Bankers Bond Insurance: Key Coverage Issues for Financial Institutions to Consider
Bankers blanket bond insurance—also referred to as bankers bonds, fidelity bonds, or financial institution bonds—provides financial institutions with protection against direct financial loss sustained as a result of criminal activity. Bankers bonds often cover:
losses caused through dishonesty of employees;
losses arising out of counterfeit currency;
loss in transit, including theft or physical destruction of property during transportation;
losses caused by computer systems fraud;
losses caused by unauthorized signatures; and
losses caused by forged checks.
Bankers bonds have several unique features different from many other insurance types because they protect against losses incurred as a direct result of fraudulent or criminal activities from within the company. While most bankers bonds are already tailored to protect companies operating within the financial sector, they are a highly customizable risk management solution. Depending on the jurisdiction, financial institutions may be required to purchase a bankers bond to operate.
While coverage depends on the specific facts, policy language and circumstances giving rise to the loss, bankers bond claims present a number of recurring issues that can result in coverage disputes. Below are several key issues to consider:
Discovery and Notice. Unlike other coverages, which may turn on when an accident occurred or whether a claim was first made, bankers bonds typically apply based on whether the loss was first “discovered” during the policy period. Because discovery triggers coverage, the timing of when the company first becomes aware of a covered loss can become a contested issue if, for example, the insurer contends it occurred before the inception of the bond or if notice was not given in a timely manner.
The meaning of “discovery” is often defined in the bond, and small changes can impact whether or not a loss is covered. Whose knowledge is relevant for the purpose of discovery? What standard measures whether those individuals should assume a particular loss is covered? Does the bond distinguish between knowledge gained by facts versus receipt of actual or potential claims? The way bankers bonds address these and many other questions can often decide whether a loss is covered.
Endorsements, Riders and Policy Customization. Bankers bonds are as varied as the financial institutions that buy them. That means that bonds are not one-size-fits-all and can be heavily negotiated to provide greater and different coverages than what may be available “off the rack.” These modifications are often accomplished through endorsements (or “riders”) modifying or expanding coverage.
Banks can secure riders for a variety of different risks—reward payments, debit cards, safe deposit boxes, transit cash letters, unauthorized signatures, warranty statements, automated teller machines, audit and examination expenses, check kiting and email transfer fraud, just to name a few. Riders can even allow banks to recover “claim expenses,” including legal fees, incurred in preparing and submitting covered claims for loss under the bond. Even the riders themselves are negotiable and can be modified.
Causation. Many bankers bonds require that the policyholder show that a loss “resulted directly from” dishonest, criminal or malicious conduct. While this kind of causation language is common, disputes nevertheless arise over whether the offending conduct and loss are close enough in the timeline of events to fit within the bond’s insuring agreement. For example, an insurer may contest whether a virus that infected the bank’s computers is close enough in time or sequence to resulting loss to constitute covered computer systems fraud. In cases of employee dishonesty and fraud, financial institutions should be mindful of the bond’s direct causation requirement.
Exclusions. Insuring agreements covering dishonest acts by employees often include significant carve outs that limit otherwise broad coverage for things like loans and trading losses. Those carve outs also can have important carve backs that preserve coverage if certain conditions are met. For example, most bonds will exclude losses resulting from loans, unless the dishonest employee was in collusion with parties to the loan transaction and received some kind of improper financial benefit. But some bonds place monetary thresholds on the financial benefit required to preserve coverage or presume the requisite benefits were obtained under certain circumstances. Paying close attention to carve outs and exceptions and, if needed, negotiating broader coverage can strengthen critical protections against fidelity claims involving employees.
Actual Loss. An important threshold question in any bankers bond claim is whether a loss actually occurred. Despite the repeated use of “loss,” many bankers bonds do not define the word, leaving it to courts to do so in the event of a dispute. One common theme in those disputes is whether the entity suffered an actual—rather than a theoretical—loss. In Cincinnati Insurance Co. v. Star Financial Bank, for example, the Seventh Circuit defined “loss” as an “actual present loss, as distinguished from a theoretical or bookkeeping loss.” 35 F.3d 1186, 1191 (7th Cir. 1994). Policyholders should be prepared to show an identifiable “loss” was suffered.
Cyber-Related Events. Given the proliferation of cybersecurity incidents and related exposures across all industries, including finance, bankers bonds have increasingly offered expanded coverage for cyber-related losses. In some instances, coverage between a cyber policy and a crime policy, like a bankers bond, may overlap.
But bankers bonds can provide critical coverage for a financial institution’s direct financial loss arising from a host of cyber incidents. Bonds can extend coverage to include perils such as extortion (including cyber-related extortion and ransomware) and erroneous transfer, social engineering fraud, computer fraud and similar cyber risks. Financial institutions should coordinate coverage between all policies, including bankers bonds and cyber policies, to ensure adequate protection from cyber risks and avoid gaps in coverage.
This non-exhaustive list highlights several common issues of focus to negotiate robust coverage for a range of risks under bankers bonds. The best time to assess those risks is before discovery of a loss or receipt of a claim. Financial institutions should be proactive in their pursuit of insurance and mindful of these key coverage issues relating to bonds. Retaining experienced coverage counsel, insurance brokers and other risk professionals during bond placement (and renewal) and early in the claims process can help maximize recoveries.
New CFPB Director Testifies on Agency Leadership and Enforcement Approach
On February 27, new CFPB Director Jonathan McKernan testified before the Senate Banking Committee, emphasizing his commitment to enforcing the law while operating within the confines of the law. His testimony focused on his commitment to enforcing the law within the framework of the Dodd-Frank Act and maintaining the agency’s core functions while exploring ways to enhance efficiency.
During his confirmation hearing, McKernan acknowledged that the CFPB director has the authority to adjust funding levels and streamline operations, which could impact staffing and enforcement priorities. When pressed by Democrats about potential external influence from outside groups or the White House, McKernan insisted that, if confirmed, he would be the one making decisions at the agency. He also pledged to maintain its complaint database and other required offices and functions.
Shortly before McKernan’s hearing, the CFPB dismissed several enforcement actions, including one against a mortgage lender of manufactured housing (previously discussed here). These dismissals have prompted discussions about potential shifts in the agency’s regulatory approach. Democratic senators used the hearing to question how these developments might align with McKernan’s espoused leadership approach at the CFPB.
In response, McKernan stated that any enforcement decisions under his leadership would be based on legal merits and resource considerations, emphasizing his commitment to ensuring that regulatory actions remain within statutory mandates while fostering a balanced and fair approach.
Putting It Into Practice: McKernan’s regulatory agenda, particularly his views on funding and enforcement policies, could lead to significant changes for financial institutions. The recent dismissal of multiple enforcement actions (previously discussed here) underscores the possibility of a shift in the Bureau’s oversight priorities. Financial institutions should closely monitor these developments to assess how regulatory expectations and compliance obligations may evolve under McKernan’s leadership.
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FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines for Now
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.
For the vast majority of reporting companies, the current deadline to file an initial, updated, and/or corrected BOI report is March 21, 2025.
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.
FinCEN intends to issue the new interim final rule by no later than March 21, 2025. The new interim final rule will extend BOI reporting deadlines, according to FinCEN.
FinCEN also intends to consider making further substantive revisions to existing BOI reporting requirements, with the goal of minimizing burdens on small businesses while ensuring that reporting companies continue to submit BOI reports that are highly useful to important national security, intelligence, and law enforcement activities.
Reporting companies remain free to submit their BOI reports now or at any time before the current reporting deadlines. However, given FinCEN’s stated intention of extending the filing deadlines further, reporting companies may want to refrain from submitting their BOI reports until a date that is closer to the applicable reporting deadline.
Major Regulatory Updates from the West Coast: New California and Washington Approaches to Healthcare Private Equity and MSO Regulation
State legislatures on the West Coast are intensifying their focus on private equity and management service organizations (MSOs) in healthcare, introducing new regulatory measures that could significantly reshape investment strategies, ownership structures, and operational matters in the healthcare space in these states. As state legislatures respond to growing concerns about the role of non-licensed entities in healthcare decision-making, recent proposals reflect a heightened focus on transaction scrutiny, ownership structures, and the autonomy of licensed providers.
California’s Senate Bill 351 (“SB 351”) and Assembly Bill 1415 (“AB 1415”), introduced in February 2025, seek to reinforce state oversight of healthcare investments, particularly those involving private equity, hedge funds, and MSOs. While SB 351 reinforces existing restrictions on corporate control over clinical decision-making, AB 1415 expands the authority of the California Office of Health Care Affordability (OHCA), extending its pre-transaction notice and clearance requirements to a broader range of entities. Meanwhile, Washington’s Senate Bill 5387 (“SB 5387”) is moving through committee review and proposes strict regulations that would limit lay ownership of healthcare practices and curb MSO involvement in operational control.
Below provides an overview of the key components and takeaways from these state legislative efforts.
Legislative Developments at a Glance
Legislation
Key Provisions
Status
SB 351 (California, First Read Feb. 12, 2025)
Codifies limits on private equity and hedge fund influence in clinical decision-making; bans non-competes & non-disparagement clauses; grants enforcement authority to the Attorney General.
Moving through committee review.
AB 1415 (California, Feb. 21, 2025)
Expands OHCA oversight and pre-closing transaction filing requirements to private equity, hedge funds, MSOs, health systems and other provider entities.
Assembly-Pending Referral.
SB 5387 (Washington, First Read Jan. 21 2025)
Requires healthcare providers to hold majority ownership of practices; limits roles, ownership and control among individuals and entities involved MSO-professional entity arrangements;
Moving through committee review.
California’s SB 351: Focused on Maintaining Clinical Decision-Making Autonomy
SB 351 reinforces California’s existing corporate practice of medicine (CPOM) prohibition by specifying certain restrictions on private equity firms and hedge funds in clinical decision-making. The bill enumerates specific restrictions to ensure that key medical and operational decisions remain within the control of licensed providers.
Specifically, SB 351 would codify the following restrictions:
Prohibiting investors from determining diagnostic tests, treatment options, patient volume, or referral requirements.
Restricting non-licensed entities from owning or managing patient medical records or influencing billing and coding practices.
Expanding enforcement authority, allowing the California Attorney General to seek injunctive relief for violations.
Banning non-compete and non-disparagement clauses in management contracts and asset sale agreements involving medical and dental practices.
While SB 351 strengthens the state’s CPOM framework, it does not contain a mandatory state pre-approval process for private equity-backed healthcare transactions, which was a feature of the much publicized Assembly Bill 3129 last year, which was ultimately vetoed by Governor Gavin Newsom.[i] Rather, the core provisions focus on clarifying what are generally recognized legal boundaries surrounding the corporate practice of medicine doctrine and clinical autonomy.
California’s AB 1415: Expanded OHCA Authority Over Healthcare Transactions
Concurrently, AB 1415 proposes a significant expansion of OHCA’s authority over healthcare transactions. The bill would broaden the scope of entities required to file pre-transaction notices with OHCA, including private equity groups, hedge funds, MSOs, and health system affiliates, all of which were previously outside the agency’s direct oversight.
If enacted, AB 1415 would reshape California’s healthcare transactional landscape by:
Requiring private equity firms, hedge funds, and newly formed holding entities involved in healthcare deals to submit filings to OHCA with respect to their involvement in material transactions.
Expanding the definition of “provider” to health systems and their affiliates to subject such entities to OHCA review. The definition is also reframed to include “any private or public health care provider”, as opposed to the current framework which lists out specific licensure or service line categories constituting a “provider”.
Expressly bringing management services organizations (MSOs) under OHCA authority, which were notably excluded under prior regulations, and consequently more directly impacting physician practice management models.
The proposed expansion of OHCA’s jurisdiction under AB 1415 represents a dramatic shift in California’s approach to healthcare transaction oversight. By requiring private equity groups, hedge funds, MSOs, and health systems to submit pre-transaction notices, the bill would broaden the regulatory reach of OHCA.
While AB 1415 would not grant OHCA the authority to block transactions outright (unlike the approach taken in last years’ AB 3129), its review process could delay closings involving such entities and introduce additional compliance burdens to navigate healthcare deals in California. As seen with prior legislative efforts, this bill signals a continued push for increased scrutiny of non-licensed entities and investors in healthcare. While the measure is likely to face intense lobbying efforts, it is worth reminding our readers that Governor Newsom’s veto statement specifically called out the existing OHCA authority and framework as a reason why AB 3129 was not necessary. Here, it will be interesting to see whether carving in private equity stakeholders within the OHCA framework makes this type of legislation more likely to get enacted into law.
Washington’s SB 5387: New Restrictions on Healthcare Ownership Structures
Meanwhile, Washington’s SB 5387 takes a relatively strict and targeted approach to regulating lay entity arrangements and influence over health care practices. Specifically, the bill includes the following key features:
Non-licensed individuals, corporations, or entities cannot own or control health care practices or employ licensed healthcare providers unless explicitly permitted under state law.
Whereas under existing law shareholders, officers and directors of professional service entities do not necessarily have to be licensed in Washington, this bill would require Washington-licensed healthcare providers to retain control of such entities by holding a majority of the voting shares, serving as the majority of directors, and occupying key leadership roles. The bill also adds what appears to be an active practice requirement to be an owner of a professional health care entity.
Shareholders, directors and officers of professional health care practices would be prevented from owning equity in or serving as an officer, director, employee or contractor of an MSO contracted with such practice, or receiving significant financial compensation from such MSO in return for ownership or management of the professional entity. Such shareholders, directors and officers would also not be able to transfer or relinquish control over the issuing of shares in the practice or the paying of dividends.
The provisions in SB 5387 take an approach similar to the version of California’s AB 3129 originally passed by the California State Assembly in May 2024, as well as Oregon’s HB 4130 passed by the Oregon House of Representatives in February 2024 (which ultimately failed to be enacted into law). Both prior bills called into question the viability of the “friendly” PC-MSO model commonly used by private equity and other investors, which typically involve succession agreements and similar arrangements that give certain control rights to MSOs relating to professional entities, among other features. Here, by delineating broad ownership and control requirements and restrictions involving professional entities and MSOs, it could prove to be difficult in practice to utilize such PC-MSO structures in Washington if the bill as currently drafted is enacted into law.
Looking Ahead
California and Washington are advancing significant legislative changes that would reshape the west coast healthcare investment landscape. We will continue tracking the proposed bills as they progress and provide updates on their impact on healthcare transactions in these states. For more information, contact our team for guidance on navigating these proposed changes.
FOOTNOTES
[i] See our previous blog series on California Assembly Bill 3129 pursued by CA state legislators in 2024: Update: Governor Newsom Vetoes California’s AB 3129 Targeting Healthcare Private Equity Deals | Healthcare Law Blog (sheppardhealthlaw.com), published October 2, 2024, Update: AB 3129 Passes in California Senate and Nears Finish Line | Healthcare Law Blog (sheppardhealthlaw.com), published September 6, 2024, California’s AB 3129: A New Hurdle for Private Equity Health Care Transactions on the Horizon? | Healthcare Law Blog (sheppardhealthlaw.com), published April 18, 2024, and Update: California State Assembly Passes AB 3129 Requiring State Approval of Private Equity Healthcare Deals | Healthcare Law Blog (sheppardhealthlaw.com), published May 30, 2024.
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A United States Sovereign Wealth Fund: First Impressions
On February 3, 2025, President Donald Trump issued Executive Order 14196 (the “EO”) directing the Secretary of the Treasury and the Secretary of Commerce, in coordination with the Assistant to the President for Economic Policy, to develop a plan for the establishment of a United States sovereign wealth fund. With the aim of promoting the “the long-term financial health and international leadership of the United States,” Treasury Secretary Scott Bessent called the creation of a US fund an issue “of great strategic importance” that President Trump foresees becoming one of the largest in the world. “The Saudi Arabia fund is on the larger side,” noted President Trump, “but eventually we’ll catch it.”
This GT Advisory analyzes the EO, considers the place of a US sovereign wealth fund within the architecture of the United States Government, and explores the fund’s likely purposes, sources of funding, investment thesis, potential structure, and important governance and other operational considerations.
Click here to read the full GT Advisory.
FinCEN Again Delays CTA Reporting Deadlines and Suspends Enforcement
On February 27, 2025, the U.S. Financial Crimes Enforcement Network (FinCEN) announced that it intends to issue an interim final rule by March 21, 2025, with extended beneficial ownership information reporting deadlines [FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines | FinCEN.gov]. It will not issue penalties or otherwise enforce failure to file initial or updated reports until the new interim final rule becomes effective.
FinCEN also plans later this year to solicit public comments in a notice of proposed rulemaking “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.”
For additional background on the CTA and other recent developments, including our previous alerts, please see: Corporate Transparency Act.
Europe: FCA Advances Efforts to Address the UK’s EU Legislative Legacy, Starting With MIFID
Following an HM Treasury policy statement, the FCA has published a consultation paper proposing amendments to some of the Markets in Financial Instruments Directive (MIFID) conduct of business and systems and controls rules inherited from the EU that continue to exist in the UK statute book in close to their original form.
The FCA has proposed an initial like-for-like transfer of rules into the appropriate parts of the FCA Handbook although some material is being dropped (for example, some recitals and other provisions from the EU legislation that they consider to be superfluous). It also envisages certain substantive amendments to reduce complexity and over prescription, e.g.:
Rationalising duplicative rules
Eliminating distinctions in rules for different types of firms where obligations are substantively similar
Tailoring language to better suit specific types of business, e.g. in cases where a distinction is necessary but has previously been ineffective
The FCA has identified an immediate opportunity to harmonise rules on conflicts of interest and best execution by unifying similar rules from legacy MIFID, UCITS and AIFMD regimes. It is also contemplating changes to client classification thresholds to create clearer and more flexible rules. In the longer term, the FCA has indicated an interest in eliminating the MIFID/non-MIFID distinction and instead basing firms’ regulatory responsibilities on the risks of harm in their respective business models.
The consultation paper lays out two stages of responses. The first, closing on 28 February 2025, should be uncontroversial as it just relates to the transfer of rules into the FCA Handbook. The second stage, which addresses substantive content amendments, closes on 28 March 2025.
Expect a policy statement from the FCA in H2 2025, as the FCA continues to work towards a tailored regulatory structure for UK portfolio managers (as well as others affected by MIFID rules).
Plans to Replace EB-5 Immigrant Investor Program
President Donald Trump has announced that he plans to offer the “Trump Gold Card” to replace the existing EB-5 Immigrant Investor Program. The Trump Gold Card Program would allow an investor who is willing to invest $5 million in the U.S. economy to obtain permanent residency.
The current EB-5 Immigrant Investor Program requires an investor to invest at least $800,000 in a company that will employ a minimum of 10 people.
The Trump Gold Card investor would be required to prove that the funds were obtained legally, pass a background check, and satisfy additional screening criteria. This program may be capped at 1 million gold cards.
Programs such as the Trump Gold Card Program aim to attract foreign capital and boost economic growth.
DOGE Blocked from Access to Department of Treasury Payment Systems
On February 21, 2025, a federal district court judge from the Southern District of New York issued a preliminary injunction against the Department of Government Efficiency’s (DOGE), access to Treasury Department payment systems, stating access was provided in a “chaotic and haphazard manner.” The order resulted from a suit filed by 19 state Attorneys General against DOGE for unauthorized access to Americans’ data. It prevents anyone affiliated with DOGE from accessing federal payment systems until further order.
According to the 64-page opinion, the judge was critical of the “‘rushed’ process by DOGE to access Bureau of Fiscal Service’s payment systems, which stores the names, Social Security numbers, birth dates, birth places, home addresses and telephone numbers, email addresses, and bank account information of Americans who have transacted with the federal government.”
The District Court also noted that “[t]he record is silent as to what vetting or security clearance process they went through prior to their appointment” and reported being “troubled by the fact that Elez [a DOGE associate] was apparently granted full access to [Bureau of Fiscal Service] systems rather than read-only access, writing that that process was ‘rushed and undertaken under political pressure.’” We have made a similar observation.
The Court requested that the Treasury Department provide a report by March 24, 2025: (1) certifying that the DOGE associates have been vetted, have obtained proper security clearances, and have been properly trained; and (2) setting forth the mitigation measures which have been taken to minimize threats associated with the access, including the reporting chains for DOGE within the Treasury Department.
The ruling stated that “[t]he process by which the Treasury DOGE Team was appointed, brought on board, and provided with access to [Bureau of the Fiscal Service] payment systems could have been implemented in a measured, reasonable, and thoughtful way. To date, based on the record currently before the Court, it does not appear that this has been the case.”
President Trump’s “America First” Investment Policy Memorandum
On February 21, 2025, President Trump issued a National Security Presidential Memorandum titled “America First Investment Policy,” outlining several key strategies aimed at enhancing U.S. national and economic security through investment policy. This memorandum directs several agencies and executive departments, including the U.S. Department of the Treasury, the U.S. Department of Commerce, the Committee on Foreign Investment in the United States (“CFIUS”), the Federal Bureau of Investigation, and the Securities and Exchange Commission to take specific actions to encourage investment from allies and to protect America’s national security interests from foreign adversaries, with a particular focus on the People’s Republic of China (“PRC”).
The White House released an accompanying fact sheet outlining its reasons for issuing the memorandum.
While the memorandum does not implement any immediately effective regulatory changes, it establishes an important framework and plan of action that investors should anticipate eventually coming into effect.
Encouraging Allied Investment
The memorandum encourages foreign direct investment from allied nations by proposing a “fast-track” review process for investments from specified “allied and partner” countries. This is intended to facilitate investments in advanced technology and other strategic areas while ensuring these investors do not partner with U.S. adversaries. Along these lines, the memorandum provides that restrictions on foreign investors’ access to U.S. assets “will ease in proportion to their verifiable distance and independence from the predatory investment and technology-acquisition practices of the PRC” and other adversaries. The United States will also expedite environmental reviews for investments exceeding one billion dollars.
Restricting Inbound Investment Linked to Adversaries
The United States “will use all necessary legal instruments,” including CFIUS, to block PRC-affiliated investments in strategic sectors like technology, critical infrastructure, healthcare, agriculture, energy, and raw materials. This may result in CFIUS expanding its scrutiny of “covered transactions” with PRC links, potentially lowering thresholds for review and increasing mandatory filings for PRC-linked entities (although certain measures could require congressional action). The memorandum also provides that the Trump administration will consult with Congress regarding expansion of CFIUS review to cover “greenfield” and farmland investments, which are currently beyond CFIUS’s authority to review.
The memorandum also directs CFIUS to cease using mitigation agreements for U.S. investments from foreign adversaries, and describes these agreements as “overly bureaucratic, complex, and open-ended.” Any mitigation agreements “should consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.” The memorandum emphasizes that the United States should direct administrative resources toward facilitating investments from key partner countries.
Restricting Outbound Investment Linked to Adversaries
The memorandum also mentions potential new restrictions on U.S. outbound investments to China in sensitive technologies like semiconductors, artificial intelligence (“AI”), biotechnology, quantum, hypersonics, aerospace, advanced manufacturing, and directed energy, and states that the United States will use all necessary legal instruments to further deter U.S. persons from investing in the PRC’s military-industrial sector. It also indicates that sanctions may be imposed under the International Emergency Economic Powers Act to address threats swiftly. The memorandum further states that the Trump administration will consider applying restrictions on various types of outbound investment, including private equity, venture capital, greenfield investments, corporate expansions, and investments in publicly traded securities, from sources such as pension funds, university endowments, and limited partner investors. Last, the memorandum notes that the Trump administration is reviewing Executive Order 14105 on outbound investment, issued by President Biden in August 2023, to assess whether it sufficiently addresses national security threats.
Passive Investments
The President’s memorandum emphasizes that the United States will continue to encourage “passive investments” from all foreign persons and entities, including non-controlling stakes and shares with no voting, board, or other governance rights and that do not confer any managerial influence, substantive decision-making, or access to sensitive technology or information.
Protecting U.S. Investors
Relevant agencies must review existing auditing standards for foreign companies on U.S. exchanges (e.g., under the Holding Foreign Companies Accountable Act), scrutinize variable interest entities often used by foreign adversary firms, and tighten fiduciary standards to exclude adversary-linked companies from pension plans.
Key Takeaways
The “America First Investment Policy” encourages the realignment and prioritization of investment flows between the United States and allied nations, provided that investors have “verifiable distance” from the PRC. As implementation unfolds, investors and businesses will need to navigate this evolving landscape with agility.
For U.S. companies, the memorandum could unlock significant opportunities and challenges. Firms in strategic sectors like semiconductors, AI, and biotechnology may benefit from increased allied investment and expedited project approvals, boosting domestic innovation and jobs. However, a broader range of transactions (such as greenfield transactions) may be subject to CFIUS review, and if a foreign investor has ties to the PRC that CFIUS considers concerning, it could face heightened scrutiny. (Notably, this already takes place, to an extent.)
For foreign investors, the impact hinges on their origin and affiliations. Investors based in allied countries (e.g., Japan, EU member states) without troubling PRC ties stand to gain from the fast-track process, potentially increasing their U.S. market presence if they comply with anti-adversary stipulations. Conversely, PRC-linked firms face heightened barriers. Investors interested in taking advantage of the fast-track process, once implemented, should consider how to best position themselves for fast-track treatment, including through any appropriate adjustments to operations and third-party relationships with China or other foreign adversaries.
SEC Withdraws from Prominent Crypto Enforcement Amid Regulatory Shift
Just over one month into the second Trump Administration, the crypto industry appears poised to notch yet another victory in its longstanding tug-of-war with regulators — perhaps its most significant to date. On February 21, Coinbase Chief Legal Officer Paul Grewal announced via blog post that the U.S. Securities and Exchange Commission (“SEC”) is set to drop its enforcement action against the company. The lawsuit, which claimed that the company had failed to fulfill registration requirements, has been one of the SEC’s highest-profile crypto cases.
The post stated that the SEC had “agreed in principle” to dismiss the case. The action must still be approved by the three sitting SEC commissioners, including Commissioner Hester Peirce and Acting Chair Mark Uyeda, both of whom have previously expressed crypto-friendly views.
This development comes on the heels of announcements from other crypto companies revealing that the SEC has voluntarily closed investigations into their activities. On February 21, OpenSea, the largest NFT marketplace, announced via a post on X that the SEC had closed an investigation into its operations. On February 24, the crypto arm of trading platform Robinhood announced that the SEC had closed its investigation into the company.
Background of the Case
The SEC filed its enforcement action against Coinbase in June 2023 under former-Chair Gary Gensler, alleging that the crypto platform violated securities laws by failing to register itself as a broker, exchange and clearing agency, as well as certain purported offers and sales of securities through its Staking Program. The case centered on the longstanding debate over whether and when digital assets should be classified as securities. Although the company was in the process of pursuing interlocutory review of this question in the U.S. Court of Appeals for the Second Circuit, the SEC’s apparent decision to drop the case would preclude an appellate showdown.
A Shift in Regulatory Approach
Acting Chair Mark Uyeda has stated his goal of developing a “sensible regulatory path” for digital assets, moving away from the aggressive enforcement tactics seen under former-Chair Gensler. Uyeda’s reforms include:
Establishing a “Crypto Task Force” led by Commissioner Peirce to address digital asset policies and pursue greater regulatory clarity. For more details on the Crypto Task Force’s initiatives, see our previous discussion here.
Replacing the SEC’s Crypto Assets and Cyber Unit with the Cyber and Emerging Technologies Unit, a smaller team targeting cyber-related misconduct. Commissioner Peirce indicated in a recent statement that while the SEC aims to provide greater legal clarity, it will not be giving crypto projects a free pass. She expressed that the agency’s aim is to “travel to a destination where people have great freedom to experiment and build interesting things” with no tolerance for “liars, cheaters, and scammers.”
Pausing or reviewing several ongoing crypto cases, indicating that the agency is open to halting certain active enforcement matters or pursuing constructive resolutions.
Looking Ahead
The SEC’s willingness to step away from ongoing enforcement investigations and actions underscores the changing regulatory landscape for crypto under the current administration. Rather than “slamming on the enforcement brakes,” as Commissioner Peirce put it, the agency now appears committed to working with stakeholders to develop forward-looking legislation and a clearer regulatory framework for the burgeoning industry.
For crypto companies navigating uncertain regulatory waters, this development may signal the beginning of a more collaborative era – but not one without scrutiny. Commissioner Peirce has cautioned that “SEC rules will not let you do whatever you want, whenever you want, however you want. Some of these rules will impose costs and other compliance burdens . . . and the Commission will use its enforcement tools when necessary to pursue noncompliance.” As the Crypto Task Force advances its work, further developments in crypto regulation and enforcement are expected in the months ahead.
Medicare Payment Model Trends and Economic Drivers – Awaiting Direction from Trump Administration
The Medicare program continues to face long term financial pressures associated with inflationary effects on health care costs and the growing wave of aging baby boomers. The Medicare Trust Fund, which is often viewed as a foil for health care affordability, has long faced a proverbial financing question. The fund covers Medicare Part A services, including inpatient hospital services and hospice care and skilled nursing services following a hospital stay. Projected solvency risks of the fund improved with the passage of the Affordable Care Act of 2010 (ACA), which, among other things, reduced Medicare payments to Medicare Advantage Organizations and implemented medical loss ratios. However, the fund faced acute short term solvency risks between 2018 to 2023. The fund is currently expected to be depleted in 2036.[1]
Under that economic drop back, the past two decades have seen incredible growth in value-based care reimbursement arrangements, including the rapid growth of the Medicare Shared Savings Program (MSSP) following passage of the ACA, the development of the Center for Medicare and Medicaid Innovation (CMMI) under the Centers for Medicare & Medicaid Services (CMS), and development of narrower alternative payment models (APMs) tested by the CMMI in subsequent years (such as the soon-to-be expiring Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model and the latest episode-based payment model Transforming Episode Accountability Model (TEAM)). Those payment models have improved quality and efficiency of care, while reducing overall cost to the Medicare program.
Indeed, on the heels of those early economic successes, CMS under the Biden Administration set a goal that by 2030 all Medicare fee-for-service beneficiaries with Medicare Parts A and Part B and a vast majority of Medicaid beneficiaries will be in an accountable care relationship for quality and total cost of care.[2] That transition is expected to generate large savings which could shore up the Fund. CMS reported 2.1BN in net savings under the Medicare Shared Savings Program in 2023.[3] Further, Medicare Advantage enrollment is shifting in this direction – as of September 2024, 50.5% of people enrolled in Medicare were participating in a Part C Medicare Advantage Program, up from 39% in 2019.[4]
The payment models package several features and innovations, but generally seek to support the “quadruple aim” – a modification of the “triple aim”, which was highly publicized during the passage of the ACA, to address provider satisfaction. One recent evolution from that policy underpinning is the expansion of population health initiatives to address health inequities.
In recent years, CMS has elevated awareness of the health inequities as a way to address systemic health disparities found in underserviced communities with shared characteristics (e.g., disability or race). Drawing on a substantial body of evidence, CMS has linked health equity with those health disparities in underserved communities which are impacted by preventable health conditions more frequently or severely than individuals outside of those communities. Beginning in 2023, CMS offered health equity adjustments under the Medicare Shared Savings Program to encourage providers to serve and improve care for underserved populations or dually eligible beneficiaries.[5] Beginning in 2025, CMMI offered accountable care organizations (ACOs) participating in the ACO REACH Model a benchmark adjustment for health equity tied to socioeconomic data for specific regions.
Relatedly, CMS has increasingly been recognizing the importance of providing coverage for non-medical aspects of health care services to reduce health inequities. CMS has encouraged providers to address social determinants of health (SDOH) and the specific health-related social needs (HRSN) that impact individuals to promote better health outcomes. For example, from its outset, CMMI’s Enhancing Oncology Model actively incorporated SDOH by requiring participants to screen for HRSNs, report patient demographic data (e.g., race, ethnicity, language, gender identify), and develop plans to implement evidence-based strategies to address health equity gaps in assigned patient populations.
While Dr. Mehmet Oz, the current nominee to lead CMS, is a staunch advocate of Medicare Advantage, it is unclear how the new Trump Administration will view and react to these trends as it retakes the helm at CMS. However, we would expect CMS to consider the economic back drop under which these trends evolved and the resulting data showing that total expenditures for the Medicare Program can be reduced without sacrificing coverage or quality. The payment models – whether the MSSP and CMMI-initiated APMs – are implemented by CMS under contractual arrangements with private insurers, ACOs and health care providers and frequently operate on calendar year periods. Accordingly, we anticipate meaningful changes will be delayed to 2026, giving stakeholders time to prepare.
[1] 2024 Annual Report, Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (May 6, 2024) at https://www.cms.gov/oact/tr/2024 (also noting that the assets of the fund were $208.8 billion at the start of 2024, which was only expected to cover 50% of the anticipated spend in 2024, failing the trustee’s recommended minimum of 100%).
[2] Chiquita Brooks-LaSure and Daniel Tsai, A Strategic Vision for Medicaid and the Children’s Health Insurance Program (CHIP), Health Affairs (November 16, 2021) at https://www.healthaffairs.org/content/forefront/strategic-vision-medicaid-and-children-s-health-insurance-program-chip.
[3] Press Release: Medicare Shared Savings Program Continues to Deliver Meaningful Savings and High-Quality Health Care, Centers for Medicare & Medicaid Services (Oct. 29, 2024) at https://www.cms.gov/newsroom/press-releases/medicare-shared-savings-program-continues-deliver-meaningful-savings-and-high-quality-health-care (lasted accessed Feb. 8, 2025).
[4] 2024 Annual Report, of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (May 6, 2024) at https://www.cms.gov/oact/tr/2024; Medicare Advantage 2020 Spotlight: First Look, Kaiser Family Foundation (October 2019) at https://files.kff.org/attachment/Data-Note-Medicare-Advantage-2020-Spotlight-First-Look.
[5] Press Release: Medicare Shared Savings Program Saves Medicare More Than $1.6 Billion in 2021 and Continues to Deliver High-quality Care, Health and Human Services (Aug. 30, 2022) at https://www.hhs.gov/about/news/2022/08/30/medicare-shared-savings-program-saves-medicare-more-than-1-6-billion-in-2021-and-continues-to-deliver-high-quality-care.html.