on February 27, 2025, through its Division of Corporation Finance, providing clarity on the application of federal securities laws to meme coins. This statement offers crucial insights for crypto market participants and potentially signals a significant change in the SEC’s interpretation of what does and doesn’t constitute a security. Below, we summarize the key points and explore the potential implications of this guidance.
Key Points from the SEC Staff Statement
Definition and Characteristics of Meme Coins: Meme coins are crypto assets inspired by internet memes, characters, or trends. They are primarily purchased for entertainment, social interaction and cultural purposes, with their value driven by market demand and speculation, akin to collectibles. These coins typically have limits or no use or functionality and are not tied to any business or revenue stream, leading to significant market price volatility. While the guidance provided clarity on meme coins that have no functionality or use, it may not be applicable to ones that do have functionality or are offered in a different manner.
Meme Coins and Securities Laws: The Staff clarified that transactions involving memecoins do not constitute the offer and sale of securities under federal securities laws. Consequently, participants in memecoin transactions are not required to register with the SEC under the Securities Act of 1933 (“Securities Act”), nor do they need to fall within the Securities Act’s exemptions from registration. The Staff also points out that while the registration obligations in respect of the Securities Act do not apply to creators of memecoins, others in the memecoin ecosystem – users, buyers/sellers and collectors – also are not afforded protections under the Securities Act.
Investment Contract Analysis: The Staff notes that a meme coin does not fall within the enumerated list of common financial instruments (e.g., “stock,” “note,” “bond”) in the definition of “securities” provided in the Securities Act (as well as the Securities Exchange Act of 1934). Interestingly, the staff tied that to the generation of yield or conveyance of rights to future income, profits or assets of a business. The Staff then applied the “Howey test” to determine whether a meme coin might be offered and sold as part of an “investment contract”. The Howey test evaluates whether there is an investment in an enterprise with a reasonable expectation of profits derived from the efforts of others. The Staff concluded that meme coins do not meet these criteria, as their value is derived from speculative trading and market sentiment, instead of the managerial efforts of promoters. Distinguishing the contract from the coin itself in this manner also marks a break from the SEC’s long-standing yet eroded position that the tokens themselves might be investment contracts.
Fraudulent Conduct and Other Legal Considerations: While meme coins may not be subject to federal securities laws, fraudulent conduct related to their offer and sale could still be subject to enforcement action by other federal or state agencies under different laws.
Implications for the Cryptocurrency Market
The Staff’s statement provides much-needed clarity for the cryptocurrency market, particularly for traders and issuers of meme coins; however, it is worth noting that projects building businesses and investors investing in businesses are not directly impacted by the Staff’s statement – as tokens that derive value based on the operations of the business (i.e., there is an expectation of profits derived from the efforts of others, through the lens of the Howey test) are not meme coins, and they may be considered “securities” pursuant to the Howey test. By confirming that meme coins are not securities, the Staff has removed a regulatory overhang from meme coin related transactions. However, this does not mean that meme coins are free from all legal scrutiny. Industry participants must remain vigilant against fraudulent practices, as these could still attract enforcement actions or private lawsuits under other legal frameworks.
Further, while the Staff statement only specifically applied to memecoins, the rationale articulated could also apply to other assets. For instance, the same rationale could apply to NFTs that only represent artwork or collectibles. In addition, it could apply to other speculative assets where the value of the asset does not rely on the efforts of others, such as sneakers and sports cards.
Ongoing Legal Considerations
Persons dealing with meme coins should still consider the following legal implications:
Compliance with Other Laws: While meme coins may not be securities, organizations or memecoin creators must ensure compliance with other applicable federal and state laws, particularly those related to anti-money laundering, fraud and consumer protection. Further, these assets might still be regulated or restricted in other countries, particularly since the “investment contract” test is fairly unique to U.S. securities laws.
Risk Disclosures: Given the speculative nature and volatility of meme coins, organizations or memecoin creators should provide clear risk disclosures to potential purchasers, emphasizing the lack of utility and the potential for financial loss.
Commodities: If meme coins are not securities, then they clearly are commodities. While the Commodity Futures Trading Commission does not have the power to regulate the spot market, it does have the power to enforce illegal abuses of the spot market. Further, much like Bitcoin, dealing in derivatives of meme coins may be a regulated activity.
Monitoring Regulatory Developments: The Staff’s statement is not a rule or regulation and does not have legal force, but is merely a statement from a portion of the SEC’s staff (and not the portion that brings enforcement actions). Industry participants should stay informed about any future regulatory changes or guidance that may impact the treatment of meme coins.
In conclusion, the statement on meme coins offers insight into the fundamental question of “Which crypto assets are securities?” Further, it signals a potential shift in how the SEC regulates the industry by proactively providing informal guidance. We see the statement as a sensible step towards regulatory clarity and a very overdue shift away from the SEC’s recent history of “regulation by enforcement” and “regulation by speechmaking” before that.
Important Update – Treasury Will Not Enforce CTA Against U.S. Citizens, Domestic Reporting Companies and Their Beneficial Owners – New Rules To Follow (March 3, 2025 Edition)
The U.S. Department of the Treasury announced on Sunday March 2, 2025 that it will “not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners [ …]” This press release from Treasury followed the February 27, 2025 release wherein FinCEN committed to (i) extending the existing March 21, 2025 filing deadline, (ii) re-writing the reporting rules (and opening the process to public comment) and (iii) not enforcing the CTA based on violations of the extended deadlines.
Thus, once the new reporting rules have been issued, and absent further change, U.S. citizens or domestic reporting companies or their beneficial owners are not expected to have reporting obligations. Non-U.S. entities that have filed in a U.S. jurisdiction to do business are expected to have a CTA filing obligation; however, for now, the scope of such an obligation has not been set, and the applicable deadline has not been determined.
As suggested by Treasury and FinCEN, subject to the additional commitments, the obligations (and applicable timelines) are as follows:
U.S. Citizens, Domestic Reporting Companies and Their Beneficial Owners: No enforcement of the CTA will be effected.
Foreign Reporting Companies (and other stakeholders not included above):
Now (as of February 27, 2025): FinCEN will not issue fines or penalties for failures to file, correct or update beneficial ownership information (BOI) reports by current deadlines and therefore filing, while mandatory (and subject to changing obligations with respect to the forthcoming new reporting rule), is at your discretion as to timing for the moment.
By March 21, 2025: FinCEN expressed its intent to issue an interim final rule extending certain, as yet undisclosed, BOI reporting deadlines.
Later in 2025: FinCEN expressed its plans to solicit public comments on potential revisions to BOI reporting requirements and issue a notice of proposed rulemaking.
There will be additional developments in this space, so it is necessary to pay careful attention to CTA updates as they develop.
Congress Puts DOE & EPA Grants/Loans Under the Microscope
Changes in Washington mean changing priorities in federal expenditures.
Such is the case with Congress’s approach to energy and environmental spending under the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) passed during the Biden Administration. IIJA and the IRA allocated an additional $200 billion combined to the Department of Energy (DOE) and the Environmental Protection Agency (EPA). This influx of appropriations allowed these agencies to greatly expand their loan and grant programs in recent years, targeting renewable energy technologies and environmental justice programs.
As extensively discussed in prior client alerts, these programs have been targeted by the Executive Branch for special scrutiny and in some cases, the Federal government has simply stopped paying awardees funds due.
With Republicans now controlling Congress, they are taking a closer look at the loans and grants awarded by DOE and EPA under those two landmark laws, especially those that were issued in the final days of the Biden Administration.
The House Energy and Commerce Committee’s Oversight Plan for the 119th Congress announced, that the Committee “will continue to review management and implementation of clean energy and advanced technology grant and loan programs authorized under the Energy Policy Act of 2005, the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA),” and “[t]he Committee will also conduct general oversight of the EPA, including review of the agency’s funding decisions, resource allocation, grants, research activities, compliance and enforcement actions, public transparency, implementation of new statutory authorities, such as the IIJA and IRA, and respect for economic, procedural, public health, and environmental standards in regulatory actions.” Further, “[t]he Committee will also conduct oversight over the DOE’s grant and loan programs that fund production in foreign jurisdictions, particularly in facilities controlled by China and the CCP.”
Following through on this declared intention, on February 26, the Energy and Commerce House Subcommittee on Oversight and Investigations held a Congressional hearing titled “Examining The Biden Administration’s Energy And Environment Spending Push.” Subcommittee Chair Gary Palmer (R-AL) said in his opening remarks, “As this Subcommittee examined last Congress, spending large amounts of funding, particularly in short timeframes carries tremendous risk.”
Rep. Palmer also questioned the DOE and EPA’s abilities to ferret out waste, fraud, and abuse, and said the Congressional hearing is designed “to evaluate whether the appropriate due diligence was done to ensure taxpayer dollars went to eligible parties and the funds are being used appropriately.”
In addition, the Committee received testimony from the EPA Office of Inspector General (OIG), the DOE OIG and from the Government Accountability Office (GAO), which have reported on ..risk factors for waste, fraud, and abuse. According to the Chairman, “These risks increased under past infusions of funding as agencies rushed to move large amounts of funding is a short amount of time.”
Concurrent Actions from the Administration
On Monday, March 3, 2025, EPA announced that the new Administrator Lee Zeldin requested an IG probe of the management of the Greenhouse Gas Reduction Fund, a $20 billion climate fund. In a statement, the EPA said that the Justice Department and FBI are conducting “concurrent investigations” of the fund. Should the IG identify clear examples of fraud, waste, and abuse, that could become the basis to cancel prior obligations.
What’s Next to Consider
Companies that have received DOE and EPA loans or grants in recent years, especially at the conclusion of the Biden Administration, should anticipate increased risk of Congressional or OIG inquiry. These inquiries can be both factual and political in nature. It will be imperative to accurately answer the question, “how did you spend taxpayer dollars.” Inquiries from Congress can be especially difficult to navigate and will benefit from the advice of experienced counsel who can help navigate the company through difficult political terrain.
Retail Competition and Fair Trading, Cost of Living Measures, Unfair Contract Terms, Mergers: ACCC Releases Its 2025-26 Compliance and Enforcement Priorities
In Brief
Australian Competition and Consumer Commission (ACCC) Chair Gina Cass-Gottlieb has just announced the ACCC’s Compliance and Enforcement priorities for 2025-2026.
Ms Cass-Gottlieb highlighted the ACCC’s particular focus on cost of living pressures on consumers by stating that the ACCC:
“would conduct dedicated investigations and enforcement activities to address competition and consumer concerns in the supermarket and retail sector”, including a new priority of addressing “misleading surcharging practices and other add-on costs”; and
focus on “fair trading issues in the digital economy”, including “promoting choice, compliant sales practices and removing unfair contract terms such as subscription traps in online sales.”
The ACCC has announced a number of new priorities, as well as confirming its 2024 priorities and its enduring priorities, including its focus on:
Consumer, fair trading and competition concerns in relation to environmental claims and sustainability, particularly greenwashing;
Unfair contract terms in consumer and small business contracts, with a focus on harmful cancellation terms, automatic renewals, early termination fee clauses and noncancellation clauses;
Improving industry compliance with consumer guarantees, with a particular focus on consumer electronics;
Any conduct that is harmful to consumers experiencing vulnerability or disadvantage;
Cartels and other anticompetitive arrangements, including misuse of market power that may affect any level of a supply chain;
Promoting competition in, and ensuring enforcement in the event of misleading pricing in relation to, essential services; and
Although not being strictly a compliance and enforcement priority, on the successful implementation of mandatory merger clearance that will be in place from 1 January 2026 (and voluntarily from 1 July 2025). In this regard:
Before the end of March 2025, the ACCC will commence consultation on draft process guidelines and analytical guidelines; and
The ACCC has reiterated its expectation that ~80% of notified mergers will be approved within 15-20 business days (following a period of informal pre-application engagement with the ACCC).
Overall, Ms Cass-Gottlieb noted that the ACCC’s
“…complementary mandates across competition, fair trading and consumer law compliance and enforcement support the community to participate with trust and confidence in commercial life and promote the proper functioning of Australian markets.”
We have produced a one-page summary that outlines these priorities and the key takeaways for businesses (click here).
See the full list of the ACCC’s 2025-2026 compliance and enforcement priorities here and Ms Cass-Gottlieb’s speech here.
China Issued Draft Administrative Measures for Reporting of Cybersecurity Incidents in Financial Business Operation
The People’s Bank of China recently released the Draft Administrative Measures for Reporting of Cybersecurity Incidents in the Operational Areas of PBOC for public comment.
Scope of Application
Pursuant to the Draft Administration Measures, financial institutions recognized by the PBOC would be required to report cybersecurity incidents to the PBOC and other relevant competent authorities (e.g., Cyberspace Administration of China). For incidents involving crimes (e.g., the endangerment of computer information systems), such financial institutions also would be required to report incidents to the relevant public security authorities.
Incident Classifications and Reporting Requirements
Covered financial institutions also would be required to classify incidents into four categories – especially significant, significant, large and average.
Incident Reporting Requirements
Reporting requirements based on entity type
Incidents occurring in the head office of a national development bank, a policy bank, a state-owned commercial bank, a China Postal Savings Bank or a joint-stock bank would need to be reported to PBOC and incidents occurring in a bank’s branches would need to be reported to a PBOC branch at the bank’s place of domicile.
Incidents occurring in a unit belonging to PBOC and a financial infrastructure operating organization under PBOC’s management would need to be reported to PBOC.
Incidents occurring in other financial institutions or their branches would need to be reported to the branch of PBOC at the place of the financial institution’s domicile.
Incidents occurring in securities, futures, or fund institutions would need to be forwarded by the dispatching organization of the China Securities Regulatory Commission to notify the branch of PBOC at the same level.
The prefectural branches of PBOC and the branches of municipalities with separate plans would need to promptly report directly to the branches of PBOC in provinces, autonomous regions and municipalities upon reports of incidents of a larger level or above occurring in their jurisdictions. When a branch of PBOC in a province, autonomous region or municipality directly receives a report of an incident of a larger level or above under its jurisdiction, it would need to promptly report the incident to PBOC.
Large level incidents: For incidents classified as “large level” or above, covered financial institutions would need to submit a brief report within 30 minutes and then submit a more fulsome report within 2 hours.
Significant level incidents: For incidents classified as “significant level” or above, covered financial institutions also would need to submit a progress report every 2 hours at least until the end of the incident. Important incident updates (e.g., such as upgrading the level of the incident, making progress in the phase of disposal, or discovering new problems) would need to be reported immediately.
Average level incidents: For incidents classified as “average level” or above, covered financial institutions would need to submit an incident report within 10 business days following containment of the incident, if feasible. If not feasible, covered financial institutions would need to submit an initial report and provide a final report within 40 business days of incident containment.
Incidents affecting personal information: For incidents involving personal information, covered financial institutions would need to submit an incident report containing the remedial measures enacted to mitigate harm caused by the incident, a sample notice sent to affected individuals, and a description of how individuals may mitigate potential harms. (Reports regarding incidents classified as “large level” or above also would need to contain the above-listed content.)
The Draft Administrative Measures also address the relevant incident reporting channels, incident report content requirements, incident liability and risk communication, and recordkeeping requirements.
The CTA: Now You See It … Now You Don’t
As the flurry of Corporate Transparency Act (CTA) developments continues, on March 2, the US Department of the Treasury (Treasury) announced the suspension of CTA enforcement against US citizens and domestic reporting companies, following on the heels of last week’s announcement by the Financial Crimes Enforcement Network (FinCEN) that it is not issuing fines or penalties in connection with beneficial ownership information (BOI) reporting for the time being. Going forward, as indicated by Treasury, the CTA will apply only to foreign reporting companies.
FinCEN’s February 27 Announcement
Barely more than a week after announcing a new March 21 reporting date for most reporting companies that have not yet filed all required reports under the CTA (see our prior alert for more information about this), 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 their BOI reports. FinCEN’s nonenforcement of penalties will continue until a forthcoming interim final rule becomes effective and new reporting deadlines set forth in that rule have passed.
FinCEN expects to issue this interim final rule no later than March 21, 2025. Additionally, FinCEN intends to solicit public comments on revisions to existing BOI reporting requirements, which it will consider as part of a notice of proposed rulemaking that the agency anticipates issuing later this year to minimize the burden of CTA compliance on small businesses while maintaining the usefulness of BOI to key enforcement functions.
Treasury’s March 2 Announcement
Wasting no time, on March 2, Treasury released a statement announcing that, not only would it not enforce penalties or fines associated with BOI reporting under the existing regulatory deadlines, but it also would not enforce any penalties or fines against US citizens or domestic reporting companies or their beneficial owners after forthcoming rule changes take effect. Treasury’s announcement noted that it will issue a proposed rule that will narrow the scope of CTA reporting obligations to foreign reporting companies only, a step that, according to Treasury, would support American taxpayers and small businesses while ensuring that the rule is appropriately tailored to advance the public interest.
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SEC Staff Issues Statement on Meme Coins
On February 27, 2025, staff in the SEC’s Division of Corporation Finance issued a public statement on so-called meme coins. According to the statement, meme coins meeting certain specified conditions will not be deemed securities for purposes of the federal securities laws.
The statement defines a “meme coin” as “a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.” According to the statement, meme coins “typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation.”
Citing the SEC’s Howey test, the staff statement provides a conditioned analysis around why meme coins should not be considered securities under federal law:
The offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others. First, meme coin purchasers are not making an investment in an enterprise. That is, their funds are not pooled together to be deployed by promoters or other third parties for developing the coin or a related enterprise. Second, any expectation of profits that meme coin purchasers have is not derived from the efforts of others. That is, the value of meme coins is derived from speculative trading and the collective sentiment of the market, like a collectible. Moreover, the promoters of meme coins are not undertaking (or indicating an intention to undertake) managerial and entrepreneurial efforts from which purchasers could reasonably expect profit.
While the SEC staff’s logic would apply equally to other classes of digital assets, such as non-fungible tokens, the statement is careful to warn that it “does not extend to the offer and sale of meme coins that are inconsistent with the descriptions set forth above, or products that are labeled ‘meme coins’ in an effort to evade the application of the federal securities laws by disguising a product that otherwise would constitute a security.” SEC Commissioner Caroline Crenshaw also issued her own statement disagreeing with the staff’s reasoned analysis. Nevertheless, the staff’s action represents the latest example of the agency’s reconsideration of its prior positions on crypto assets.
Trusts as Accredited Investors: Navigating Trusts and Private Market Investments
Investments in private markets are rapidly becoming an essential part of a well-rounded investment portfolio, especially for ultra-high-net-worth individuals and families. According to Ernst & Young, the assets under management in private markets more than doubled from $9.7 trillion in 2012 to $22.6 trillion in 2022. This growth is projected to continue, with an estimated $72.6 trillion expected to be transferred to heirs by 2045, marking the largest intergenerational wealth transfer in history.
Given this backdrop, it’s critical for investors to familiarize themselves with the laws and regulations surrounding alternative investments in private securities. In particular, trusts—commonly used as estate planning tools—play a significant role in this arena.
This article is the first part of a three-part series discussing trusts in the context of certain common investor thresholds for investment in private securities. This article will examine trusts as “accredited investors” under the Securities Act of 1933.
Trusts as Investment Vehicles
Many private securities take advantage of Regulation D of the Securities Act of 1933, which allows for the private offering of securities subject to specific requirements. In Regulation D, Rule 506 requires that investors be “accredited investors”—a term that has significant implications for trusts looking to invest in private markets.
How a Trust Can Qualify as an Accredited Investor
A trust can qualify as an accredited investor under the Securities Act of 1933 in three primary scenarios:
Trust with Assets Over $5 MillionA trust may qualify as an accredited investor if it meets the following criteria:
The trust has assets of over $5 million.
The trust was not specifically formed to acquire the securities offered.
A sophisticated individual, who can demonstrate experience and knowledge in financial matters, directs the trust’s investment decisions.
For more information on whether a trust is formed for the purpose of acquiring the securities offered or whether a person is a “sophisticated person,” please visit: SEC Considerations – Investments in Private Securities.
Bank-Served TrustIf a bank serves as the trustee of a trust and makes investment decisions on behalf of the trust, the trust can qualify as an accredited investor, regardless of the trust’s size or other factors.
Grantor Trusts: Revocable vs. IrrevocableThe qualifications for grantor trusts depend on whether the trust is revocable or irrevocable:A revocable trust qualifies if:
The grantors (the individuals who created the trust) independently meet the criteria to be accredited investors.
The grantors are the only beneficiaries of the trust.
There is also a highly fact-specific test for irrevocable grantor trusts to qualify as accredited investors. For more information, please visit: SEC Considerations – Investments in Private Securities.
What This Means for Trust Advisors:
When advising clients about structuring trusts for investment in private securities, an advisor should understand how a trust may qualify as an accredited investor. Structuring a trust to meet these qualifications can be complex. Still, it offers a valuable opportunity for clients to participate in private market investments—especially given the ongoing wealth transfer and growth of private assets.
Careful consideration of these rules and regulations is essential in helping trusts navigate the world of private market investments. With the right planning, trusts can serve as effective tools for both wealth transfer and participation in private securities, enabling clients to grow their assets in a regulated, secure manner.
The increasing prominence of private market investments and the massive wealth transfer underway highlight the importance of understanding the regulatory landscape for trusts looking to invest in private securities. By keeping these guidelines in mind, advisors can ensure that clients’ trust structures are positioned to take advantage of new opportunities in private markets. As the world of private securities continues to expand, staying informed about these regulations will help trust advisors better serve their clients and ensure the long-term success of investments in private securities.
Out With a Bang: Treasury Restricts Corporate Transparency Act to Foreign Reporting Companies
On March 2, 2025, the Treasury Department announced suspension of the March 21, 2025 deadline for filing under the Corporate Transparency Act (CTA) for any domestic companies or U.S. citizens.
Treasury said that it is preparing a proposed rulemaking to narrow the scope of the rule to foreign reporting companies only. “Foreign reporting companies,” under the present formulation, are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the U.S. by filing a document with a secretary of state or any similar office.
While the rule may be subject to legal challenge, as the narrowing proposed by the Treasury Department is inconsistent with the text of the CTA itself, it is not clear who, if anyone, would challenge the new proposed rules. Congress is also contemplating changes to the law.
The determination from Treasury follows the February 17, 2025 decision out of the Eastern District of Texas in Smith v. United States Department of the Treasury, which lifted the last remaining nationwide preliminary injunction on enforcement of the filing deadline, following the Supreme Court’s stay of the injunction in Texas Top Cop Shop, Inc., et al. v. Merrick Garland, et al., earlier this year.
Passed in the first Trump Administration but implemented during the Biden presidency, the CTA — an anti-money laundering law designed to combat terrorist financing, seize proceeds of drug trafficking, and root out illicit assets of sanctioned parties and foreign criminals in the U.S. — faced legal challenges around the country, many of which are still pending before appellate courts.
Treasury has not announced what will happen to the information provided by entities that have already filed under the CTA. However, domestic companies and U.S. citizens are no longer under any obligation to keep that information up to date given the suspension of enforcement.
CTA Is Pausing Fines, Penalties and Enforcement Actions Regarding Filing of Beneficial Ownership Information Reports
Below is a statement from the Financial Crimes Enforcement Network (FinCEN) released February 27, 2025 stating it will not take any enforcement action against a Reporting Company that fails to file or update a beneficial ownership information report per the Corporate Transparency Act, pending the release of a new “interim final rule.” FinCEN intends to issue this interim final rule (which will extend the reporting deadline) prior to the current reporting deadline of March 21, 2025. We will continue to monitor for updates. For now, however, failure to file will not result in fines, penalties or any other enforcement actions.
FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines
Immediate release: February 27, 2025
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.
Alexander Lovrine and Walter Weinberg contributed to this article.