On July 25, 2024, the U.S. District Court for the Eastern District of Texas stayed the U.S. Department of Labor’s (DOL) recently-issued final rule, set to take effect September 23, 2024, which would amend the definition of an “investment advice fiduciary” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (the 2024 Rule).  One day later, in a separate case challenging the 2024 Rule, the U.S. District Court for the Northern District of Texas also stayed the 2024 Rule on similar grounds.  Both decisions stay the effective date of the 2024 Rule indefinitely while the cases are pending.

Continue Reading Two Federal District Courts Stay DOL Fiduciary Rule

Judge Ada E. Brown of the Northern District of Texas this afternoon granted summary judgment in favor of Ryan, LLC and the plaintiff-intervenors in the case of Ryan, LLC v. Federal Trade Commission challenging the FTC’s ban on post-employment non-competes (“Non-Compete Rule”). Judge Brown concluded that the FTC lacked statutory authority to promulgate the Non-Compete Rule, and that the Non-Compete Rule is arbitrary and capricious. Accordingly, Judge Brown set aside the Non‑Compete Rule and ordered that it will not be enforceable or take effect on its original effective date of September 4, 2024 or thereafter.

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On July 1, 2024, the SEC adopted tailored disclosure requirements and offering processes for non-variable annuity contracts—specifically, for registered index-linked annuities (RILAs) and annuity contracts that offer fixed investment options and apply market value adjustments (MVAs) to amounts withdrawn before the end of the fixed option’s term. The final rule will require issuers of RILAs and MVAs to register offerings on an amended Form N-4, the form currently used to register most variable annuities.

Continue Reading SEC Adopts Significant Form and Rule Amendments for the Registration of RILAs and MVAs

On May 23, 2024, the SEC approved exchange rule changes that will allow the listing and trading of a number of spot Ether exchange-traded products (ETPs). Ether is the second-largest cryptocurrency by market capitalization after Bitcoin.  The decision follows the SEC’s recent approval of spot Bitcoin ETPs in January 2024, as previously summarized here. 

Continue Reading SEC Approves Exchange Listings for Spot Ether ETPs
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On June 6, 2024, the New York Stock Exchange (NYSE) filed an application with the SEC pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4 thereunder, proposing a rule change that, if approved by the SEC, would exempt closed-end funds (CEFs) registered under the Investment Company Act of 1940 and listed on the NYSE from the requirement to hold annual shareholder meetings.

Continue Reading NYSE Proposes to Exempt Registered Closed-End Funds from Annual Shareholder Meeting Requirement

On June 14, 2024, the SEC announced the settlement of administrative proceedings brought against a registered investment adviser for disseminating allegedly misleading performance information of a private fund that it advised.  The SEC alleged that from at least November 2021 through February 2023, the adviser advertised performance returns that were experienced by a single investor in a private fund as the private fund’s performance even though the investor’s performance was at times significantly higher than the fund’s performance.  According to the order, the performance disparity was due to certain successful IPO investments the fund had made that were credited to the investor’s capital account in greater proportion than other fund investors’ capital accounts because the other investors were unable to participate fully in the IPO investments due to investment restrictions under FINRA Rules 5130 and 5131.

Continue Reading SEC Settles Enforcement Proceedings Against Adviser for Allegedly Misleading Performance Advertising

On June 18, 2024, the SEC announced the settlement of administrative proceedings brought against a marketing and business communications firm for alleged internal accounting control deficiencies that caused the firm’s failure to promptly respond to a ransomware attack that occurred between November 29, 2021 and December 23, 2021, and which involved the unauthorized encryption of the firm’s computers, exfiltration of firm and client data, and business service disruptions.  According to the order, the firm received and reviewed network intrusion alerts escalated to it by its third-party managed security services provider, but the firm’s cybersecurity alert review and incident response policies and procedures failed to adequately establish a prioritization scheme and provide clear guidance to internal and external personnel on procedures for responding to such incidents. As a result, the firm did not take the malware-infected instances off its network, investigate the activity, or take other steps to prevent further network compromise until December 23, 2021. 

Continue Reading SEC Settles Enforcement Proceedings Against Business for Allegedly Insufficient Internal Controls Relating to Cybersecurity Incident

On June 26, 2024, the U.S. Court of Appeals for the Fifth Circuit vacated the SEC’s 2022 rescission of certain rule amendments regarding proxy advisory firms, holding that the SEC’s explanation for rescinding the amendments was “arbitrary and capricious and therefore unlawful.”

Continue Reading Fifth Circuit Court of Appeals Vacates SEC’s 2022 Rescission of Certain 2020 Amendments to Proxy Rules
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Private equity investments in health care to be subject to increased oversight from federal and state regulators, including antitrust officials

Federal and state governmental regulation of health care transactions continues to increase rapidly.  At the federal level, there is increased focus on the role of private equity in health care and the perceived impact on access to care, quality of care and pricing.  At the same time, a growing number of states have passed and continue to propose legislation that increases state oversight of health care transactions.  As a result of this increase in regulatory scrutiny from federal and state regulators, parties interested in conducting health care transactions must consider various regulatory requirements and the factors regulators take into account when analyzing proposed health care transactions. 

Continue Reading Health Care Transactions Facing Increased Federal and State Regulatory Scrutiny
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On June 27, 2024, the United States Supreme Court (the “Court”) affirmed the Fifth Circuit’s ruling in SEC v. Jarkesy and held that a defendant facing civil penalties in a securities fraud claim brought by the Securities and Exchange Commission (the “SEC”) has a right to a jury trial in a federal court.1 Specifically, the Court held that the SEC’s attempt to compel respondents to defend themselves before the agency, namely in an administrative proceeding before an Administrative Law Judge (“ALJ”) employed by the SEC, violates respondents’ Seventh Amendment right to a jury trial in cases where the SEC pursues civil penalties. Accordingly, this decision will likely limit the number of future SEC actions adjudicated by an ALJ in an administrative forum due to the restriction on the available remedies.

Continue Reading SEC v. Jarkesy: A Divided Supreme Court Holds That the SEC Cannot Seek Civil Penalties through an Administrative Proceeding