They discuss how companies may respond to the different federal government whistleblower programs, as well as the shift in priorities under the current administration, including investigating federal contractors.

A preview of the conversation can be found in the Q+A below.

Sabrina: What are trends you’re anticipating or areas you’re watching in the whistleblowing space?

Annie: One significant area of focus, where we are already seeing activity, including based on whistleblower tips, is investigations of federal contractors. Earlier this year, the administration announced its Civil Rights Fraud Initiative, the purpose of which is to “investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws.” The Initiative is intended to enforce policies announced in various recent Executive Orders aimed at certain forms of discrimination.

Kamil: We expect that universities could be a particular area of focus as a basis of a False Claims Act action and that action could be pursued on the ground that the university is violating the DEI policies that you just discussed in these Executive Orders. While we have not yet seen… a False Claims Act enforcement action brought against a university by the Civil Rights Fraud Initiative, according to news reports, investigations by the DOJ have started based on this theory.

They also compare how the current and prior administrations have approached AI through executive orders, and examine recent parallel criminal and civil cases brought by the Department of Justice and Securities and Exchange Commission for alleged “AI-washing,” which refers to a company’s false or misleading statements about its use of AI and the capabilities of its AI program.

A preview of the conversation can be found in the Q+A below.

Sabrina: Mehdi, could you describe the recent legislation to protect AI whistleblowers and how it came about?

Mehdi: Introduction of this bill comes on the heels of commentary from Senator Grassley and others expressing concern that employment and non-disclosure agreements may be stifling employees of AI companies from making protected disclosures to government regulators. … It is worth noting that current whistleblower protections under Sarbanes-Oxley and Dodd-Frank are generally tied to reporting unlawful activity. This Act would be broader, covering disclosures about risks that may not yet be illegal.

Sabrina: Kamil, what would Senator Grassley’s proposed AI Whistleblower Act do? 

Kamil: Importantly, unlike other regimes discussed in prior episodes, the legislation does not purport to offer the opportunity for a large monetary reward for blowing the whistle. It does, however, contain a section called “Anti-Retaliation Protection for AI Whistleblowers.” That section protects a whistleblower who provided information regarding an AI security vulnerability or conduct the whistleblower reasonably believes to be an AI security vulnerability or AI violation from a range of retaliatory conduct, including demotion, suspension, threats, harassment, or termination.

They start off with brief background on antitrust law and then discuss the new whistleblower program and how it reflects a change in the Antitrust Division’s approach.  

A preview of the conversation can be found in the Q+A below.

Sabrina: Kamil, can you speak to the genesis of the Antitrust Division’s new whistleblower program and how it fits into existing DOJ Antitrust policies? 

Kamil: Since the 1990s, the Antitrust Division has had a “leniency policy.” Broadly speaking, when an organization or individual is the first to report that it engaged in a criminal conspiracy, it can receive non-prosecution protection. Under the statute known as “ACPERA,” the first to report these conspiracies can also receive a variety of benefits in related civil litigation as well. The leniency policy is an important enforcement tool for the Antitrust Division. It creates a powerful incentive for companies and individuals to self-report in order to avoid or mitigate criminal prosecution and penalties.

Then, on July 8, the DOJ Antitrust Division announced a partnership with the U.S. Postal Service to create a Whistleblower Rewards Program for reporting criminal offenses on “antitrust crimes and related offenses.” Under this program, whistleblowers who voluntarily provide information about antitrust offenses that result in at least a $1 million recovery may be eligible to earn a reward, which is presumptively 15-30 percent of the amount of the fine or recovery.  

Sabrina: Kyle, what are the eligibility requirements of this new program?

Kyle: There are a few key eligibility requirements we should touch on: (1) the tip must relate to an eligible criminal violation; (2) the whistleblower must provide original information; and (3) there must be a nexus to the U.S. Postal Service. Taking the first requirement first. The whistleblower must provide information relating to an eligible violation under this Antitrust program. It can’t be a tip on just anything.

A preview of the conversation can be found in the Q+A below.

Isaac: Let’s talk a little bit about green energy and the IRA. I was hearing that some rollback of the IRA was happening, but that the more established technologies like wind and solar should be largely safe, but it’s almost like the opposite happened. Aharon, did something change as part of the negotiations of the bill?

Aharon: I think there’s an underlying current amongst Republicans as to wind and solar subsidies needing to be done with. For decades, these industries told Republicans that they need temporary incentives in order to get them off the ground, but at some point in time they would be able to be sufficient on their own and compete in the marketplace. This conversation has been going on for 20 years and I think Republicans started asking more questions as well and just thought it was time to start cutting it off. I also think from a policy perspective, there have been more questions asked on the Republican side of the aisle with regard to how solar and wind, because they’re temporary, affect the grid.

Isaac: Let’s move on to regulatory guidance because a big part of what now tax policy moves towards is what do the regulations look like that are interpreting the bills. Bella, do you want to discuss this? 

Bella: There’s over 60 calls for regulations by the Treasury for this bill. Some of it is to explain and provide details or rules and some of it is to make the mechanics work. And even beyond those that are specifically authorized in the tax, there are other provisions that will require Treasury to provide guidance and explanations to taxpayers about. So I think it will be interesting to see what they prioritize, what comes out first of how various provisions are interpreted, particularly given the lack of legislative history.

A preview of the conversation can be found in the Q+A below.

Isaac: Aharon, was there anything interesting about the timing of The One Big Beautiful Bill, maybe relative to other reconciliation bills?

Aharon: I think a good comparison to this bill is the Tax Cuts and Jobs Act or TCJA, which wasn’t signed until December 22, 2017, and I think that relates to a lot of the fundamental differences between the TCJA and the OBBBA. I think a real difference in the process in 2017 was that the bill followed more of a “respecting congressional traditions” with regards to how markups are conducted and how legislation moves. Another key difference was that the Senate Finance Committee actually held the markup in 2017.  They didn’t hold the markup this time around. Also in 2017, there was a formal Conference Committee, which has become increasingly rare in recent decades. This time around the House passed the bill.

Isaac: Davis, do you want to discuss “carried interest”?

Davis: I don’t think that people thought that there was a need to have this in the legislation. On the other hand, on the campaign trail, President Trump had said that he was inclined to repeal the exception that carried interest had enjoyed.  So, there was always this question of whether carried interest should in fact come back into play. But again, to the surprise of many, not only did it not make it into the legislation, it never touched any of the iterations of the legislation. It was not in the House bill or the Senate bill.

They touch on the recent downward trend in SEC whistleblowing enforcement and contrast that against the opposite trend under other programs, in part driven by a growing focus on whistleblowers as a potential means of pursuing investigative priorities.

A preview of the conversation can be found in the Q+A below.

Sabrina: Kamil, can you start us off with brief background?

Kamil: In the U.S., there are a variety of avenues for a whistleblower to consider.  For example, the SEC, Federal Reserve, CFTC, and a provision of the False Claims Act have long provided an avenue for whistleblowers to come forward. More recently, DOJ Criminal and DOJ Antitrust have developed respective whistleblowing programs.

Sabrina: We’ve been seeing an incredible amount of coverage on whistleblowing cases, regimes, and proposed legislation.  But against this background of heightened attention to whistleblower activities, we are seeing a downturn in SEC awards.  Annie, can you give some background?

Annie: As reported in the past couple of weeks, the SEC has denied over 30 consecutive awards this year between late-April and mid-July. In fact, only about $20 million has been awarded this year.  Although we’re only a little more than halfway through the year, that is a drop in the bucket compared to last year, when the agency awarded over $255 million to 47 individual whistleblowers. This may reflect a change in approach and priorities at the SEC. For example, under the last administration we saw a significant uptick in SEC enforcement actions related to the SEC whistleblower protection rule, Rule 21F-17. Under the current administration, however, we have not seen any SEC whistleblower rule enforcement actions to date.

They explore key enforcement risks stemming from recent tariffs and discuss the potential for civil litigation under the False Claims Act. A preview of the conversation can be found in the Q+A below.

Andrew: Customs fraud and tariff evasion are now listed as the Department’s second-highest white-collar criminal enforcement priority. What does that signal about how the government is approaching these issues today?

Sharon: It’s a fundamental shift. For years, customs-related violations were typically addressed as regulatory infractions, or occasionally, in egregious cases as criminal prosecutions involving false statements, conspiracy to defraud the government, or smuggling. Those violations didn’t even make the list of priorities. But the posture today is markedly different. DOJ has identified customs and tariffs fraud as a top corporate criminal enforcement priority, signaling a shift for companies with global supply chains.

Andrew: What makes the FCA such a powerful statute in the trade context?

Tom: The False Claims Act is fundamentally about ensuring the government receives what it's owed. One thing that makes it so potent, especially in the trade space, is the low standard for triggering liability. The FCA doesn’t require proof of specific intent to defraud. Instead, companies can be held liable if they submit false information “knowingly”—which includes acting in reckless disregard or deliberate ignorance of the truth. That’s a lower threshold than what’s required for criminal prosecution under criminal smuggling or IEEPA’s criminal provisions.

Annie and Kamil provide background on the FCA and explain its role in investigations of and actions focused on alleged fraud in connection with government programs. They also cover recent notable settlements, with recoveries amounting to hundreds of millions of dollars.

They also delve into Executive Order 14173, which has implications for the use of the FCA, focusing on antidiscrimination laws. The discussion includes recent court actions and the administration’s emphasis on investigating and penalizing illegal DEI practices in the private sector. 

To learn more about risks and opportunities under the FCA in the new tariff environment, read Partner Thomas White and Special Counsel Andrew DeFilippis’ article in Bloomberg Law “New Tariff Environment Poses Big Risk and Opportunity Under FCA.”

Topics include the role of injunctive relief, the impact of mandatory disclosure regimes and related internal investigations

They explore protections that can mitigate risk when an employee leaves, including electronic measures to limit or disable access to information; policies, procedures, and contractual requirements, such as nondisclosure agreements; and monitoring activities of a competitor who has hired former employees.  They also discuss how to limit the risk of new employees bringing trade secrets from their former employer. 

Annie, Alex and Sabrina also discuss the importance of training and culture, including reminding employees that they do not own trade secrets they are privy to or contribute to in their work. 

They discuss how non-compete provisions in employment contracts can help mitigate the risk of employees taking confidential information to competitors and the challenges associated with enforcing non-competes.

Annie, Alex and Sabrina also cover the concept of “inevitable disclosure” of confidential information, recent court cases related to non-competes and trade secrets, and the implications of the FTC's efforts to invalidate non-compete agreements on a federal level.

Annie, Alex and Sabrina highlight the importance of understanding both state and federal laws to protect trade secrets and discuss the forms of relief available, such as injunctive and monetary relief.

Boards should stay informed and be proactive, Nader and Jay note. With regulations around AI still evolving, having a robust governance framework can protect a company from potential legal issues and enhance a company’s reputation for responsible and ethical AI use. 

Disclaimer: This is not legal advice.

Since Congress passed the Multidistrict Litigation Act in 1968 and created the MDL process, there have been no specific rules dictating how judges should manage MDLs, beyond the Federal Rules of Civil Procedure that apply in every federal civil case.

In 2017, the Advisory Committee established an MDL Subcommittee to consider whether new rules should be added to address the unique challenges of MDLs. Rule 16.1, which is designed to guide MDL courts in addressing the various and complex issues unique to MDL proceedings, is the first proposed rule to come out of the MDL Subcommittee’s efforts.

Annie and Kamil cover the increase in enforcement actions and investigations into employment and other agreements that the SEC and other regulators view as potentially impeding, preventing or discouraging whistleblower activity. They also discuss new programs aimed at further incentivizing whistleblower reporting to the government, such as the Whistleblower Pilot Program created by the United States Attorney’s Office for the Southern District of New York.

In addition, the governments of nations such as Russia and China have enacted an array of sanctions, export and other control measures, which can subject multinational companies to highly challenging situations with conflicting sanctions regimes. In this environment, companies and financial institutions must address a range of national security risks and considerations when establishing or executing their business operations, legal decision-making and compliance programs.

In this podcast, former federal prosecutors Sharon Cohen Levin, Nicky Friedlander, Tony Lewis and Amanda Houle discuss major developments in national security enforcement, including the Department of Justice’s increased focus on this area. Sharon led the Money Laundering and Asset Forfeiture Unit in the U.S. Attorney’s Office for the Southern District of New York for two decades; Nicky is a former Chief of the Complex Frauds and Cybercrime Unit in the U.S. Attorney’s Office for the Southern District of New York; Tony was the Deputy Chief of the Terrorism and Export Crimes Section in the U.S. Attorney’s Office for the Central District of California; and Amanda was Co-Chief of the National Security & International Narcotics Unit in the U.S. Attorney’s Office for the Southern District of New York.

Michelle and June review key ESG developments in 2023, noting a trend of growing divergence in ESG requirements and expectations at the international, federal and state level. This trend creates uncertainty and challenges for financial institutions.

In light of the uncertainty and rapid developments in the ESG space, Michelle and June offer practical guidance for financial institutions, including the need to continue to closely monitor the changing ESG landscape and to adopt a coordinated approach to compliance in order to mitigate the risks of fragmented and reactive responses.

While we avoided a recession in 2023, ongoing economic uncertainty, rising interest rates, regulatory headwinds and geopolitical tensions contributed to a second year of falling activity levels in global M&A following 2021’s record-breaking year.

M&A deals continued to face scrutiny from antitrust and foreign investment regulators in the United States and globally. In 2023, the EU adopted its new Foreign Subsidies Regulation, and in the United States, the FTC and DOJ proposed changes to the HSR rules and issued Draft Merger Guidelines.

Cross-border M&A activity remained significant at $707 billion during the first nine months of 2023, but was down 21 percent compared to a year ago. Geopolitics, sanctions and foreign investment and competition regulation explain some of the trends in cross-border M&A, as investment pivots to align with countries’ political affiliations.

Frank and Melissa expect to see more blends of traditional acquisition financing mixed with private credit solutions in 2024. They anticipate a significant uptick in activity this year with an increase in strategic buyers executing on deals, private equity buyers and a rebound in the cross-border deals.

Marc and Melissa explore the ongoing trend of increased shareholder proposals focused on environmental, social and political topics and touch on ESG as it relates to the broader legislative and political climate. ESP-focused shareholder proposals and ESG issues are at the center of a growing web of legislation and government actions at multiple levels.

They also note that companies may be looking to implement an officer exculpation provision in 2024.

Julie, Tracy and Annie examine pending employment and contracting cases that may be affected by the Court’s decision, cover related shareholder proposals and offer guidance for employers, including reviewing hiring and promotion processes and procedures to examine whether any decisions are expressly based on race, gender or other protected classes. 

Connor, John and Sam provide insight on how Australia might benefit from the Australia-United States Climate, Critical Minerals and Clean Energy Transformation Compact, which was formed this year to provide a framework for the countries to work together to reduce the cost of clean energy technologies and lay the foundation for the global clean energy economy.

They also discuss the possible designation of Australia as a “domestic source” for purposes of the U.S. Defense Production Act, which would provide benefits to Australian companies operating under certain contracts with the U.S. government. Finally, they provide an overview of loans and tax credits under the U.S. Inflation Reduction Act that are available for Australian companies with critical minerals and clean energy projects in the United States.

Joe, who helped develop the 2010 horizontal merger guidelines that would be replaced by the new guidelines, notes that the new guidelines would create more uncertainty about what kinds of mergers the government is going to choose to challenge. Joe expects that the government is most likely to focus on merger activity by so-called dominant firms that have more than a 30 percent market share, even though a much broader set of concerns is raised in the new guidelines. He also expects that going forward courts may not give as much credence to the new guidelines given their break from prevailing tradition, and thus paradoxically the new guidelines may make it harder for the government to prevail in court.

Melissa points out some of the practical ways the draft guidelines might impact M&A deals. Parties would need more advance planning around potential antitrust issues, with hostile and topping bidders in particular needing to create clear plans to obtain timely clearances. She also would expect to see a shift in antitrust risk allocation provisions, including changes in reverse break fees, operating restrictions that apply between signing and closing, and “hell or highwater” clauses.

The False Claims Act (FCA) authorizes qui tam actions by private parties, called “relators,” who sue on behalf of the United States. The government may intervene and take over litigating the case during the “seal period”—the window at the outset of the action during which the case is sealed. If the government chooses not to intervene, the relator litigates the action. But the government has a right to intervene later for “good cause.”

In Polansky, the government chose not to intervene during the seal period, but years later, moved to dismiss the case. The relator argued that the government could not do so because it had not intervened during the seal period. The government responded that it could move to dismiss without intervening at all.

The Supreme Court adopted neither position. Instead, it held that the government may move to dismiss over a relator’s objection an FCA action so long as it moved to intervene at some point.

Annie and Tracy note that the qui tam provision of the FCA remains a powerful tool for prosecutors to encourage whistleblowers to come forward.  But a relator’s path to success may seem more uncertain after the Court’s decision.

The Sarbanes-Oxley Act, as modified by the Dodd-Frank Act, provides protections and incentives for whistleblowers who report potential violations of the securities laws. Dodd-Frank also incentivizes potential informants to come forward by authorizing the SEC to grant awards to whistleblowers.

Annie and Tracy discuss two recent amendments by the SEC to its whistleblower program that appear to reflect the agency’s readiness to grant more and larger awards. One authorizes the SEC to make awards for related, non-SEC actions, even if they may be more directly connected to other agencies. The second gives the SEC discretion to grant a larger award in appropriate circumstances.

They also discuss two cases recently brought by whistleblowers against the SEC in the Third and Fifth Circuits involving the agency’s denials of whistleblower awards. 

In the current economic climate,  many companies are evaluating whether they are deploying their assets in a way that maximizes value, and financial sponsors are open to more complex opportunities. Carve-out transactions, in either an M&A or a spin-off context, can be a particularly attractive option.

In either context, there are several considerations to keep in mind, including tax aspects and impacts on financing arrangements for the parent company; the need for third-party consents; the relationship between the carved-out business and parent company going forward; and, if the company opts for a spin-off, the choice of listing venue and potential flowback risks.

Slack Technologies went public through a direct listing, which allows existing shareholders to sell their unregistered securities on the first day of public trading at the same time as the company’s registered shares are sold. Slack claimed that the plaintiff in this case lacked standing to sue because he could not trace the purchase of his Slack shares to the registration statement.

The issue before the Court was whether Section 11 of the Securities Act of 1933 requires plaintiffs to plead and prove that they purchased securities registered under the registration statement they allege is materially false or misleading. In a win for defendants, the Supreme Court unanimously held that the plaintiffs must plead and prove these facts, reversing the U.S. Court of Appeals for the Ninth Circuit.

Jeff and Julia discuss how the ruling reaffirms the longstanding interpretation of Section 11 and note that the Court’s decision could encourage more companies to go public through a direct listing. The ruling might also encourage legislative efforts to improve tracking of the ownership and registration of securities, including through the use of blockchain technology.

The IRA, which was passed in August 2022, is the largest investment in clean energy in U.S. history and  is expected to unleash a new wave of energy transition projects across the United States. It introduced new or enhanced credits for renewable energy, clean electricity investment and production, energy storage, clean hydrogen, electric vehicles, clean technology manufacturing, sustainable fuels and carbon capture.

While the IRA has opened up numerous opportunities for energy transition projects,  there are still a number of uncertainties, including final rules on direct pay and transferability, the potential impact of the OECD’s Pillar Two rules and how debt ceiling discussions may impact availability of IRA tax credits.

Sullivan & Cromwell represented Fiat in this litigation. 

In the United States, the Inflation Reduction Act (IRA), which was passed in August 2022, provides an estimated $369 billion in investments in energy security and climate change programs and also creates significant tax incentives for critical minerals to be extracted, processed and/or recycled in the United States or countries that are trade partners with the U.S.

Proposed by the European Commission in March 2023, the Critical Raw Materials Act (CRMA), aims to secure the EU’s supply of critical raw materials and bolster Europe’s own extraction, processing, refining and recycling of strategic raw materials. The CRMA would create a European Critical Raw Materials Board, set EU-wide targets for annual consumption of strategic raw materials, and establish a streamlined permitting process for strategic projects. However, unlike the IRA, it does not provide any additional funding.

In Bissonnette v. LePage Bakeries Park St., the plaintiffs, who delivered baked goods to stores and restaurants, claimed they were transportation workers, which would exempt them from Section 1 of the FAA. The Second Circuit held that because the plaintiffs charged for the baked goods, the transportation was incidental and the plaintiffs were in the baked goods industry and therefore not excluded from the FAA. After the Supreme Court issued its Saxon ruling a month later, the Second Circuit panel reconsidered Bissonnette, but adhered to its original ruling, which affirmed the district court order compelling arbitration.

In Chamber of Commerce v. Bonta, a divided Ninth Circuit panel examined a California law, A.B. 51, that broadly prohibits employers from requiring mandatory arbitration agreements. Reversing a district court, the majority held that the A.B. 51’s restrictions are valid but could not be enforced if an unlawful agreement was entered into.

After the Supreme Court issued its ruling in Viking River Cruises, the Ninth Circuit panel reheard the case and came to the opposite conclusion, upholding the district court’s injunction against A.B. 51.

Annie and Diane said that in light of the Chamber of Commerce ruling, they expect California employers who had temporarily gotten rid of their arbitration agreements to be revising those policies. The Saxon and Bissonnette decisions left things less clear, but clients may wish to reexamine arbitration agreements to ensure employees’ work is characterized properly.

Isaac and Davis start off by discussing Internal Revenue Code Section 4501, commonly referred to as the one percent buyback tax, which is intended to encourage corporations to reinvest excess cash in their operations rather than buy back stock.  The IRS clarified that some transactions will not be considered buybacks, such as corporate liquidations for many SPACs, while redemptions of preferred stock do appear to be subject to the tax.

On FIRPTA, they discussed guidance to determine in if an entity qualifies for an exemption from U.S. real property holding company status, including whether the IRS will look through partnerships and certain corporations.

Michelle and June recap recent ESG-related legal and regulatory developments in the banking, asset management and insurance sectors. The OCC, FDIC and the Federal Reserve proposed principles for climate-related financial risk management for large financial institutions, and the federal banking regulators plan to work together to issue consistent interagency guidance. State-level regulators, including the New York Department of Financial Services, are beginning to propose climate-related guidance which is intended to align with the work of federal and international banking regulators.

A key development in 2022 was the SEC’s proposal of climate disclosure rules. Michelle and June discuss the impact that the proposed rules may have on financial institutions, as well as the impact of overlapping ESG-related requirements from lawmakers abroad, including in the United Kingdom and the European Union.

Michelle and June also examine other ESG challenges that financial institutions may face, including “anti-ESG” scrutiny around climate targets and memberships in net-zero alliances, increased regulatory enforcement and litigation risk related to ESG and the potential impact of the Supreme Court’s decision last year in West Virginia v. EPA on U.S. federal agencies’ ability to regulate ESG activities.

Annie and Kamil discuss recent Department of Justice enforcement activity involving whistleblowers under the FCA’s qui tam provision, which permits private citizens with knowledge of fraud to sue on behalf of the government. In particular, several of the matters involved the healthcare industry, underscoring that this an active area for qui tam litigation and enforcement actions.

In addition, Annie and Kamil discuss several qui tam cases currently pending before the U.S. Supreme Court. One of those cases, United States, ex rel. Jesse Polansky v. Executive Health Resources, Inc., addresses the issue of whether the government has the authority to dismiss a FCA suit after declining to proceed with the action. The Supreme Court will also hear argument on two consolidated cases from the Seventh Circuit regarding the applicable standard for scienter under the FCA.  The Supreme Court’s decisions in these cases will be of critical importance for FCA whistleblowers and entities contracting with the government more broadly.

Steve, Jeff and Julia discuss numerical trends in private securities litigation. Although such litigation has slowed overall, certain types of lawsuits, including those with ESG and SPAC-related claims, have increased. The episode also explores recent court rulings from the Second Circuit, the Ninth Circuit and the California Court of Appeal with significant implications for securities litigation, as well as noteworthy developments in cryptocurrency-related filings.

For an in-depth discussion of these topics, read S&C’s Securities Enforcement and Litigation Update.

Among the topics discussed, the group examined the record-breaking activist campaign activity in the first quarter of 2022, which persisted despite the continued market volatility and macroeconomic uncertainty that dampened activity levels in 2020 and 2021. Additionally, they explored how the nature of campaigns shifted in 2022, with a greater focus on corporate strategies and operations and a reduced focus on capital allocation and M&A.

Companies have shown greater resistance to activist demands, they noted, by adopting shareholder rights plans and settling with activists more slowly. This led to decreased success in activists obtaining board seats compared to recent years.

They explained that shareholder activism activity in 2023 is expected to be impacted by a variety of factors, including new and proposed policies for institutional investors, new universal proxy rules, the DOJ’s enhanced scrutiny of interlocking directorates under Section 8 of the Clayton Act, upcoming implementation of the Inflation Reduction Act and the potential adoption of the SEC’s proposed rules on share buybacks and amendments to Schedule 13D.

For more information about this topic, read S&C’s review of 2022 U.S. Shareholder Activism and Activist Settlement Agreements.

Steve, Jeff and Julia discuss the SEC’s enforcement and regulatory activity relating to ESG disclosures, digital assets and SPACs. They also highlight the SEC’s focus on insider trading, market manipulation and recordkeeping. The episode concludes with a review of court challenges to the SEC’s enforcement powers.

For an in-depth discussion of these topics, read S&C’s Securities Enforcement and Litigation Update.

Following a record-setting year in 2021, a numbers of factors at the beginning of 2022, including soaring inflation, rising interest rates and geopolitical events, such as Russia’s invasion of Ukraine and the deterioration of U.S.-China relations, led to some of the slowest quarters in M&A globally since the onset of the pandemic.

The regulatory landscape for mergers has also shifted, both in the United States and globally, with the Federal Trade Commission and U.S. Department of Justice under the Biden administration taking a more aggressive approach to antitrust enforcement, especially in the labor, agriculture, healthcare and tech sectors. Despite the agencies’ willingness to bring enforcement actions and litigation against proposed mergers, judges have frequently relied upon existing precedent to rule in favor of merging companies.

De-SPAC transactions have seen increased focus as well, both from regulators and litigants, resulting in the demise of SPACs throughout last year, which is expected to continue into 2023 and beyond.

Despite a general slowdown, several factors may lead to an uptick in activity in the first quarter of 2023, such as the strength of the U.S. dollar, a continued push for M&A activity by activists in the United States and abroad, the death of potential antitrust bills in Congress and the shift to more realistic projections from potential target companies, which make it more likely for buyers to make attractive offers.

With Democrats and Republicans narrowly controlling the Senate and House, respectively, it is unlikely that the United States will see significant standalone tax policy passed in the next two years. However, progress is possible on a few fronts, including the Extenders Bill, which would extend expiring deadlines for a range of tax legislation, and the Secure 2.0 Act, which will give part-time workers better access to retirement benefits and increase the age when required minimum distributions must start. Some tax legislation could also become law by being included in a must-pass bill, such as the National Defense Authorization Act.

Most likely, changes to tax policy will occur at the Treasury- or IRS-level rather than through Congressional action, although political dynamics and other factors could slow policymaking in those arenas as well.

They also discuss how the new balance of power in Congress could make it more difficult for the United States to align with global tax initiatives, such as the Organisation for Economic Co-operation and Development’s Pillar II proposals for a global minimum corporate tax.

Carsten and Olivier discuss some of the macro-economic trends impacting the European market, including the energy supply crisis, inflation, recession as well as transformational issues, such as the mobility car industry. Additionally, heightened Antitrust scrutiny and an increased relevance of Foreign Direct Investment (FDI) Screening add to deal complexity and have reduced the pace of M&A transactions significantly. Despite these factors, a significant number of deals have been struck in the energy, infrastructure and cybersecurity sectors in Europe.  Cautiously optimistic, Carsten and Olivier expect a significant number of P2P, carve-out and distressed M&A transactions in the coming months. Moreover, China’s softening of pandemic restrictions and the slowdown of inflation in the United States have had a positive impact on the European markets and could provide a boost for M&A deals.

Melissa provides a U.S. perspective of the market for cross-border transactions into Europe. She points out that this is a great time for U.S. acquirers to be thinking about making investments in Europe as the market is less competitive than in recent years.

Brendan and Tony build on their previous podcasts from 2020 and 2021 and discuss the agency’s enforcement priorities and its newest compliance expectations. These developments come at a time when U.S. enforcement agencies appear to be increasingly focused on corporate compliance. 

Topics include the DOJ’s focus on data analytics in testing the effectiveness of a company’s compliance function and culture, using compensation systems to provide incentives or disciplinary measures to improve compliance, and on companies’ use of electronic messages on personal devices.

For more information about compliance programs, read Brendan and Tony’s chapter in the Latin Lawyer Guide to Corporate Compliance, “Developing a Robust Compliance Programme in Latin America.”

They note that nearly all of the increase in shareholder proposals over the past decade is due to environmental, social and political proposals, as opposed to governance proposals. Still, governance proposals raise important issues and their proponents have become sophisticated about how they submit these proposals. 

Proposals seeking to lower the threshold of ownership needed for shareholders to call a special meeting was the largest category of structural governance proposals this year. Marc and Melissa note that the companies that defeated these proposals mostly demonstrated that the requested threshold would essentially give too much power to a single shareholder or to a couple of large holders.

Click here to learn more about S&C’s 2022 Proxy Season Review and watch our recent webinar.

This year saw big growth in social and political proposals, with an 81 percent increase in civil rights, human rights and racial equity impact-related proposals. Marc and Melissa explore the different categories of social and political proposals, including those calling for racial equity audits and civil rights audits and challenges to corporate political spending. In prior years, this category was largely taken up by DEI-related proposals. This year, proposals increasingly focused on workplace characteristics, harassment, inadequate paid sick leave, employee health and safety issues.

Click here to learn more about S&C’s 2022 Proxy Season Review and watch our recent webinar.

The group discussed how the new ballots will likely lead to more activism, especially from smaller investors, and how companies can respond. On a positive note, the new proxy process has spurred many companies to refresh their bylaws to better address this new process.

Environmental proposals have steadily increased over the past decade, with an explosion in 2021 and 2022. In 2021, these proposals rose 40 percent year-over-year and this year they jumped a further 38 percent.

With proponents more reluctant to settle and the Securities and Exchange Commission less likely to grant no-action relief, 78 percent more environmental proposals reached a shareholder vote compared to 2021. One of the most notable trends was the increased granularity of these proposals. Correlated with this increasing granularity, however, the 2022 environmental proposals received lower levels of shareholder support. 

Looking forward, they expect that companies will have an even harder time negotiating a compromise or excluding environmental shareholder proposals, which may become even more granular in their demands.

Learn more from S&C’s 2022 Proxy Season Review and watch our recent webinar.

SEC Staff Legal Bulletin No. 14L—which reversed prior SEC guidance and altered the staff’s approach to the ordinary business and economic relevance exclusions—had a significant impact on the submission and voting trends this year. The SEC’s new approach correlated with a significant decrease in the likelihood of companies obtaining no-action relief, as the staff now assesses whether a proposal raises issues with a broad societal impact in determining whether a proposal is excludable.

As a result, shareholder proposals made it to a vote much more frequently this proxy season. Yet the number of passing proposals decreased, as shareholder support for social, environmental and political proposals decreased after steadily rising throughout the last decade.

Looking ahead, they expect ESG proponents to continue to submit more proscriptive and granular proposals to attract shareholder support. They also expect increased focus by the SEC on director qualifications, cyber security and human capital management disclosure.

Click here to learn more about S&C’s 2022 Proxy Season Review and watch our recent webinar.

They analyze three key changes introduced by the Act: the corporate minimum tax, the one percent buyback tax and clean energy initiatives. 

In the United States, an administrative law judge recently denied the Federal Trade Commission’s request to prohibit the transaction on competition grounds. In Europe,  the European Commission opened a highly publicized suspensory investigation into the transaction, which is seen as a test case for the EC’s recently revised policy on reviewing mergers that do not require mandatory reporting to the EC. The partners discuss these developments and how they might impact M&A deals going forward, especially in the pharmaceutical and tech sectors.

They also touch on how the new climate-related disclosure requirements proposed by the U.S. Securities and Exchange Commission compare to the new EU laws.

Ryan and Matt highlight some key distinctions in these laws, including their scope and applicability, the rights granted to individuals with respect to their personal information, and compliance obligations imposed on companies that collect personal information from individuals in these states.  Finally, they discuss current trends in state privacy laws and possible future developments.

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On March 21, the SEC released a comprehensive proposal to mandate climate-related disclosures in SEC reporting companies’ annual reports and registration statements. Michelle and June discuss aspects of the proposed rules that will likely have particular implications for financial institutions, especially in light of the increasing focus from financial regulators on climate-related financial risks, as well as financial institutions’ other obligations that may affect their overall climate strategy. 

Click here to read S&C’s memo on the proposed rules and key implications for financial institutions.

To watch S&C’s webinar on the SEC’s proposed rules and read additional S&C publications on this topic, click here.

Visit us at www.sullcrom.com

Visit us at www.Sullcrom.com

Visit us at www.Sullcrom.com

Visit us at www.SullCrom.com

For more information about this topic, read S&C’s memo on the Review and Analysis of 2021 U.S. Shareholder Activism and Activist Settlement Agreements.

Visit us at www.Sullcrom.com

Visit us at Sullcrom.com

Please visit us @ Sullcrom.com

The Build Back Better Act passed in the House on November 19 and is now before the Senate. The partners discuss how proposed tax changes in the bill might have significant impacts on founders, companies and venture capital firms in Silicon Valley.

Visit us at SullCrom.com

Visit us at SullCrom.com

Visit us at Sullcrom.com

For more information on this topic, watch our recent webinar, “The Impact of Maintaining a Diverse, Equitable and Inclusive Workforce,” and subscribe to our blog, “Legal Developments Affecting the Workplace.”

Brendan and Tony build on their last podcast and discuss the updated guidance from certain U.S. enforcement agencies, talk about certain changes to foreign enforcement regimes and conclude with a few best practices. They also explain the importance of compliance programs, especially in the enforcement context.

For more information about this topic, please see Brendan and Tony’s chapter in the Guide to Corporate Compliance, titled “Developing a Robust Compliance Programme in Latin America.”

Annie and Kamil earlier discussed the increased focus by U.S. agencies on the use of whistleblowers in investigations involving alleged money laundering and corruption. Listen to that episode here.