ILPA Publishes Updated Reporting Template and New Performance Template
The Institutional Limited Partners Association (ILPA) recently released its updated ILPA reporting template (Reporting Template) and a new ILPA performance template (Performance Template), together with corresponding guidance.
The enhancements aim to promote greater standardisation, transparency and comparability in private fund reporting, reflecting the industry’s evolving dynamics. As such, the Reporting Template and the Performance Template aim to strengthen the alignment of interests and partnerships between general partners and limited partners to foster a more efficient and trustworthy investment environment.
Background
The original ILPA reporting template was introduced in 2016 to standardise disclosures related to fees, expenses and carried interest within the private fund sector. Since then, the industry has experienced transformative changes, including, among other things, shifts in fund economics, increased expectations for transparency and the emergence of advanced technological solutions to support reporting processes.
ILPA initiated the formation of the Quarterly Reporting Standards Initiative (QRSI) in 2024, in response to the US Securities and Exchange Commission’s proposed release of the Private Fund Adviser’s Rule (PFA) to ensure that the ILPA reporting framework conformed to the PFA. When the PFA was vacated by US courts, the QRSI became an “industry-driven” solution engaging a diverse group of stakeholders, including limited partners, general partners, service providers and consultants, to collaborate on updating the Reporting Template.
Key Updates to ILPA’s Reporting Template
The Reporting Template introduces several notable changes, including:
Additional Cash Flow Detail. The Reporting Template added more detail to the cash / non-cash flows section to include offering and syndication costs, placement fees and partner transfers.
Detailed internal chargebacks. The Reporting Template now requires the breakdown of internal chargebacks, enabling the identification of expenses allocated or paid to general partners or related entities.
Granular external partnership expenses. The Reporting Template provides a more detailed categorisation of external partnership expenses, aligning more closely with general ledger accounts to enhance clarity and consistency.
Uniform reporting level. The Reporting Template establishes a single uniform level of detail for all general partners, with the aim of promoting consistency with the reporting frameworks outlined in governing documents and accounting standards.
The Reporting Template replaces the 2016 version going forward for funds still in their investment period during the first quarter of 2026 and for funds commencing operations on or after 1 January 2026.
Introduction of ILPA’s Performance Template
Alongside the Reporting Template, the ILPA published the Performance Template designed to standardise return calculation methodologies in the private fund sector.
The key features of the Performance Template include, among other things:
Cash flow and portfolio-level transaction mapping. The Performance Template sets out tables to capture cash flows as well as fund- and portfolio-level transaction type mapping, intended to provide transparency into the calculation methodology for performance metrics.
Standardised performance metrics reporting. The Performance Template includes reporting for performance metrics including the internal rate of return, total value to paid-in and multiple on invested capital, with designated breakouts for the relevant gross and net figures.
Two methodology forms. The Performance Template is available in two versions to support general partners’ varying approaches to fund-level performance calculation methodology — one version is based on itemised cash flows (i.e., the granular method) and the other on grossed-up cash flows (i.e., the gross-up method).
The ILPA recommends that the Performance Template should be used for funds commencing operations on or after 1 January 2026.
The Reporting Template and Performance Template are available here and here, respectively.
FTC Announces 2025 Hart-Scott-Rodino Threshold Revisions
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the Act), parties to certain mergers or acquisitions must notify the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) and observe a waiting period before closing. This notification program allows the FTC and DOJ to evaluate potential anticompetitive effects of a proposed transaction. Whether a proposed transaction is subject to the notification program generally depends on the size of the transaction and the size of the parties.
The Act requires parties to file the notification and observe the waiting period if either of the following would be true as a result of the proposed transaction:
The acquiring person will hold an aggregate amount of voting securities, non-corporate interests, or assets of the acquired person valued in excess of $200 million (as adjusted).
The acquiring person will hold an aggregate amount of voting securities, non-corporate interests, or assets of the acquired person valued in excess of $50 million (as adjusted) but not more than $200 million (as adjusted), and one person has sales or assets of at least $100 million (as adjusted), and the other person has sales or assets of at least $10 million (as adjusted).
The dollar thresholds above are noted to be “as adjusted” because they are required to be revised annually by the FTC based on changes in the gross national product. A complete list of the original thresholds, two most recent prior thresholds, and current threshold revisions are shown in this chart:
Original Threshold
Prior Threshold(Went Into Effect February 27, 2023)
Prior Threshold(Went Into Effect March 6, 2024)
Current Threshold(Will Go Into Effect February 21, 2025)
$10 million
$22.3 million
$23.9 million
$25.3 million
$50 million
$111.4 million
$119.5 million
$126.4 million
$100 million
$222.7 million
$239.0 million
$252.9 million
$110 million
$245.0 million
$262.9 million
$278.2 million
$200 million
$445.5 million
$478.0 million
$505.8 million
$500 million
$1.1137 billion
$1.195 billion
$1.264 billion
$1 billion
$2.2274 billion
$2.39 billion
$2.529 billion
Size of Transaction Alone: The original size-of-transaction threshold under the Act was $200 million. As the chart above shows, the current size of transaction threshold for this purpose is $505.8 million. Using the applicable current threshold, transactions are reportable under the Act if the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, or assets of the acquired person valued in excess of $505.8 million.
Size of Transaction and Size of Person: The original size-of-transaction thresholds under the Act were $50 million and $200 million, while the size-of-person thresholds were $100 million and $10 million. Using the applicable current thresholds, transactions are reportable under the Act if a) the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, or assets of the acquired person valued in excess of $126.4 million but not more than $505.8 million, b) one person has sales or assets of at least $252.9 million, and c) the other person has sales or assets of at least $25.3 million.
Each notification under the Act requires a filing fee, which is dependent on the size of the transaction. The updated filing fees will be effective on February 21, 2025, and are as follows:
Size of Transaction
Filing Fee
in excess of $126.4 million but less than $179.4 million
$30,000
not less than $179.4 million but less than $555.5 million
$105,000
not less than $555.5 million but less than $1.111 billion
$265,000
not less than $1.111 billion but less than $2.222 billion
$425,000
not less than $2.222 billion but less than $5.555 billion
$850,000
$5.555 billion or more
$2.39 million
Civil penalties may be imposed for violations of the Act. Effective January 10, 2024, the maximum civil penalty amount increased from $51,744 to $53,088 per day.
Earlier this year, the FTC, in concurrence with the DOJ, issued rules updating the premerger notification form (HSR Form). The revised rules were published in the Federal Register on November 12, 2024, and took effect on February 10, 2025. As of that date, all notifications must use the updated HSR Form. The FTC also announced that it will lift the suspension on early termination of the 30-day waiting period, which has been in place since February 2021.
Texas Federal Court Pauses CFPB Rule Banning Medical Debt from Credit Reports
On February 6, a judge for the United District Court for the Eastern District of Texas issued a 90-day stay on the CFPB’s final rule prohibiting the inclusion of medical debt in consumer credit reports, delaying the rule’s effective date from March 17 to June 15.
The CFPB’s rule (which we previously discussed here and here) seeks to prohibit consumer reporting agencies from including these unpaid medical bills in credit reports and prohibit lenders from considering medical debt when making credit decisions. The pause follows a legal challenge (previously discussed here) from industry trade associations, contending that the rule exceeds the CFPB’s authority under the Fair Credit Reporting Act (FCRA).
Putting It Into Practice: The 90-day delay temporarily halts implementation of the CFPB’s rule, however its future remains uncertain under new CFPB leadership. The rule would have been effective 60 days after publication in the Federal Register. However, the Bureau’s first Acting Director, Scott Bessent “suspend[ed] the effective dates of all final rules that have been issued or published but that have not yet become effective. Any formal changes to the rules would require adherence to the Administrative Procedure Act (APA) through formal notice-and-comment rulemaking. The rule is also subject to a challenge under the Congressional Review Act. Consumer reporting agencies should continue to monitor these developments closely, as the litigation could lead to further delays or a potential invalidation of the rule.
Listen to this post
California Governor Appoints New DFPI Commissioner
On February 7, California Governor Gavin Newsom announced the appointment of Khalil “KC” Mohseni as the new Commissioner of the California Department of Financial Protection and Innovation (DFPI). Mohseni has been serving as the Chief Deputy Director of the DFPI since 2023 and has previously held positions such as Chief Operations Officer at the State Controller’s Office and Deputy Director of Administration at the California Department of Housing and Community Development. His appointment is subject to Senate confirmation.
Putting It Into Practice: Mohseni’s experience in state financial operations and regulatory oversight suggests a continued emphasis on consumer protection for the DFPI. Given the uncertain future of the CFPB under the Trump administration, state regulators like the DFPI are expected to take a more active role in consumer financial oversight (previously discussed here). Financial institutions should monitor state-level regulatory developments and prepare for a potential uptick in state-level enforcement actions and rulemaking.
Listen to this post
Trump Administration Announces New Picks for the CFPB and OCC
On February 12, the Trump administration announced Jonathan McKernan as the Director of the CFPB and Jonathan Gould as the Comptroller of the Currency. McKernan and Gould will replace Acting Directors Russell Vought and Rodney Hood, who were appointed to head the CFPB and the OCC, respectively, on an interim basis.
McKernan, a lawyer, spent several years in private practice before joining the staff of Senator Bob Corker, and then held other policy advisor roles at the Treasury Department and the Federal Housing Finance Agency before becoming Counsel to Senator Pat Toomey on the Senate Banking Committee.
President Biden nominated McKernan to serve as a Republican member on the FDIC’s Board in 2022. McKernan has made a number of speeches as FDIC Director which may signal his potential approach as CFPB Director. Among his positions, he stated that regulators “should avoid the temptation to pile on yet more prescriptive regulation or otherwise push responsible risk taking out of the banking system.” He has also opposed the FDIC’s final rule implementing the Community Reinvestment Act, criticizing the length and complexity of the rule, as well as whether regulators had the authority to prescribe certain aspects of the rule.
Gould was previously chief legal officer at the crypto firm Bitfury and, before that, was senior deputy comptroller and chief counsel at the OCC. His appointment is in line with the Trump administration’s crypto friendly approach.
Putting It Into Practice: Changes at the Bureau are happening by the hour. Acting Director Vought expanded an existing stop-work order at the CFPB, suspending all supervision and examination activities in addition to rulemaking and enforcement. The agency’s next scheduled funding request was canceled, with Vought citing that its current funding amount was sufficient. CFPB headquarters have also been closed and Vought terminated dozens of employees who were still in their probationary period. The continued broadsides against the CFPB means that McKernan will inherit a severely weakened Bureau. With rulemaking, enforcement, and supervision at the Bureau halted, providers of consumer financial products and services should closely monitor the activity of state-level regulators, who may become more active in response to a weakened CFPB (previously discussed here).
Listen to this post
Beltway Buzz, February 14, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
Congress: Big Picture Legislative Update. The 119th Congress is revving up, and the Buzz is monitoring two major legislative issues:
Government funding expires on March 14, 2025—one month from today. Clearly, there is plenty of political acrimony between the parties, along with consternation among Democrats concerning how the administration has operated during its first several weeks. There are no clear signs yet about whether we are heading for a government shutdown, and anything can happen, as we saw during the final week of 2024.
This week, the U.S. Congress officially started the budget reconciliation process that it will use to pass Republican legislative priorities, such as tax cuts, border security, defense spending, and energy promotion. As the Buzz has previously discussed, this complicated process will allow the Republicans to avoid the legislative filibuster in the U.S. Senate and pass legislation on a party-line basis. The process is likely to take up much of Congress’s time in the coming weeks and months.
AG Issues Memos on Private-Sector DEI. On February 5, 2025, Pam Bondi, the newly confirmed attorney general, issued two memoranda to U.S. Department of Justice (DOJ) employees instructing them on steps that they must take to implement Executive Order (EO) 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The memos are as follows:
“Ending Illegal DEI and DEIA Discrimination and Preferences.” This memo instructs the DOJ’s Civil Rights Division and Office of Legal Policy to jointly draft and submit a report containing recommendations “to encourage the private sector to end illegal discrimination and preferences, including policies relating to [diversity, equity, and inclusion (DEI) and [diversity, equity, inclusion, accessibility (DEIA)].”
This report must contain “specific steps or measures to deter the use of DEI and DEIA programs or principles that constitute illegal discrimination or preferences, including proposals for criminal investigations and for up to nine potential civil compliance investigations of [private-sector] entities.” (Emphasis added.) This likely refers to provisions of EO 14173 that invoke the False Claims Act, which allows for criminal penalties, treble damages, attorneys’ fees, and private citizen “whistleblower” actions. Lauren B. Hicks, T. Scott Kelly, and Zachary V. Zagger provide an analysis of the implications of EO 14173 for organizations doing business with the federal government that will be subject to potential liability under the False Claims Act.
“Eliminating Internal Discriminatory Practices.” This memo primarily instructs DOJ officials to terminate internal discriminatory programs and policies relating to DEI and DEIA. This includes the elimination of positions, programs, grants, contracts with vendors, etc., relating to DEI. It also directs DOJ officials to make recommendations on how to align the agency’s enforcement activities, litigation positions, consent decrees, regulations, and policies with the EO.
The memo further instructs DOJ officials to develop new guidance that “narrow[s] the use of ‘disparate impact’ theories” and emphasizes that “statistical disparities alone do not automatically constitute unlawful discrimination.”
DOL Nominees Announced. The Senate has already confirmed sixteen of President Trump’s agency nominees, but the employment-related agencies (i.e., the U.S. Department of Labor (DOL), the U.S. Equal Employment Opportunity Commission, and the National Labor Relations Board (NLRB)) are a bit behind. There was some news this week, however, relating to DOL nominees:
Secretary of Labor Hearing. The Senate Committee on Health, Education, Labor and Pensions was scheduled to hold a hearing this week on the nomination of former U.S. Representative Lori Chavez-DeRemer of Oregon to be secretary of labor. But due to a snowstorm in the Washington, D.C., area, the hearing has been rescheduled for February 19, 2025.
DOL Subagency Nominees. Potentially filling in the leadership positions of the DOL’s subagencies, are the following nominees who were announced this week:
David Keeling has been nominated to be the assistant secretary of labor for occupational safety and health. Keeling has held several positions overseeing private-sector employers’ workplace safety programs.
Wayne Palmer has been nominated to be the assistant secretary of labor for mine safety and health. Palmer held the same position during the first Trump administration.
Daniel Aronowitz, an insurance industry executive, has been nominated to lead the Employee Benefits Security Administration.
Henry Mack III has been nominated to lead the Employment and Training Administration. Mack previously served in the Florida Department of Education.
CFPB Halts Activity. Activity at the Consumer Financial Protection Bureau (CFPB) was effectively stopped this week while the Department of Government Efficiency reviews the agency’s internal operations. The CFPB, which “enforces Federal consumer financial law and ensures that markets for consumer financial products are transparent, fair, and competitive” stretched its reach over the last several years as part of former President Joe Biden’s “whole of government” approach to promoting unionization. For example, in 2023, the CFPB entered into an information sharing agreement with the NLRB “to address practices that harm workers in the ‘gig economy’ and other labor markets.” Pursuant to that agreement, the CFPB also focused on “employer-driven debt” that allegedly results from employee expenses related to “employer-mandated training or equipment.” Created by Congress in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, CFPB has long been criticized by Republicans.
H-1B Registration Period Announced. U.S. Citizenship and Immigration Services has announced that the fiscal year 2026 H-1B cap registration period will open at noon ET on Friday, March 7, 2025, and close at noon ET on Monday, March 24, 2025. Nicole Fink and Philip K. Sholts have the details on the increased fees, the second go-round of the beneficiary-centric selection process, and other need-to-know aspects of the process.
Remembering Justice Scalia. Supreme Court of the United States Justice Antonin Scalia passed away this week in 2016 at the age of seventy-nine. While an incredible amount has been written about Justice Scalia and his legal philosophy, at the Buzz, we remember his jurisprudence related to labor and employment law. For example, Justice Scalia took part in decisions holding that union “salts” were employees under the National Labor Relations Act (NLRA) and that the NLRB was precluded by the Immigration Reform and Control Act of 1986 from awarding backpay to undocumented workers—even if their employment termination was otherwise unlawful under the NLRA. With the opportunity to write for the Court, Justice Scalia authored opinions emphasizing the need for sufficient commonality between potential members of a class action, particularly in employment law cases, as well as an opinion holding that the Federal Arbitration Act preempted state laws prohibiting class action waivers in arbitration. Finally, in Oncale v. Sundowner Offshore Services, Inc., Justice Scalia wrote that Title VII of the Civil Rights Act of 1964’s prohibition of discrimination “because of … sex” applied to same-sex sexual harassment claims.
Blockchain+ Bi-Weekly; Highlights of the Last Few Weeks in Web3 Law: February 14, 2025
The first weeks of February have been eventful for digital asset regulation, with major policy shifts, legal battles and legislative initiatives shaping the future of Web3. The SEC’s formation of a dedicated crypto rulemaking task force, Coinbase’s latest legal maneuvering, the CFTC’s scrutiny of sports-related prediction markets, and Senate hearings on stablecoins signal an evolving regulatory landscape. Key developments include renewed scrutiny over bank relationships with crypto firms and the SEC’s shifting stance on spot crypto ETFs. As the U.S. government reassesses its approach to digital asset oversight, key figures in Congress, and the SEC have signaled a strong desire for reforms and meaningful legislation. However, significant hurdles remain—not least of which is the relatively short window Congress has to pass legislation before the election cycle takes over.
These developments and a few other brief notes are discussed below.
SEC Forms Crypto Rulemaking Task Force: January 21, 2025
Background: On his first day as acting SEC Chair, Mark Uyeda announced that the SEC has “launched a crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets.” Commissioner Peirce has been tapped to lead the task force, which according to SEC press release, “will collaborate with Commission staff and the public to set the SEC on a sensible regulatory path that respects the bounds of the law.” Further, its focus will be “to help the Commission draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks and deploy enforcement resources judiciously.” The task force has since solicited comments by e-mailing [email protected] and setting up a meeting request form here.
Analysis: Commissioner Peirce’s Token Safe Harbor Proposal 2.0 from 2021 remains one of the most well-structured and thoughtful regulatory approaches to digital assets from any regulator, making her an ideal choice to lead this task force. While it is unclear how this initiative will interplay with the Third Circuit’s recent rulemaking ruling, it seems increasingly likely that some form of crypto regulation will emerge from the SEC in the coming months or years. The challenge ahead is significant—defining ‘decentralization,’ ensuring oversight to prevent fraud and abuse and fostering innovation without stifling legitimate actors is a delicate balance. If anyone is equipped to navigate this, it’s Commissioner Peirce.
Coinbase Files Petition for Permission to Appeal at Second Circuit: January 21, 2025
Background: The lower court in the SEC v. Coinbase matter previously stayed the matter and granted permission for Coinbase to ask the Second Circuit to hear its interlocutory appeal of matters decided on its Motion for Judgment on the Pleadings. The Second Circuit still has to agree to hear the matter, and in its opening brief, Coinbase implores the appellate court to weigh in on whether digital asset transactions in secondary markets are investment contract transactions.
Analysis: Amicus filed by the Blockchain Association and the Chamber of Commerce also encouraged the appellate court to take up this issue. Newly appointed Chair of the Senate Finance Services Digital Asset Subcommittee, Senator Lummis, also weighed in, asking for the Second Circuit to take up the issue. Administrations come and go, but case law is enduring, so this is still a very important case and will set legal precedent for years to come. The “ecosystem theory” provided by the SEC and endorsed by the lower court makes no sense. Bitcoin, Ether and other assets that the SEC had admitted are not securities have gigantic “ecosystems,” and it also makes no sense as to how an “ecosystem” can register with the SEC. Strong appellate case law on these issues would alleviate the need to rush into expansive legislation that could have unknown externalities (including benefitting incumbents to the detriment of new entries), even if they do provide a level of clarity.
Joint Press Conference Held on Bipartisan Roadmap to Digital Asset Legislation: February 4, 2025
Background: “Crypto and AI Czar” David Sacks held a press conference with Senate Banking Chair Tim Scott, House Financial Services Chair French Hill, House Agriculture Chair Glenn “GT” Thompson and Senate Agriculture Chair John Boozman to discuss the previously issued Executive Order titled Strengthening American Leadership in Digital Financial Technology and how the Executive and Legislative branches planned to work together in establishing a clear framework for U.S. digital assets and their issuers.
Analysis: The main takeaway seemed to be that stablecoin legislation is on the immediate horizon, which is discussed below as well as related to Senator Hagerty’s GENIUS Act being released the same day as the press conference. It also appears that FIT 21 (passed through the House last year) will be the starting point for a market structure bill, but as I have previously covered, there are still significant hurdles to overcome to make that market structure bill fit for purpose. There was recognition by all the speakers that digital assets are going to be foundational in financial services for the foreseeable future, so creating a framework to ensure U.S. dominance in the sector will be crucial in maintaining the current dominance of American financial markets.
CFTC and SEC Announce Digital Asset Agendas: February 4, 2025
Background: In a statement titled “The Journey Begins,” Commissioner Peirce put forward her plans as the leader of the newly formed SEC Crypto Task Force. While at the CFTC, Acting Chair Pham announced a plan to “Refocus on Fraud and Helping Victims, Stop Regulation by Enforcement” and various task force realignments at the agency. Both seem intent to remain focused on bringing actions against fraudsters or bad actors while removing enforcement focus from good actors who are attempting to abide within the bounds of commodities and securities laws when applied to blockchain-enabled cryptographic technologies.
Analysis: Commissioner Peirce’s statement is especially well done. “In this country, people generally have a right to make decisions for themselves, but the counterpart to that wonderful American liberty is the equally wonderful American expectation that people must decide for themselves, not look to Mama Government to tell them what to do or not to do, nor to bail them out when they do something that turns out badly.” The Digital Chamber, Blockchain Association and others have already announced organized working groups to assist the agencies in reaching sound policies that protect against fraud while preserving American freedoms and innovations. There seems to be renewed hope that a sensible and transparent framework for operating a digital asset company in the United States is feasible in the next few years.
Congress Holds Hearings on Debanking (Chokepoint 2.0): February 5-6, 2025
Background: The Senate Banking Committee held a hearing titled Investigating the Real Impacts of Debanking in America on February 5, followed shortly thereafter by a House Financial Services Committee hearing titled Operation Choke Point 2.0: The Biden Administration’s Efforts to Put Crypto in the Crosshairs on February 6. While both had an aim at determining the scope of debanking and potential solutions to legally operating individuals and companies being refused banking services, the House’s hearing focused especially on digital assets and had testimony from Coinbase head of legal Paul Grewal and NYU Professor Austin Campbell, both of whom emphasized the disproportionate impact debanking has had on digital asset participants.
Analysis: Directly before the Senate’s hearing, Senator Cramer (R-ND) reintroduced his Fair Access to Banking Act, which would require banks to provide impartial and risk-based explanations for granting or refusing lending or other banking services. The FDIC also released 175 documents related to its supervision of banks that engaged in, or sought to engage in, crypto-related activities before the hearings (previously withheld despite FOIA requests/litigation over those requests; also, read this bench slap transcript in that FOIA action if you are ever having a bad day and need a pick-me-up). This was a great section of the think pieces referenced below about the effect debanking can have on ordinary people and the need for access to DeFi for people that want more control over their own finances.
CFTC Investigates Sports-Related Prediction Market Contracts (February 9, 2025)
Background: The CFTC has opened an inquiry into the legality of sports-related prediction market contracts, reinforcing its oversight of event contracts under the Commodity Exchange Act. In a February 9 statement, the agency confirmed it is reviewing the regulatory status of these products and assessing whether they constitute unlawful gaming or derivatives trading. In response, Robinhood preemptively delisted its prediction contracts, citing regulatory uncertainty. However, Kalshi and Crypto.com kept their markets active through and past the Super Bowl, arguing they fall within existing CFTC exemptions.
Analysis: The CFTC’s scrutiny signals a potential crackdown on sports-related event contracts, an area that has long existed in a regulatory gray zone. Until last year’s case between Kalshi and the CFTC, the agency took the position that betting contracts generally are binary options that are subject to the agency’s regulation and oversight. Further, it remains unclear how these fit within the framework of the two federal statutes that explicitly address sports betting, the Wire Act and the Unlawful Internet Gambling Enforcement Act, particularly if the Department of Justice adjusts its interpretation of those laws.
Briefly Noted:
Polsinelli Releases Tech Transaction and Data Privacy Report: The Polsinelli annual Tech Transactions and Data Privacy Report is out, which breaks down the information companies should stay informed on regarding tech and data privacy legal issues for 2025, including a breakdown of Web3 topics to pay attention to.
SEC Pauses Certain Investigations and Cases. On February 11, the SEC and Binance filed a joint motion to stay the agency’s lawsuit against Binance for 60 days. The rationale was that the SEC’s joint task force is working on regulations that may “impact and facilitate the potential resolution of this case. Additionally, it appears that the SEC has sent a number of close-out letters in recent weeks, formally closing investigations into certain other crypto companies.
Senate Stablecoin Bill Introduced: Senate Banking Committee member Bill Hagerty (R-TN) has introduced a bipartisan Senate stablecoin bill (Senator Gillibrand (D-NY) is a co-sponsor) as a companion to the House bill passed through their financial services committee last year. The House also dropped a discussion draft bill. Bills like this for discrete digital asset issues combined with knowledgeable people in administrative leadership roles make total sense.
SEC Scores Win on Major Question Defense Against Kraken: The SEC successfully struck Kraken’s Major Question defense (but since there doesn’t need to be discovery on the issue, left open the ability for Kraken to assert again later) but failed to get due process and fair notice defenses tossed.
Senate Confirms Treasury Secretary: Scott Bessent has been confirmed as the new Treasury secretary, replacing Janet Yellen. He is viewed as “pro-crypto,” so one can hope for some common sense rulemaking around digital asset tax reporting and compliance during his tenure.
SAB 121 Repealed: The Controversial SEC Staff Accounting Bulletin 121 (SAB 121), which essentially foreclosed publicly traded banks from taking custody of digital assets for their customers by requiring digital assets be listed as liabilities on the banks’ balance sheets, has been withdrawn. This comes after both the House and Senate passed a bipartisan resolution to withdraw the rule, which was vetoed by President Biden.
Tornado Cash Sanctions Lifted: It looks like the U.S. government will likely not be appealing the decision that overturned the OFAC sanctions of Tornado Cash, and there is no en banc review, so it is heading back to the District Court for either a nationwide vacatur or a more limited ruling. This does not, however, eliminate sanctions against the legal persons who allegedly performed bad acts using Tornado Cash, and wallets believed to be associated with North Korea remain on OFAC’s blacklist.
KuCoin Enters Plea Deal: Kucoin agreed to pay $300 million in unlicensed money transmission penalties, and its founders entered deferred prosecution agreements related to operating a digital asset exchange without proper money transmission licenses.
Conclusion:
As regulatory and legislative efforts accelerate, 2025 is shaping up to be a pivotal year for the digital asset industry. The formation of the SEC Crypto Task Force, bipartisan movement on stablecoin and market structure legislation, and ongoing legal challenges against regulatory overreach indicate that the framework governing digital assets is evolving in ways that could significantly impact the industry’s trajectory.
Increasing Divergence Between US and EU Banks in Approach to Climate Change
Over the past several weeks, each of the major US banks have announced their withdrawal from the Net Zero Banking Alliance (presumably in response to the policy priorities of the second Trump Administration). Although participation in this group may have been more a matter of “virtue-signaling” rather than expressing and adopting a meaningful commitment, the departure of the US banks was nonetheless noteworthy as demonstrating the changing political climate in the United States. During this same time period, in contrast, many of the European Union’s largest banks have re-affirmed their commitment to the Net Zero Banking Alliance, declaring it a core component of their environmental and sustainability strategies.
This divergence between the US and EU with respect to the Net Zero Banking Alliance is illustrative of the increasing divide between the two major Western economies on an array of issues related to climate change. For example, while the SEC is preparing to dismantle the Biden Administration’s climate disclosure law, the EU is maintaining–although possibly adjusting–its own climate disclosure laws. Navigating this divide is becoming increasingly complex for the many companies that operate in both jurisdictions, or simply have commercial ties and are subject to regulatory burdens on both shores of the North Atlantic.
Several of Europe’s biggest banks have declared their commitment to the world’s largest climate alliance for the industry, distancing themselves from Wall Street’s sudden exit from the group. . . . The declarations of support for NZBA follow a period of crisis for the alliance, which saw its biggest US members walk away in quick succession after the Nov. 5 election. President Donald Trump has since taken a wrecking ball to the climate agenda of his predecessor, including ordering that the US leave the Paris climate agreement. Though Europe is struggling with its own backlash against environmental, social and governance regulations, its biggest banks say they remain committed to working together to fight climate change.
www.bloomberglaw.com/…
Trump Nominates McKernan to Be CFPB Director
On Feb. 11, 2025, President Trump nominated Jonathan McKernan to be the next director of the Consumer Financial Protection Bureau (CFPB). If confirmed by the Senate, McKernan would replace Russell Vought, who President Trump designated as acting director of the CFPB on Feb. 7, 2025, a day after Vought was confirmed as the director of the White House Office of Management and Budget.
In his most recent role, McKernan was a member of the Board of Directors of the Federal Deposit Insurance Corporation (FDIC). He held that post from Jan. 5, 2023, until he resigned on Feb. 10, 2025.
While at the FDIC, Mr. McKernan served as co-chairman of the Special Committee of the Board that oversaw an independent third-party review of sexual harassment and professional misconduct allegations at the FDIC, as well as issues relating to the FDIC’s workplace culture. As one of two Republican members of the Board, McKernan—along with now-Acting FDIC Chairman Travis Hill—frequently opposed the efforts of the Democratic majority.
Prior to joining the FDIC, McKernan was a counsel to Ranking Member Pat Toomey (R-PA) on the staff of the Senate Committee on Banking, Housing, and Urban Affairs. He also served as a senior counsel at the Federal Housing Finance Agency, a senior policy advisor at the Department of the Treasury, and a senior financial policy advisor to Sen. Bob Corker (R-TN). He holds a Bachelor of Arts and Master of Arts in economics from the University of Tennessee, and a law degree from the Duke University School of Law.
If confirmed by the Senate, McKernan would return to the FDIC board, as the CFPB’s Director holds an ex officio seat.
Industry groups have welcomed McKernan’s nomination. For instance, the American Financial Services Association released a statement congratulating McKernan on his nomination and complementing his “extensive experience in the financial-services policy arena.” The Consumer Bankers Association followed suit, issuing a statement that noted that “Mr. McKernan’s experience as a former FDIC Board Member, counsel to lawmakers, and attorney focused on consumer finance and banking highlight his qualifications to lead the Bureau at a critical time.”
It is unclear what McKernan will try to accomplish if confirmed as CFPB director. The Trump administration has suggested that the CFPB should be shut down. President Trump has confirmed that his goal is to dismantle the CFPB, which he said, “was set up to destroy people.” But it is unlikely that the Trump administration would be able to abolish or shut down the CFPB, as any such effort would likely face significant challenges in Congress and the courts.
Given that fact, McKernan—who is likely to be confirmed—may take steps to rein in the CFPB’s perceived abuses and chart out a business-friendly regulatory and enforcement agenda, with much of the agenda tied to the goals of reducing regulatory compliance costs and promoting innovation. But those broad outlines leave open questions that would only be answered in the coming weeks and months.
Texas’ Power Transmission Infrastructure: Addressing Growing Demand from Data Centers and Crypto Mining
Texas is facing a rapidly evolving energy landscape, driven in part by the surging power demands of data centers and cryptocurrency mining operations. As the digital economy expands, the state’s existing power transmission infrastructure must adapt to ensure grid reliability, affordability and sustainability. However, the growing demand for electricity raises critical challenges, including the need for additional transmission capacity, grid resilience, and fair cost allocation for new infrastructure investments.
Rising Energy Demand from Data Centers and Crypto Mining
Texas has become a prime location for data centers and cryptocurrency mining operations due to its deregulated energy market, favorable business climate and relatively low electricity costs. Data centers, which support cloud computing, artificial intelligence (AI), and financial transactions, require vast amounts of power, often operating 24/7. Similarly, cryptocurrency mining facilities run continuously, consuming significant amounts of electricity to maintain blockchain networks.
The Electric Reliability Council of Texas (ERCOT) projects that power demand from these industries will grow substantially in the coming years. Consumption of electricity from large flexible loads such as data centers and crypto mining facilities is projected to account for 10% of ERCOT’s total forecasted electricity consumption in 2025. ERCOT currently expects power demand to nearly double by 2030. Without strategic infrastructure upgrades, this demand would likely strain the grid, increase congestion and lead to higher electricity prices for consumers.
Challenges with Existing Transmission Infrastructure
Texas operates its own independent power grid, which provides flexibility but also limits its ability to import electricity from neighboring states during periods of high demand. The state’s transmission infrastructure has already faced challenges in keeping up with rapid population growth and extreme weather events. In 2021, Winter Storm Uri exposed vulnerabilities in the grid, leading to widespread outages and highlighting the need for greater investment in both generation and transmission capacity.
One major challenge is that much of Texas’ renewable energy generation—especially wind and solar—is located in rural areas, far from major load centers like Dallas, Houston and Austin. Without sufficient transmission capacity, this clean energy cannot be efficiently delivered to where it is needed. The addition of high-energy-consuming industries like data centers and crypto mining exacerbates this challenge by increasing congestion on existing transmission lines.
The Need for Additional Transmission Infrastructure
To accommodate the growing energy needs, Texas must significantly expand its high-voltage transmission network. New transmission lines are necessary to:
Relieve Grid Congestion – increasing transmission capacity reduces bottlenecks that can drive up energy prices and cause reliability concerns.
Enhance Grid Resilience – strengthening transmission infrastructure can help prevent widespread outages during extreme weather events.
Support Renewable Integration – more transmission lines will allow Texas to take full advantage of its abundant wind and solar resources by connecting them to high-demand areas.
Ensure Reliability for Data Centers and Crypto Mining – dedicated infrastructure planning can ensure that new energy-intensive operations do not disrupt service for residential and commercial consumers.
The Costs of Transmission Expansion
One of the biggest questions surrounding transmission expansion is funding. Historically, Texas has used a mix of ratepayer contributions, state incentives, and private investments to build and maintain its power infrastructure. There are several potential funding mechanisms for new transmission lines:
• Ratepayer Contributions – transmission costs are often passed on to consumers through electricity bills. However, increasing rates to fund expansion may face resistance, especially if residential and small-business customers bear a disproportionate burden of the cost.
• ERCOT Transmission Cost Recovery – ERCOT has a cost allocation model that spreads transmission investments across various market participants. This approach ensures that those benefiting from the upgrades contribute to the costs.
• Direct Charges on Large Energy Consumers – one potential policy solution is to require data centers and crypto mining companies to pay a larger share of transmission infrastructure costs. Special tariffs or direct infrastructure investment agreements could be established to ensure that these industries contribute fairly.
• Public-Private Partnerships – collaboration between the state government, utilities, and private investors could help finance large-scale transmission projects. In some cases, tax incentives or low-interest financing options could encourage private sector investment in critical infrastructure.
• Federal Funding and Grants – the federal government has recently made funding available for grid modernization projects through the Infrastructure Investment and Jobs Act. The new administration has called some of this into question. Texas could leverage these funds to supplement state and private investments.
Balancing Growth and Grid Reliability
Expanding transmission infrastructure is essential, but it must be done in a way that balances economic growth with grid reliability. Policymakers must ensure that the costs are distributed equitably and that the grid remains stable during periods of high demand. Additionally, investments in energy storage, smart grid technology, and demand response programs can complement transmission expansion by improving overall efficiency.
Texas has long been a leader in energy innovation, and addressing these transmission challenges will be critical to the state maintaining that position. By implementing forward-thinking policies and funding strategies, the state can support its growing digital economy while ensuring a reliable and affordable power supply for all consumers.
SEC Renewed Action on Hedge Clauses
Hedge Clauses and the SEC’s Position
Hedge clauses are provisions in investment advisory agreements that aim to limit an adviser’s liability for certain actions or outcomes. The U.S. Securities and Exchange Commission (the “SEC”) has expressed the position that such clauses can mislead clients into thinking they cannot exercise their legal rights and improperly infer or suggest that clients have waived non-waivable causes of action. Thus, the SEC reasons, such hedge clauses may be seen as misleading statements that discourage clients from taking legal actions against an adviser when such action may be appropriate. The SEC has stated previously that:
there are few (if any) circumstances in which a hedge clause in an agreement with a retail client would be consistent with [] antifraud provisions, where the hedge clause purports to relieve the adviser from liability for conduct as to which the client has a non-waivable cause of action against the adviser provided by state or federal law. Such a hedge clause generally is likely to mislead those retail clients into not exercising their legal rights, in violation of the antifraud provisions, even where the agreement otherwise specifies that the client may continue to retain its non-waivable rights.
In the same 2019 interpretation, the SEC acknowledged briefly that facts and circumstances should determine that whether a particular hedge clause is misleading. Consistent with this approach, the SEC often distinguishes between retail clients and more sophisticated or institutional clients, both generally and, in the past, even in this specific context. However, the SEC’s 2019 interpretation went further, stating that a “contract provision purporting to waive the adviser’s federal fiduciary duty generally . . . would be inconsistent with the Advisers Act, regardless of the sophistication of the client (emphasis added).” Although the SEC’s position was not met with universal agreement, many investment advisers subsequently took steps to limit the use of hedge clauses.
ClearPath Enforcement Action and Settlement
The SEC has recently taken the opportunity to remind investment advisers of its position on hedge clauses. On September 3, 2024, the SEC entered an order accepting an Offer of Settlement from ClearPath Capital Partners LLC (“ClearPath”), a registered investment adviser to retail investors and private funds. In the order, the SEC found that ClearPath violated Section 206(2) of the Investment Advisers Act of 1940 (the “Advisers Act”) because of its improper use of liability disclaimers in both advisory agreements with retail clients and in governing documents of its private fund clients. Without admitting or denying the SEC’s findings, ClearPath agreed to a censure, to cease and desist from further violations of the charged provisions, and to pay a $65,000 civil penalty.
ClearPath’s Use with Retail Investor Clients
ClearPath used two advisory agreements containing hedge clauses with retail investors. These hedge clauses purported that ClearPath is not liable to its clients for “any action or inaction,” unless due to “gross negligence,” “willful malfeasance,” and violations of “applicable law.” The SEC reasoned that, when read in its entirety, this language may mislead ClearPath’s retail clients, causing them to not exercise their non-waivable legal rights, resulting in a violation of Section 206(2) of the Advisers Act.
ClearPath’s Use with Private Funds
ClearPath used hedge clauses in a limited partnership agreement of a private fund that ClearPath advised and served as general partner. The private fund’s provisions included a limitation on ClearPath’s liability to the private fund for “mistakes of judgment, or for action or inaction” and explicitly required investors to “waive any and all current and future claims (and right to assert such claims) against [ClearPath] and the other Indemnified Parties for any breach of fiduciary duty.” The operating agreement of another private fund for which ClearPath is the manager provided that ClearPath is not liable for “any loss or damage” unless the result of “fraud, deceit, gross negligence, willful misconduct or a wrongful taking.” These governing documents also contained other language purporting to limit fiduciary duties, a permissible concept under certain state laws but not in the context of the federal fiduciary duty of investment advisers.
The SEC found that, when read in its entirety, the language used by ClearPath is inconsistent with an adviser’s fiduciary duty and stated that the language may mislead ClearPath’s client into not exercising its non-waivable rights, thus constituting a violation of Section 206(2) of the Advisers Act.
Why Does This Matter?
The use of hedge clauses by investment advisers in the exculpation and indemnification provisions in their advisory agreements and private fund governing documents is common. Such clauses may have been considered standard and in use for some time. However, in light of the SEC’s renewed focus on the topic and enforcement actions and settlements such as ClearPath, investment managers should once again review their use of hedge clauses with informed legal counsel. Hedge clauses should be tailored to the sophistication of the clients and amended where needed (with appropriate communication to clients) to avoid an interpretation that, when an agreement is read in its entirety, such clauses waive (or appear to waive) any non-waivable rights of the client.
Private Market Talks: Exploring APAC’s Private Credit Frontier with ADM Capital’s Chris Botsford [Podcast]
The Asia-Pacific private credit market has doubled in the past five years, presenting growing and intriguing opportunities for credit investors. Despite its growth, the APAC region remains a complex, diverse and often unfamiliar landscape that accounts for only about 7% of the global private credit market.
We spoke with Christopher Botsford, founding partner of ADM Capital, to delve deeper into the APAC private credit market and the opportunities it presents as well as its key differentiators from the American and European regions. With over three decades of experience in the area, Chris shares his approach to navigating this dynamic market and strategies for successful credit investing in one of the world’s most vibrant economic areas.