Mexico’s Federal Executive Proposes Reforms to Competition Law
On April 24, 2025, Mexico’s Federal Executive sent the Senate a draft decree that aims to reform, add, and repeal several provisions of the Federal Competition Law (the Initiative to reform) to initiate the legislative process.
The Initiative to reform proposes amendments that are divided into four main areas: (i) organic configuration and adjustment of the National Antimonopoly Commission’s powers; (ii) strengthening the Commissions’ powers and improving antitrust procedures; (iii) regulatory adjustments; and (iv) adjustments in telecommunications and broadcasting matters.
(i) Changing the National Antitrust Commission’s Organizational Configuration and Attributions
The initiative proposes eliminating the Federal Economic Competition Commission (COFECE) and creating the National Antimonopoly Commission as a decentralized public agency attached to the Ministry of Economy. The new Commission would have legal personhood, management autonomy, and technical and operational independence.
The Commission’s structure would include a plenary composed of five commissioners the Federal Executive appoints in a staggered manner and that the Senate of the Republic ratifies. The Commission would maintain separation between the investigation and sanction functions.
(ii) Strengthening Powers and Improving Procedures to Combat Monopolies
The Initiative to reform would strengthen the Commissions’ investigative and sanction tools to combat monopolistic practices, as well as illicit concentrations. The main measures include:
Absolute Monopolistic Practices: Article 53 would be amended to sanction anticompetitive information exchanges without the need for a prior agreement.
Concentrations: The timeframe for investigating unlawful concentrations would increase from one to three years, and monetary thresholds would decrease to make more transactions reportable.
Collective Actions: The Initiative to reform specifies that these would be exercised once the administrative resolution is final.
Immunity and Fine Reduction Programs: The terms and benefits would change to encourage early cooperation by the entities under investigation.
Penalties and Enforcement Measures
In addition, the reform would strengthen enforcement measures and sanctions. For example, fines would increase for impeding verification visits ($22,628,000 MXN) and for failure to cooperate in appearances ($3,394,200.00 MXN).
Economic sanctions would become proportional to the damage caused. Examples of penalty increases include penalties of up to 20% of a company’s income for absolute monopolistic practices, 15% for committing relative monopolistic practices or illicit concentrations, and up to 10% for closing a transaction without obtaining an authorization from the authority when this was required.
(iii) Regulatory Adjustments
The Initiative to reform proposes adjustments to update legal references and elevate various regulatory provisions and the organic statute of the former COFECE to the status of law. Among the main adjustments are the following:
Verification and Qualification Procedures
The Initiative to reform proposes to make law the Procedure for Verification of Compliance with Obligations, which seeks to dissuade companies from neglecting to report transactions that may affect competition. This procedure would allow the National Antimonopoly Commission to verify that companies comply with their legal obligations and prevent mergers from taking place without prior supervision, which may result in anticompetitive effects.
In addition, the Qualification Procedure, which establishes criteria to determine whether certain information should be excluded from a file due to protected communications between a company and its defense counsel, would be made law. This seeks to guarantee the protection of confidential information and strengthen companies’ legal security, while ensuring that investigations are conducted in a fair and transparent manner. Strengthening of Investigative Powers
The Initiative to reform seeks to improve the procedures for investigating, notifying concentrations, and issuing opinions, with the objective of making them clearer, faster, and more efficient. Among the improvements are:
More Robust Investigations: The Investigating Authority would receive additional tools, such as inspection procedures, surveys, and data collection, in order to obtain relevant information. This would allow for the timely identification of anticompetitive practices.
Notification of Concentrations: Deadlines for investigating illicit concentrations would extend from one to three years, and monetary thresholds would decrease to make more transactions notifiable (the lowest threshold is $837,236,000 MXN in asset accumulation). This is especially relevant in digital markets, where acquisitions may be complex and difficult to track.
Definitions and Key Concepts
The Initiative to reform expands and specifies the elements that the National Antimonopoly Commission must consider when determining the existence of substantial power, and related markets. These include:
Substantial Power: More detailed criteria would be established to identify whether a company has the ability to fix prices, restrict supply, or exclude competitors without other agents being able to counteract these actions.
Related Markets: The Initiative to reform introduces a clearer definition of this concept that considers the interactions between markets that may influence competition. This is particularly relevant in sectors such as digital, where companies generally operate in multiple, interconnected markets.
These clarifications seek to ensure that the Commission’s investigations and resolutions are technically sound and in line with international best practices.
Transparency
The Initiative to reform aims to reinforce the principle of transparency by ordering the stenographic versions of the Plenary of the National Antimonopoly Commission’s sessions be published.
In addition, the reform proposes that the Plenary’s resolutions be drafted in the citizens’ language, facilitating consumers and companies’ understanding.
(iv) Changes in Telecommunications and Broadcasting
The Initiative to reform includes provisions to regulate cross participation in telecommunications and broadcasting, in compliance with Article 28 of the Mexican Constitution. The National Antimonopoly Commission would impose limits on the concentration of frequencies and concessions and would order the divestiture of assets when necessary to guarantee competition. The procedures related to preponderance would coordinate with the agency in charge of telecommunications and broadcasting policies.
In addition, it states that the legal acts that the Federal Telecommunications Institute (IFT) has issued in matters of economic competition, preponderance, and asymmetric regulation would continue to be effective.
General Impact
The Initiative to reform seeks to consolidate a more robust legal framework to combat anticompetitive practices, strengthen the state’s control over the economy, and promote fairer and more competitive markets.
The National Antimonopoly Commission may be operational by July 1.
Achieving this goal might depend on two key factors:
1.
Congress’ approval of the proposed amendments without significant debate; and
2.
The president’s appointment of the five new commissioners, followed by Senate ratification.
Considering the majority in Congress, these objectives are potentially achievable.
A Common Denominator Governs the Medicare Fraction – SCOTUS Today
In its 2022 decision in Becerra v. Empire Health Foundation, for Valley Hospital Medical Center, the U.S. Supreme Court held that the phrase “entitled to [Medicare Part A] benefits” applied to “all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.” 597 U. S. 424, 445 (2022) (quoting §1395ww(d)(5)(F)(vi)(I); alteration in original).
In doing so, the Court left open the question of what it means to be “entitled to supplementary security income [SSI] benefits . . . under subchapter XVI.” §1395ww(d)(5)(F)(vi)(I).
Today, in Advocate Christ Medical Center v. Kennedy, the Court, in a 7–2 decision (with Justice Barrett writing for the majority and Justice Jackson, joined by Justice Sotomayor, dissenting), held “that a person is entitled to such benefits when she is eligible to receive a cash payment during the month of her hospitalization.” Today’s decision continues the unbroken string of losses that the petitioner hospitals have suffered in this litigation at both the administrative and judicial levels.
Like Empire Health, Advocate Christ Medical Center concerns the so-called “Medicare fraction,” statutorily defined as
“the fraction (expressed as a percentage), the numerator of which is the number of such hospital’s patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter and were entitled to [SSI] benefits (excluding any State supplementation) under subchapter XVI of this chapter, and the denominator of which is the number of such hospital’s patient days for such fiscal year which were made up of patients who (for such days) were entitled to benefits under part A of this subchapter.” §1395ww(d)(5)(F)(vi)(I).
The petitioner hospitals asserted that the “entitled to” phrase encompasses all patients enrolled in the SSI system at the time of their hospitalizations, even if those patients were not entitled to an SSI payment during that month. Unsurprisingly, the hospital’s theory would result in the inclusion of significantly more people into the numerator of the Medicare fraction, thereby increasing the amount of funding a hospital may receive. See §§1395ww(d)(5)(F)(vii)–(xiv). According to their theory concerning the potential adjustment governed by the Medicare fraction, the hospitals claim that the Department of Health and Human Services underfunded them during the fiscal years 2006–2009.
As our readers who are health care lawyers understand, the Medicare fraction concerns a reimbursement rate adjustment known as the “disproportionate share hospital adjustment,” which provides enhanced Medicare payments to hospitals that serve “an unusually high percentage of low-income patients.” The enhancement is based on the assumption that such patients are more expensive to treat than high-income patients.
Justice Barrett succinctly describes what the dispute over the Medicare fraction is about:
The numerator counts “the number of patient days attributable to Medicare patients who are poor”—i.e., those Medicare patients who are entitled to SSI benefits under subchapter XVI. Id., at 430. The denominator counts “the number of patient days attributable to all Medicare patients.” Ibid. When the Medicare fraction is expressed as a percentage and added to the Medicaid fraction’s percentage, the sum of the two yields the “‘disproportionate patient percentage.’” §1395ww(d)(5)(F)(vi). The resulting percentage “determines whether a hospital will receive a DSH adjustment”—and if so, how much. Id., at 431. “The higher the disproportionate-patient percentage,” the more funding a hospital receives.
Barrett goes on to note that the “benefits” in question are cash benefits, a conclusion easily reached given that such benefits are to be “paid” in cash and eligibility for them is to be determined on a monthly basis. Ultimately, the Court concludes that a patient is an individual who is
“entitled to [SSI] benefits . . . under subchapter XVI” when she is eligible to receive an SSI cash payment. And because eligibility is determined on a monthly basis, an individual is considered “entitled to [SSI] benefits” for purposes of the Medicare fraction only if she is eligible for such benefits during the month of her hospitalization.
The essence of the hospital’s and the dissenters’ position is that the wording of the statute should be read as defining entitlement to SSI benefits to mean that a patient is entitled to them “even if she does not qualify for a payment during the month of hospitalization.” However, the majority quickly disposed of that view as being contradicted by Empire Health. Recognizing that Congress had to make a choice with respect to achieving certain economies in the provision of covered health care services, the Supreme Court affirmed the judgment of the U.S. Court of Appeals for the District of Columbia Circuit and held that “[f]or purposes of the Medicare fraction, an individual is ‘entitled to [SSI] benefits’ when she is eligible to receive an SSI cash payment during the month of her hospitalization.”
In what some might see as unusual given recent events, the Court concluded its opinion by stating that “[w]e must respect the formula that Congress prescribed.”
Supreme Court Clarifies ERISA Prohibited Transaction Pleading Standards
On April 17, 2025, the U.S. Supreme Court, in a unanimous opinion, resolved a circuit split and established a plaintiff-friendly pleading standard for ERISA prohibited transaction claims in Cunningham v. Cornell University, No. 23-1007.
Background
The plaintiffs in Cunningham accused Cornell’s retirement plans of engaging in prohibited transactions by paying excessive fees for recordkeeping and administrative services, among other claims. The university contended that these transactions were exempt under ERISA Section 408(b)(2), which permits certain transactions with parties in interest if the compensation is reasonable. The Second Circuit had previously affirmed the district court’s dismissal of the participants’ prohibited transaction claims, ruling that plaintiffs must plead and prove the absence of such exemptions to state a claim under ERISA Section 406(a)(1)(C).
Supreme Court’s Ruling
In a decision authored by Justice Sonia Sotomayor, the Supreme Court reversed the Second Circuit’s ruling. The Court held that plaintiffs are not required to preemptively allege that ERISA’s exemptions do not apply. Instead, the burden is on the plan fiduciaries to raise and prove these exemptions as affirmative defenses. The Court reasoned that:
Affirmative defenses, such as the exemptions at issue, must be plead by the defendant seeking to benefit from them.
It is an undue burden to require plaintiffs to plead the non-application of exemptions since these facts are typically within the defendant’s knowledge and control.
Such preemptive requirement could unfairly force plaintiffs to engage in discovery before having the necessary information.
Implications for ERISA Litigation
The Cunningham decision resolved a circuit split and aligned with the Eighth and Ninth Circuits to treat ERISA exemptions as affirmative defenses rather than necessary elements of the claim to be initially plead by plaintiffs. This standard seemingly makes it easier for plaintiffs to state a prohibited transaction claim and may increase the number of lawsuits surviving motions to dismiss, as plaintiffs are no longer required to anticipate and address potential exemptions. An overall uptick in 401(k) fee litigation is also possible.
The Cunningham court acknowledged that defendants may feel increased pressure to engage in expensive discovery and settlement talks — even in cases they believe are meritless — and pointed to tools to help screen meritless claims, including:
Dismissing claims where Plaintiffs do not have Article III standing;
Limiting discovery;
Rule 11 sanctions;
Cost shifting under ERISA Section 1132(g)(1); and
Using Fed. R. Civ. P. 7(a) to order plaintiffs to address exemptions by filing a reply to answers raising this issue.
Justice Alito’s concurrence echoed the importance of such safeguards while highlighting that Rule 7(a) may be the most promising tool. Still, Justice Alito recognized that Rule 7(a)’s reply mechanism is not a “commonly used procedure,” and thus its effective usage “remains to be seen.”
Ultimately, employers and plan fiduciaries should take note of the Supreme Court’s clarified pleading standard for prohibited transaction claims. Employers should review service provider fee arrangements for reasonableness and confirm that policies are in place to maintain detailed records of fiduciary decision-making.
Delaware’s New Approach To Interested Director and Minority Stockholder Protections
On March 25, Delaware governor, Matt Meyer, signed into law Substitute 1 to Senate Bill 21 (SB 21), following its rapid approval by the Delaware state legislature. This legislative measure aims to counter the current trend of companies relocating their headquarters out of Delaware, following a January 2024 Delaware Chancery Court ruling that overturned a $56 billion compensation package for a high-profile tech CEO.
SB 21 and the changes to the Delaware General Corporation Law (DGCL) it contains could potentially lower litigation risks for Delaware-based corporations, including their directors, officers, and majority shareholders.
This strategic move to refine corporate governance in Delaware will most significantly impact how interested director and interested stockholder transactions are handled. These amendments introduce new safe harbor provisions and redefine key terms, which greatly enhance the protections for interested directors, interested officers, and majority shareholders. As Delaware aims to retain its status as the renowned hub for corporations, often leading the way in corporate law, these changes promise to provide a more predictable and favorable legal environment for corporations.
The amendments took effect immediately following the Governor’s signature and, in most cases, are applied retroactively. Regarding SB 21’s retroactive application, these amendments cover all acts or transactions, regardless of whether they occurred before, on, or after the date of enactment. However, they do not apply to any actions, proceedings, or requests to inspect books or records that were initiated or made on or before February 17, which is when the initial draft of the amendments was first made public.
Interested Director, Officer, and Stockholder Transactions
Prior to the amendments, DGCL §144(a) provided a safe harbor for transactions involving interested directors, ensuring they were not automatically void or voidable due to conflicts of interest, provided that all relevant facts about the director’s or officer’s conflict, including their involvement in the transaction, were fully disclosed. The transaction then had to be approved by (1) a majority of disinterested directors on the board or a board committee, even if they did not constitute a quorum, and (2) a majority of informed, disinterested, and uncoerced stockholders.
If these conditions went unmet, the transaction had to be “fair to the corporation and its stockholders” to qualify for the safe harbor, necessitating compliance with the “entire fairness” doctrine. Entire fairness is historically the highest standard of review in corporate law, requiring boards to demonstrate both fair pricing and fair procedures in transactions with conflicts of interest.
In a recent case, the Delaware Supreme Court demonstrated that transactions could be deemed entirely fair, despite flaws, emphasizing factors like independent negotiation, expert advisory involvement, and informed stockholder approval. The court emphasized that fair dealing and fair pricing can be established through comprehensive vetting, appropriate timing, and market validation, even when certain procedural safeguards are not employed. Although DGCL §144(a) previously ensured that such transactions were not void or voidable solely due to director interest, directors and officers could still face litigation for breaches of fiduciary duties, if they failed to demonstrate entire fairness in the transaction or both of the aforementioned requirements.
The amendments from SB 21 broaden the scope of protection under the safe harbor provisions, now preventing any claims for equitable relief or monetary damages if there is either, (1) approval by a well-informed and functioning special committee with at least two disinterested directors or (2) an informed, uncoerced vote by disinterested stockholders. This significantly lessens the stress on interested parties and corporations, allowing them to transact without the same fear of legal repercussions. However, under SB 21, as discussed below, in a going private transaction where there is a controlling shareholder, both mechanisms, designed to protect minority shareholders from conflicted transactions, must still be used in order to take advantage of the safe harbor.
Controlling Stockholder Transactions
SB 21 amends the DGCL to introduce a more structured framework for transactions involving controlling stockholders. These amendments, particularly to DGCL §144, aim to streamline the approval process for such transactions, excluding “going private” deals, and provide a clearer path to avoid legal challenges if specific conditions are met.
The amendments to DGCL §144(b) establish a safe harbor for transactions involving controlling stockholders. This safe harbor is designed to protect these transactions from actions seeking equitable relief and damages, provided they meet certain criteria. The transaction must be approved, in good faith, by a special committee that has the express authority to negotiate and reject the transaction. The committee must consist of a majority of disinterested directors and must exclude the controlling stockholders. This ensures that the decision-making process is unbiased and focused on the best interests of the corporation and its minority shareholders.
Alternatively, the safe harbor can be applied if the transaction is approved or ratified by a majority of informed, disinterested, and uncoerced stockholders, provided that all material facts regarding the transaction are disclosed to them. This dual pathway for approval offers flexibility, while maintaining rigorous standards for transparency and fairness.
For “going private” transactions, the amendments introduce a new subsection, DGCL §144(c), which outlines a more stringent dual requirement for safe harbor protection. This provision mandates that the transaction must be approved by both a special committee and a majority of disinterested stockholders, with all material facts disclosed to both parties. This is essentially invoking the DGCL’s entire fairness standard of review.
These amendments effectively roll back previous expansions of the MFW Doctrine, which was established in the landmark case of Kahn v. M&F Worldwide Corp. The Delaware Supreme Court had previously ruled that controlling stockholder transactions could be reviewed under the business judgment rule, rather than the “entire fairness” standard, only if such transactions were conditioned on approval by both an independent special committee and a majority of disinterested stockholders.
SB 21 confirms that the full scope of the MFW Doctrine is now limited to going private transactions. For other controlling stockholder transactions, compliance with either of the MFW procedural mechanisms (i.e., approval by an independent special committee or a majority of disinterested stockholders) allows under the business judgment rule. This simplification could potentially reduce litigation risks and provide a more predictable legal framework for corporate transactions involving controlling shareholders.
These amendments reflect a strategic shift in Delaware’s corporate law, aiming to balance the interests of minority shareholders, with those of controlling stockholders. By providing a more predictable and streamlined process for approving transactions, the amendments could encourage more efficient dealmaking.
Now, following SB 21, it is paramount for companies to ensure that all material facts are thoroughly disclosed and that the decision-making process is free from coercion of informed, disinterested, and uncoerced stockholders.
Controlling Stockholder Classification
SB 21 also introduced DGCL §144(e), a subsection that sharpens the focus on corporate governance by clearly defining key terms related to stockholder and director roles. The new definitions are pivotal under the DGCL, especially the term “controlling stockholder,” which now refers to an entity or individual with significant influence, either by owning a majority of voting power, having the contractual right to elect a majority of directors, or wielding equivalent power through substantial voting shares and managerial control. This clarity helps pinpoint who holds sway in corporate affairs, promoting more transparent governance.
In tandem, SB 21 outlines what makes a “disinterested director.” Such a director is uninvolved in the transaction, free from material interests, and lacks significant ties to interested parties. This definition is crucial for ensuring directors act impartially, safeguarding the corporation’s and shareholders’ interests. SB 21 also presumes independence for directors meeting these criteria, a presumption that can only be overturned with detailed evidence, bolstering directors’ defenses against potential shareholder lawsuits. The enhanced protection allows directors to act more freely and confidently, knowing that their independence is presumed and safeguarded against unwarranted challenges. This assurance can make Delaware a more attractive jurisdiction for companies, as it reduces the risk of litigation over director decisions and reinforces the state’s reputation for strong, clear corporate governance standards, potentially discouraging companies from considering relocation.
The amendments further introduce safe harbor provisions for transactions involving conflicted directors or officers. These provisions shield such transactions from legal challenges if they receive approval from an independent board committee with at least two directors or are ratified by a majority of disinterested stockholders. This process ensures that even potentially conflicted transactions are handled with transparency and fairness. The final amendments in SB 21 refine a pre-existing safe harbor provision for disinterested directors, mandating that disinterested director approvals occur within an independent committee context.
Redefining Stockholder Inspection Rights
SB 21 amends DGCL §220, making significant changes to the rights of stockholders and directors in inspecting the books and records of Delaware corporations. Historically, Section 220 allowed stockholders to inspect corporate records for a “proper purpose,” which courts have interpreted to include a variety of reasons such as investigating potential misconduct, engaging in proxy contests, and assessing stock value. Once a proper purpose was established, stockholders were entitled to access records deemed “necessary and essential” to their purpose. However, the scope of what constituted “necessary and essential” had broadened over time, extending beyond traditional board materials to include electronic communications like emails and texts.
The amendments aim to curtail this expansion by clearly defining “books and records” as core materials, such as board minutes from the past three years, board presentations, director independence questionnaires, and communications with stockholders. While stockholders can still request additional materials, they must now demonstrate a “compelling need” and provide “clear and convincing evidence” that these materials are essential to their purpose.
Furthermore, the amendments provide corporations with greater certainty and protection, by allowing them to impose reasonable confidentiality restrictions on the use and distribution of inspected records. Corporations can also redact information that is not directly related to the stockholder’s purpose. These changes address previous challenges where courts sometimes denied confidentiality protections, depending on the circumstances.
Overall, the amendments to Section 220 establish a structured framework for record inspection, aiming to balance the rights of stockholders with the need to protect corporate confidentiality and limit the scope of inspection to truly essential materials.
Navigating Nasdaq and NYSE: Essential Insights for Companies
In 2025, 145 companies have effectuated reverse stock splits. Both companies listed on Nasdaq and on the New York Stock Exchange (“NYSE”) often conduct reverse stock splits to comply with each exchange’s minimum share price requirement of US $1.00. A reverse stock split reduces a company’s outstanding shares while proportionally increasing the share price.
In recent years, Nasdaq has introduced a series of rule changes that make it more challenging for companies to effectuate reverse stock splits to maintain compliance with Nasdaq’s minimum bid price requirement. Furthermore, effective as of April 2025, Nasdaq revised its initial listing requirements such that companies conducting an initial public offering with a subsequent listing to Nasdaq must raise more capital than previously required during times of economic uncertainty and stock market volatility.
Below are the various rule changes companies need to keep in mind when deciding to go public as well as what companies need to know to stay public.
How many companies have been delisted from Nasdaq and the NYSE in 2025?
As of April 21, 2025, there have been an aggregate of 121 delistings from Nasdaq and NYSE.
As of April 21, 2025, 158 companies have received bid price deficiency notices from Nasdaq.
Why are companies being delisted from Nasdaq and the NYSE?
Delistings have mainly been the result of the failure to meet: minimum bid price requirements, market capitalization requirements and shareholders equity requirements. Some delistings are also attributed to mergers.
What triggers Nasdaq to send a bid price deficiency notice?
If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company.
How can a company regain compliance with the Nasdaq minimum bid price requirement?
In order to regain compliance with the minimum bid price requirement, a security must have a closing bid price of $1.00 or more for 10 consecutive business days.
Under certain circumstances, to ensure that a company can sustain long-term compliance, Nasdaq may require the closing bid price to equal or to exceed the $1.00 minimum bid price requirement for more than 10 consecutive business days before determining that a company is in compliance with the bid price requirement. In determining whether to look beyond the 10 consecutive business days for compliance, Nasdaq will consider factors including, but not limited to: (i) margin of compliance (the amount by which the price is above the $1.00 minimum standard); trading volume (a lack of trading volume may indicate a lack of bona fide market interest in the security at the posted bid price); (iii) the market maker montage (e.g., if only one of eight market makers is quoting at or above the minimum bid price and the quote is only for 100 shares, then added scrutiny may be appropriate); and (iv) the trend of the stock price (e.g. is it moving up or down?).
Notwithstanding the foregoing, a company will not be considered to have regained compliance with the bid price requirement if the company takes an action to achieve compliance and that action results in the company’s security falling below the numeric threshold for another listing requirement without regard to any compliance periods otherwise available for that other listing requirement. For example, if a company effectuates a reverse stock split and regains compliance with the bid price requirement but, as a result of the reverse stock split, falls out of compliance with the publicly held shares requirement, the company will continue to be considered non-compliant until both: (i) the other deficiency is cured (e.g. the publicly held shares requirement) and (ii) thereafter the company meets the bid price standard for a minimum of 10 consecutive business days, unless Staff exercises its discretion to extend such 10 day period as discussed above. Additional compliance periods are no longer available as they otherwise would have been for secondary deficiencies prior Nasdaq’s recent rule change. If a company does not regain compliance with the bid price requirement and the additional deficiency during the initial compliance period applicable to the bid price requirement noncompliance, Nasdaq will issue a Staff Delisting Determination Letter.
How long does a company have to regain compliance with the Nasdaq bid price deficiency if it has neither (i) effectuated a reverse stock split in the prior 12 months or (ii) effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one?
If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company,advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements.
Is a company eligible to request Nasdaq grant it a second 180-day compliance period?
Companies Listed on The Nasdaq Capital Market
If a company listed on The Nasdaq Capital Market does not regain compliance with the bid price requirement during the initial 180 day compliance period it may be eligible for a second 180-day compliance period if it meets the market value of publicly held shares requirement for continued listing and all other requirements for maintaining its listing The Nasdaq Capital Market (except for the bid price requirement) and provides Nasdaq with written notice that it intends to regain compliance with the bid price requirement during the second 180-day compliance period by effecting a reverse stock split, if necessary.
Companies Listed on The Nasdaq Global Select Market or The Nasdaq Global Market
If a company listed on The Nasdaq Global Select Market or Global Market is unable to comply with the bid price requirement prior to the expiration of its initial 180-day compliance period, it may transfer to The Nasdaq Capital Market to take advantage of the additional 180-day compliance period offered to securities traded on The Nasdaq Capital Market. Such a company must meet the $1 million market value of publicly held shares requirement for continued listing, and all other requirements for initial listing on Thee Nasdaq Capital Market (except for the bid price requirement) and provide written notice to Nasdaq that it intends to regain compliance with the bid price requirement during the second 180-day compliance period by effecting a reverse stock split, if necessary.
If a company does not provide written notice of its intent to cure the deficiency, or if it does not appear to Nasdaq that it is possible for the company to cure the deficiency, the company will not be eligible for the second compliance period.
If a company has either (i) effectuated a reverse stock split in the prior 12 months or (ii) effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one is it eligible for a 180-day compliance period to regain compliance with Nasdaq’s bid price requirement?
No. If a company has effected a reverse stock split within one year of non-compliance or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company will not be eligible for a 180-day compliance period and the Nasdaq Listing Qualifications Department shall issue a Staff Delisting Determination.
How does Nasdaq calculate whether a company has effectuated reverse stock splits with a cumulative ratio of 250 shares or more during the prior two-year period?
Nasdaq calculates the cumulative ratio of reverse stock splits by multiplying the split ratios. For example, if a company effectuates a 1-for-5 split and a 1-for-10 split in the prior two years, Nasdaq would multiply 5 x 10 such that the cumulative ratio would be 50.
What happens if a company’s price falls to $0.10 or less during the compliance period?
If, during the compliance period, the closing bid price falls to $0.10 or less for ten consecutive trading days, the Nasdaq Listing Qualification Department will issue a Staff Delisting Determination with respect to the security.
What happens if a company fails to regain compliance with the bid price requirement following the expiration of the applicable compliance period?
A company that fails to regain compliance with the bid price requirement following the expiration of the applicable compliance period will be issued a delisting letter and will have its securities suspended from trading on the Nasdaq Stock Market, effective on the 7th calendar day following receipt of Staff’s delist determination. The company may still appeal Staff’s determination which will stay the delisting, but the company’s securities will remain suspended from trading on Nasdaq through the duration of the Hearings Process.
Does a company require stockholder approval prior to effectuating a reverse stock split?
Delaware
Yes, stockholder approval is required to effectuate a reverse stock split. If a company is listed on a national securities exchange such as Nasdaq or the NYSE and the company will continue to meet exchange listing requirements after the reverse stock split, a company may effectuate a reverse stock split if it obtains approval of such split from a majority of the votes cast at a stockholder meeting.
Nevada
Stockholder approval is not required if a company effectuates a reverse stock split of its outstanding shares simultaneously with a proportional reverse stock split of its authorized shares.
Stockholder approval is required if a company effectuates a reverse stock split of its outstanding shares but does not proportionately adjust its authorized shares. Pursuant to Nevada law, a publicly traded corporation may effectuate a reverse stock split if it obtains approval of such split from its stockholders based upon the voting threshold set forth in its charter documents (i.e. either a majority of the voting capital outstanding or a majority of the votes cast).
What other new rules has Nasdaq recently implemented?
Effective as of April 11, 2025, companies seeking to list on The Nasdaq Capital Market or The Nasdaq Global Market in connection with an initial public offering must satisfy the applicable minimum Market Value of Unrestricted Publicly Held Shares (“MVUPHS”) requirement of the Nasdaq Listing Rules solely from the proceeds of the initial public offering. This prevents companies from using shares held by existing non-insider stockholders and offered for resale to meet the public float requirement of Nasdaq’s initial listing standard.
The foregoing rule with respect to MVUPHS does not apply to (i) companies seeking to uplist their securities from the over-the-counter markets (OTC Markets) to Nasdaq and (ii) foreign issuers.
What new rules has NYSE implemented?
As of July 2024, NYSE American no longer accepts applications for initial public offerings unless the gross proceeds from the initial public offering are at least $10 million.
Central Bank of Ireland Updates its UCITS Q&A on Portfolio Transparency for ETFs
In a move that will be welcomed by asset managers conducting exchange-traded fund (ETF) business in Ireland, or those who are hoping to move into the Irish ETF space, the Central Bank of Ireland (the Central Bank) has moved to allow for the establishment of semi-transparent ETFs by amending its requirements for portfolio transparency.
In Ireland, ETFs are typically established as undertakings for collective investment in transferable securities (UCITS), and semi-transparent ETFs are actively managed ETFs that disclose their holdings on a periodic (less than daily) basis.
Previously, the Central Bank only authorised ETFs that published their holdings on a daily basis. This approach was evidenced by the Central Bank’s response to a previous version of its UCITS Q&A 1012 which posed the question, “I am a UCITS and am authorised by the Central Bank as an active ETF. Am I required to provide details of the holdings within my portfolio on a daily basis?”. The Central Bank stated that it would not authorise an ETF, including an active ETF or a UCITS ETF share class of a UCITS, unless arrangements were put in place to ensure that information is provided on a daily basis regarding the identities and quantities of portfolio holdings and that these arrangements must be disclosed in the prospectus of the UCITS.
This daily disclosure requirement had, in the past, been a blocker for certain asset managers wishing to enter the Irish ETF market due to concerns that having to publish holdings on a daily basis could potentially lead to other asset managers short-selling or even copying their investment strategies. On the back of this feedback, the funds industry in Ireland had petitioned the Central Bank to change their position in the hope that it would bring more active managers (i.e., traditional fund managers) to Europe.
The revised Q&A, published by the Central Bank on 17 April 2025, while retaining the ability for ETFs to publish holdings on a daily basis, now provides flexibility in that “periodic disclosures” are now permissible once the following conditions are adhered to:
Appropriate information is disclosed on a daily basis to facilitate an effective arbitrage mechanism;
The prospectus discloses the type of information that is provided in point (i);
This information is made available on a nondiscriminatory basis to authorised participants (APs) and market makers (MMs);
There are documented procedures to address circumstances where the arbitrage mechanism of the ETF is impaired;
There is a documented procedure for investors to request portfolio information; and
The portfolio holdings as at the end of each calendar quarter are disclosed publicly within 30 business days of the end of the quarter.
For asset managers who wish to stick to the status quo and continue to disclose portfolio holdings on a daily basis, they must ensure that (i) the prospectus discloses the type of information that will be provided in relation to the portfolio; and (ii) the portfolio information is made available on a nondiscriminatory basis.
Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), took a similar approach in revising its guidance in late 2024. However, the Central Bank’s updated rules are in fact more flexible than those of the CSSF in that a) they cover both active and passive ETFs and b) only “appropriate information” is required to be shared with APs and MMs of semi-transparent Irish ETFs as opposed to the requirement to disclose full portfolio holdings in Luxembourg.
These new semi-transparent ETFs will be most attractive for active asset managers who have previously been dissuaded from establishing an ETF in Ireland due to their reluctance to share their proprietary information.
Federal Banking Regulators Adopt a Permissive Stance on Cryptocurrency
The federal banking regulators have each recently adopted a more permissive approach to the regulation of cryptocurrency activities within the banking sector. The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve System (FRB) have issued new guidance that relaxes previous restrictions and requirements for banks engaging in crypto-related activities. The three agencies have also withdrawn two interagency statements, the Joint Statement on Crypto-Asset Risks to Banking Organizations (3 January 2023) and the Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities (23 February 2023).
The OCC’s recent Interpretive Letter 1183, dated 7 March 2025, rescinds the earlier Interpretive Letter 1179, which had outlined a supervisory non-objection process for banks engaging in crypto-asset activities. This restores the prior regulatory regime for national banks and federal savings associations and such federally-chartered institutions will no longer be required to receive the OCC’s non-objection prior to engaging in such digital asset activities. The OCC reaffirmed that crypto-asset custody, distributed ledger, and stablecoin activities are permissible for national banks and federal savings associations, as previously discussed in Interpretive Letters 1170, 1172, and 1174. The OCC emphasizes that banks must conduct these activities in a safe, sound, and fair manner, adhering to applicable laws and sound risk management practices.
Similarly, the FDIC has issued new guidance, dated 28 March 2025, which rescinds the prior notification requirement established by FIL-16-2022 for FDIC-supervised institutions wishing to engage in crypto-related activities. The new guidance clarifies that these institutions may engage in permissible crypto-related activities without prior FDIC approval, provided they adequately manage associated risks. The FDIC’s approach aligns with the OCC’s stance, allowing banks to explore new and emerging technologies, including crypto-assets and digital assets, while ensuring compliance with consumer protection and anti-money laundering requirements. The FDIC stated it would work with the OCC and Federal Reserve to replace the interagency statements on crypto-activities.
On 24 April 2025, the FRB rescinded SR 22-6 which required state member banks to provide advance notice of crypto activities and SR 23-8 establishing a supervisory nonobjection process for state member bank engagement in dollar token activities.
State-chartered banks are generally prohibited from engaging in activities that are not permissible for national banks, so the OCC’s recission of Interpretive Letter 1179 removes one hurdle for state-chartered banks engaging in crypto-activities. The FDIC and FRB have removed another hurdle in no longer requiring prior nonobjection. All three of the federal banking regulators are expected to continue to work with the President’s Working Group on Digital Asset Markets and further guidance is needed to address issues not covered in the guidance discussed above, such as the ability of banks to hold crypto-assets other than stablecoins on balance sheet or lend crypto-assets.
SEC Policy Shift and Recent Corporation Finance Updates – Part 2
Since the beginning of the year, the US Securities and Exchange Commission’s (SEC) Division of Corporation Finance staff (Corp Fin Staff) has issued several important statements and interpretations, including a Staff Legal Bulletin on shareholder proposals and multiple new and revised Compliance and Disclosure Interpretations (C&DIs). Given the pace and importance of these recent changes, it is critical that public companies be aware of the significant policy shift at the Division of Corporation Finance and the substance of the updated statements and interpretations.
This is the second part of an ongoing series that will discuss recent guidance and announcements from the Corp Fin Staff. This installment will review the new and revised C&DIs released by the Corp Fin Staff relating to unregistered offerings.
Securities Act Rules
On 12 March 2025, the Corp Fin Staff released a number of new and revised C&DIs relating to Regulation A and Regulation D under the Securities Act and withdrew many C&DIs that were no longer applicable.
Regulation A – Nonpublic Correspondence and State Securities Laws
Regulation A is a framework that is used primarily by smaller companies to raise capital in unregistered offerings. Regulation A has two offering tiers (Tier 1 and Tier 2) that have different eligibility requirements, offering limits, and disclosure obligations.
With respect to C&DIs regarding Regulation A, and specifically Securities Act Rules 251 to 263, the Corp Fin Staff revised three C&DIs to clarify certain filing requirements, requesting confidential treatment during a review, and certain registration requirements. The Corp Fin Staff revised Question 182.01 to specify how issuers can make previously submitted nonpublic draft offering statements publicly available at the time of the first public filing of the offering statement. It also clarifies that Corp Fin Staff will make nonpublic correspondence publicly available at the end of their review of the offering statement.
Revised Question 182.02 provides that during the review of a nonpublic draft offering statement, an issuer can request confidential treatment for correspondence by utilizing Rule 83 in the same way it would during a typical registered offering review. Additionally, Question 182.10 now clarifies that even though securities initially sold in a Tier 2 offering are exempt from registration, registration and qualification requirements under state securities laws are not preempted with respect to resales of the securities purchased in that Tier 2 offering unless separately preempted.
Regulation D – Foreign Issuers, Demo Days, and Accredited Investors
Regulation D provides an exemption from the registration requirements under the Securities Act for limited unregistered offerings and sales of securities. With respect to Regulation D, the SEC revised or issued new C&DIs regarding disclosure requirements for foreign private and Canadian issuers, the interplay between Regulation D and Regulation S for foreign offerings, when “demo days” or similar events would constitute a general solicitation, and verification of accredited investor status.
A demo day is an event in which startup companies can show their product or services to prospective investors. With respect to investor accreditation, issuers are limited in the number of nonaccredited investors they can offer and sell securities to in certain Regulation D offerings, and they have greater disclosure obligations to those nonaccredited investors.
Foreign Issuers
In revised Question 254.02, the Corp Fin Staff removed the reference to disclosure requirements for foreign private issuers being set forth in Securities Act Rule 502(b)(2)(i)(C) when using Regulation D, and this C&DI now just states “yes” to the question of whether foreign issuers can use Regulation D.
Question 255.33 provides that under Securities Act Rule 500(g), as long as a foreign offering meets the safe harbor conditions set forth in Regulations S relating to offerings made outside the United States, then the offering does not need to comply with the conditions of Regulation D (which in part limit the number of nonaccredited investors that can be included). The Corp Fin Staff revised this question to specify that the 35-person limit for the number of nonaccredited investors under Regulation D applies only within any 90-calendar-day period.
The Corp Fin Staff revised Question 256.15 to clarify that under Securities Act Rules 502(b)(2)(i)(B)(1) and (2), a Canadian issuer can satisfy the information requirements of Securities Act 502(b) using financial statements contained in a multijurisdictional disclosure system (MJDS) filing. The revision captures all financial statements rather than just the issuer’s most recent Form 20-F or Form F-1 and requires preparing the MJDS filing in accordance with International Financial Reporting Standards.
Demo Days
Question 256.27 now adds that in relation to “demo days” or other similar events, communications meeting the requirements of Securities Act Rule 148 will not constitute general solicitation or general advertising, even if the issuer does not have a pre-existing, substantive relationship with the persons in attendance. Revised Question 256.33 similarly highlights that if a demo day meeting the Rule 148 requirements is not a general solicitation, then it will also not be subject to limitations on the manner of offering by Securities Act Rule 502(c) (which sets forth limits on issuers from offering and selling securities through general solicitation or general advertising). Events that do not comply with Rule 148 will continue to be evaluated based on facts and circumstances to determine if they constitute a general solicitation or general advertisement.
Accredited Investors
Newly issued Question 256.35 establishes that, aside from the verification safe harbors in Securities Act Rule 506(c)(2)(ii), taking “reasonable steps to verify accredited investor status” first involves the issuer conducting an objective consideration of facts and circumstances of each investor and the transaction. Factors that should be considered under this analysis include the nature of the purchaser and what type of accredited investor they claim to be, the type and amount of information that the issuer has about the purchaser, and the nature of the offering. These factors should be considered interconnectedly to assess the reasonable likelihood that a purchaser is an accredited investor, which then helps the issuer determine the reasonable steps needed to verify that status.
New Question 256.36, in conjunction with Question 256.35, indicates that based on the particular facts and circumstances, a high minimum investment amount for an offering may serve to allow an issuer to reasonably conclude that it took reasonable steps to verify accredited status. This aligns with Securities Act Release No. 9415 (10 July 2013) and the recent Latham & Watkins no-action letter (12 March 2025) issued by the Corp Fin Staff that provides more detail about what conditions, along with a minimum investment amount, would evidence reasonable steps that a purchaser is accredited.
Conclusion
Many of the new and revised C&DIs discussed above are welcome changes and provide greater clarity with respect to unregistered offerings and sales of securities. These C&DIs are just a handful of the new and updated guidance issued by the Corp Fin Staff since the beginning of the year and reflect a policy shift by the SEC overall that will likely be continued in the months ahead.
Sweeping Changes to Indiana’s “Controlled Project” Rules Could Impact Local Governments as Soon as July
On April 10, 2025, Indiana Governor Mike Braun signed Senate Enrolled Act 1 (SEA 1) into law, introducing a number of changes to the state’s property tax and local income tax system.
In the meantime, we want to alert our non-public school corporation clients to a key, time-sensitive change: SEA 1’s expansion of the definition of a “controlled project,” which brings previously exempt projects within the scope of Indiana’s petition-remonstrance and referendum requirements.
Many local government entities have previously undertaken capital projects which were outside the scope of these statutory processes. However, SEA 1 now extends these voter-triggered mechanisms to cover a broader range of political subdivisions and projects, including those initiated by cities, towns, counties, and special districts such as library districts, fire protection districts, and redevelopment districts.
Subject to the controlled project exceptions provided in law, these new categories of controlled projects will apply to any projects:
Approved by a resolution of the non-school corporation governmental entity adopted on or after July 1, 2025; and
Expected to be financed, in whole or in part, by bonds or leases paid from that governmental entity’s debt service fund.
These projects may be subject to the petition-remonstrance process or a mandatory referendum process in accordance with the below:
For Cities, Towns, and Counties:
Current Debt Service Fund Tax Rate
Project Requirements
Less than $0.25
Not subject to petition-remonstrance process or referendum process.
Greater than $0.25 but less than $0.40
Subject to petition-remonstrance process if requested by community.
Greater than $0.40
Must be approved via referendum.
For All Other Political Subdivisions** (Except Public School Corporations):
Current Debt Service Fund Tax Rate
Project Requirements
Less than $0.05
Not subject to petition-remonstrance process or referendum process.
Greater than $0.05 but less than $0.10
Subject to petition-remonstrance process if requested by community.
Greater than $0.10
Must be approved via referendum.
** Category includes municipal corporations, such as library districts, fire protection districts, special service districts, airport authorities, and all other separate local governmental entities that can finance projects through bonds or leases paid from ad valorem property taxes, and all special taxing districts, including, but not limited to, park districts, sanitary districts, and redevelopment districts.
However, governmental entities can avoid triggering the petition-remonstrance or referendum process under SEA 1 by taking the following steps on or before June 30, 2025:
Adopting the necessary ordinance or resolution approving the project and its financing; and
Holding any necessary public hearings related to the project and financing.
If both steps are completed by June 30, 2025, your project will not be subject to the new requirements.
Please note that due to other changes in SEA 1, referenda for controlled projects may only be on the ballot in general elections, so if your upcoming project is subject to a mandatory referendum under the new rules, it will not be on the ballot until November 2026.
EU Regulators Take Different Enforcement Paths for ESMA ESG Fund Name Guidelines
European regulators have taken different routes as to how they plan to enforce the European Securities and Markets Authority’s (“ESMA”) guidelines (the “Guidelines”) with respect to the use of sustainability‑related terms in fund names. The deadline to implement these changes for existing funds is by 21 May 2025 and has applied to new funds in scope from 21 November 2024.
The Guidelines set out minimum exclusionary criteria for funds with sustainability‑related terms in their names as well as requiring minimum asset allocation levels in line with the environmental and/or social characteristics promoted or sustainable investment objectives. For further information on the Guidelines themselves, please see our alert here.
ESMA has commented that a “temporary deviation” from the threshold and/or exclusions requirements in the Guidelines will generally be treated as a “passive breach” and should be corrected in the best interest of investors, provided that the deviation is “not due to deliberate choice” by the fund manager.
Supervisory action may be taken where there are discrepancies in quantitative thresholds that are not explicitly passive breaches or in circumstances where the fund does not demonstrate a substantively “high level” of investments to reference the sustainability‑related term(s) in its name.
As noted by the Responsible Investor (link to article attached here), EU regulators have confirmed a variety of approaches so far, as outlined below:
More stringent approaches
Austria
Austrian Financial Markets Authority
The Austrian regulator stated that any violation of the Guidelines will be committing an administrative offence and liable for a fine of up to €60,000 in line with the Investment Funds Act.
Belgium
Belgium Financial Services and Markets Authority
With respect to enforcement tools, the Belgian regulator has noted that they will look to impose administrative and remediation measures such as orders to be dealt with by a specific deadline if they suspect greenwashing.
Norway
Financial Supervisory Authority of Norway
The Norwegian regulator specified that enforcement will be aligned to possible supervisory actions taken in other areas and may include corrective orders to be determined by the severity of the violations. For more severe violations, fines may be imposed.
Croatia
Croatian Financial Services Supervisory Agency
The Croatian regulator has noted that it will apply a proportionate enforcement approach which can range from formal warnings, requests for corrective action, to administrative measures for serious or repeated breaches.
Lithuania
Bank of Lithuania
In cases of non‑compliance, the Bank will instruct management companies to rectify the situation and sanctions may be applied in accordance with existing regulation.
Liechtenstein
Liechtenstein Financial Market Authority
The regulator has noted that they will evaluate whether enforcement action will be necessary, but that any procedures will follow existing alternative investment fund manager law ranging from warnings to fines.
Spain
Spain National Securities Market Commission
The Spanish regulator has confirmed that it will set reminders to managers to adapt before the end of the transitional period. If non‑compliance is determined after this date, measures will be implemented to align with Spanish collective investment scheme regulations.
Lighter touch approaches
Luxembourg
Luxembourg regulator CSSF
The Luxembourg regulator has noted that subject to relevant circumstances, it may consider further investigation and enter into a supervisory dialogue with market participants where necessary.
Italy
Italian Companies and Stock Exchange Commission
The Italian regulator has confirmed that it will also open dialogue with any managers that might be in breach of the guidelines.
France
Autorité des Marchés Financiers
The French regulator has said that it is planning to rely on its existing enforcement tools to sanction “established” regulatory breaches.
Ireland
Central Bank of Ireland
The Irish regulator has noted that it plans to assess compliance once the implementation period has concluded but has noted that this will be multifaceted in nature.
Denmark
Danish Financial Supervisory Authority
The Danish regulator has commented that supervisory actions will depend on the circumstances, but that “significant breaches” may result in an order being issued to the fund to remedy the situation by a specific deadline.
Germany
BaFin
BaFin has flagged that it has the power to issue orders in line with the German Capital Investment Code, but that the Code does not stipulate that managers should be fined solely on the basis that the fund name is misleading.
Malta
Malta Financial Services Authority
The Maltese regulator has confirmed that they will complete gap analysis to determine fund compliance, which could subsequently lead to other supervisory engagements.
Finland
Finnish Financial Supervisory Authority
The Finnish regulator has not disclosed any current enforcement plans, but not that there are disclosure requirements with respect to ESG thresholds and exclusions present in their current regulatory regime.
Estonia
Estonia Financial Supervisory Authority
The Estonia regulator chose not to disclose any information relating to their supervisory activities due to legal and confidentiality conflicts.
BaFin Publishes Draft Guidance Note on the Influence by Investors
On 14 March 2025, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) published a draft Guidance Note on the possibility of investors taking influence on investment funds. The draft contains explanations and potential concerns regarding investor influence or input on investment decisions by third-party managers to investment funds. BaFin emphasizes the principle of third-party management, according to which the final decision rests with the management company (KVG) or a portfolio manager (in the case of outsourcing). BaFin views instructions as well as approval and veto rights of investors regarding individual transactions critically with regard to the principle of third-party management. BaFin also takes a critical view of acquisition initiatives (recommendations) essentially originating from the investors if the KVG no longer carries out its own evaluation. This may be particularly relevant in connection with institutional funds. The consultation ended on 31 March 2025.
ESMA Publishes Guidelines on the Classification of Crypto-Assets As Financial Instruments
On 19 March 2025, the European Securities and Markets Authority (ESMA) published guidelines on the conditions and criteria for the classification of crypto-assets as financial instruments. According to ESMA, crypto-assets can be classified as transferable securities, money-market instruments, units in collective investment undertakings, derivative contracts or emission allowances in accordance with the Markets in Financial Instruments Directive (MiFID II). In the guidelines, ESMA – like BaFin in the past – reaffirmed the principle of technological neutrality. This means that an asset classified as a financial instrument remains a financial instrument from a regulatory perspective and is primarily regulated by MiFID II even if it is tokenized. For example, a crypto-asset can be a transferable security within the meaning of MiFID II if it is not an instrument of payment, is fungible, and is negotiable on the capital market. A crypto-asset that conveys a proportional share in a portfolio managed according to an investment strategy, without providing investors with control options (e.g., voting rights), is generally a unit or share in an investment fund. In addition, the guidelines serve to further specify the types of crypto-assets. The guidelines apply from 18 May 2025.
EBA Consults on Regulatory Technical Standards for the EU Anti-Money Laundering Package
On 6 March 2025, the European Banking Authority (EBA) published drafts of four Regulatory Technical Standards (RTS) on the European Union’s new anti-money laundering package (AML/TF package) for consultation. The anti-money laundering package consists of four legal acts that were published in the Official Journal of the European Union on 19 June 2024 and are to be applied or implemented in stages from 1 July 2025. Essentially, a new authority will be created that will directly supervise certain financial institutions in the EU, the approaches of national supervisory authorities and Financial Intelligence Units (FIUs) within the EU will be harmonised and a uniform set of rules for the prevention of money laundering and terrorist financing will be introduced for the first time. The consultation is open for feedback until 6 June 2025 and the EBA intends to submit its final report to the European Commission on 31 October 2025.
BaFin Supplements Interpretation and Application Guidance on the German Anti-Money Laundering Act
In March 2025, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) again revised its interpretation and application guidance on the German Anti-Money Laundering Act (Auslegungs- und Anwendungshinweise (AuA) zum Geldwäschegestz), which was last updated on 29 November 2024, and added guidance on crypto-asset service providers and certain issuers of asset-referenced tokens, following the publication of the German Financial Market Digitalisation Act (Finanzmarktdigitalisierungsgesetz) on 27 December 2024. In addition, information on increased due diligence obligations for crypto-asset transfers with self-hosted addresses has been included.
ESMA Consults on Simplification of Insider Lists
On 3 April 2025, the European Securities and Markets Authority (ESMA) published a consultation paper with draft implementing technical standards to extend the simplified format for drawing up and updating insider lists for issuers admitted to trading on Small and Medium Enterprises (SME) Growth Market to all issuers. A corresponding mandate for ESMA can be found in the EU Listing Act. The implementing technical standards are to contain three different model templates for insider lists, which differ depending on whether the respective Member State has decided against limiting insider lists to those persons who, due to the nature of their function or position with the issuer, always have access to inside information. The proposals aim to reduce the burden associated with the creation of insider lists. The consultation ends on 3 June 2025.
BaFin Studies on the Certificates‘ Market
On 12 March 2025, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) published information on two market studies in which it examined the certificates’ market for retail investors, particularly with regard to distribution practices. One study explicitly dealt with interest and express certificates, the other with turbo certificates. BaFin examined both manufacturers and distributors, and also surveyed nearly 2,000 investors who had invested in the relevant products.
In the study on interest and express certificates (investment certificates) conducted from May 2024 to February 2025, BaFin initially noted that while these products had experienced increased sales since the end of the low-interest rate phase, no systematic misconduct or even serious deficiencies were found with regard to product distribution.
However, BaFin criticized the sometimes-flawed design of products with regard to the chosen target market definition and the fact that investors in express certificates often lacked an understanding of their functionality and risks. BaFin has announced, among other things, that it will focus its ongoing supervisory activities on this area.
In the study on turbo certificates covering the period from 2019 to 2023, BaFin noted a sharp increase in the market volume of such products but also came to the conclusion that almost ¾ of investors had to realize losses on their investments during the period under review, which amounted to a total of around EUR 3.4 billion. BaFin intends to publish detailed results in the second quarter of 2025; further measures to protect investors are still being examined.
ESMA Publishes Facilitation For the Provision of Research
On 8 April 2025, the European Securities and Markets Authority (ESMA) published its Technical Advice to the European Commission on the amendments to the research provisions in the MiFID II Delegated Directive. Since MiFID II, analyses (so-called “research“) are generally considered as inducements, meaning that the fees for research services must be paid by the financial service providers subject to MiFID II themselves or from a separate, client-related research payment account (so-called “unbundling regime”). Deviations from these requirements were already permitted for non-large financial service providers as part of the relief measures during the covid pandemic. Further simplifications have now become possible in connection with the EU Listing Act. ESMA therefore proposes the possibility of a joint payment of execution and research fees, regardless of the size of the financial service provider. In addition to an agreement on the part of the financial services provider, further prerequisites are that excessive payments for research and an impairment of the best possible execution of client orders are avoided.
ESMA Publishes Translations of Guidelines on the Common Classification of Crypto-Assets (MiCAR)
On 10 March 2025, the European Securities and Markets Authority (ESMA) published the official translation of the guidelines on templates for explanations and opinions, and the standardised test for the classification of crypto-assets under the MiCAR Regulation.
The guidelines contain the specific templates for:
Content and form of the explanation to be attached to the white paper that the crypto-assets are not a crypto-asset exempt from MiCAR, an e-money token or an asset-referencing token;
Content and form of the legal opinion to be submitted to the authorities for asset-referencing tokens;
A uniform test to be applied by the authorities to classify crypto-assets.
The guidelines will apply from 12 May 2025.
Replacing UK PRIIPs: FCA Consults on Further Proposals for Consumer Composite Investments
The UK Financial Conduct Authority (FCA) has recently published a consultation paper (CP25/9) setting out further proposals on product information for consumer composite investments (CCIs), i.e., investments where the returns are dependent on the performance of or changes in the value of indirect investments.
Background
On 21 November 2024, the UK government enacted the Consumer Composite Investments (Designated Activities) Regulations 2024. This legislation enables the FCA to replace the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation and the Undertakings for Collective Investment in Transferable Securities (UCITS) disclosure requirements that were introduced across the EU when the UK was a member state, with a new domestic framework (the Framework).
The FCA’s initial proposals for the Framework were set out in an earlier consultation paper, “A new product information framework for Consumer Composite Investments” (CP24/30), published in December 2024, which sought to create a more transparent, engaging and flexible disclosure framework for retail investors.
Following the closure of the consultation period for CP24/30 in March 2025 and in response to stakeholder feedback, the FCA has now published CP25/9, a second consultation paper focusing on consequential and transitional issues necessary to support the effective implementation of the Framework. The Framework will apply to products currently subject to the PRIIPs regime, as well as to UCITS funds, in each case where the investment is made available for distribution to retail investors. This will include overseas funds that benefit from the FCA’s Overseas Funds Regime (OFR), and other recognised schemes.
Key Proposals under CP25/9
The most notable proposals under CP25/9 are as follows:
Simplification of Transaction Cost Disclosures: The FCA proposes to remove the requirement for firms to calculate and disclose ‘implicit’ transaction costs (such as ‘slippage’ i.e., the difference between the price at which a trade is executed and the arrival price when the order to trade is transmitted to the market), which it views as complex and of limited value to consumers. Instead, firms will only need to disclose ‘explicit’ transaction costs (e.g., broker fees, exchange fees, and stamp duty), which are deemed easier to measure and for consumers to understand and compare.
Alignment and Rationalisation of Cost Disclosure Rules: CP25/9 proposes to align the cost disclosure requirements in the assimilated Markets in Financial Instruments Directive Organisation Regulation (MiFID Org Reg) with the new CCI rules. The FCA states that this will eliminate duplicative or conflicting requirements.
Transitional Provisions: The FCA outlines a transition period, allowing firms to continue using existing disclosure documents (such as PRIIPs key information documents (KIDs) or UCITS key investor information documents (KIIDs)) or to adopt the new CCI product summary at any point during the transition. The transition period is designed to give firms sufficient time to adapt to the new regime without undue complexity or disruption.
Consequential Amendments to the FCA Handbook: The consultation details the necessary changes to various FCA sourcebooks (including the Conduct of Business Sourcebook (COBS), Collective Investment Schemes Sourcebook (COLL), Investment Funds Sourcebook (FUND), and others) to reflect the replacement of the PRIIPs and KIID regimes with the new Framework. This includes updating terminology, cross-references, and removing obsolete provisions.
Complaints Handling for Unauthorised Firms: Unauthorised manufacturers and distributors of CCIs do not fall within the compulsory jurisdiction of the Financial Ombudsman Service (FOS). As a result, the FCA proposes to apply requirements on unauthorised manufacturers of CCIs (other than operators of OFR funds) to implement ‘reasonable and transparent’ complaints-handling procedures, ensuring that complaints raised by retail investors are dealt with without unreasonable delay and in a competent, diligent, and impartial way.
Enforcement and Supervision: The FCA confirms that its investigative and enforcement powers under the Financial Services and Markets Act 2000 (FSMA) (as amended by the FSMA (Designated Activities) (Supervision and Enforcement) Regulations 2024) will apply to both authorised and unauthorised persons carrying out CCI activities, designed to ensure robust oversight of the new regime.
Next Steps
The consultation period for CP25/9 closes on 28 May 2025. The FCA intends to publish a combined policy statement responding to feedback on both CP24/30 and CP25/9, with final rules in late 2025. In addition, the FCA anticipates that the new CCI regime will come into force for all firms at the same time, with the transition period and effective dates to be confirmed in a forthcoming policy statement.
CP24/30 and CP25/9 are available here and here, respectively.