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On September 28, 2024, California governor Gavin Newsom vetoed AB 3129, a bill that, among other things, would have required private equity firms and hedge funds to provide 90 days’ prior written notice to, and for some transactions, obtain consent from, the state attorney general prior to proceeding with certain health care transactions.

In a statement attached to his decision to veto AB 3129, the governor cited concerns regarding the redundancy of the bill given that under current law the state’s Office of Health Care Affordability (OHCA) is responsible for analyzing and evaluating certain health care consolidation transactions. While OHCA does not have the power to block a covered transaction, OHCA may refer to and coordinate with the state’s attorney general to review any transactions that may be anti-competitive or affect health care affordability.

In light of the recent increase in federal and state scrutiny of private equity investments in health care about which we have previously written, we will continue to monitor regulatory developments in this area.

If you have any questions about this article, please contact Jeremy M. Alexander at jmalexander@vedderprice.com or the Vedder Price attorney with whom you normally work.

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The Federal Trade Commission (“FTC”) has filed a Complaint and a proposed Consent Order that would bar the CEO of oil company Hess from sitting on the Board of Chevron after the merger of the two companies.  According to the Complaint filed in the matter on September 29, CEO John B. Hess has a long history of encouraging high-level OPEC executives in their stated mission to stabilizing pricing in oil markets.  The merger agreement between the parties requires them to appoint Mr. Hess a Director of Chevron, the surviving company. 

OPEC oil producers account for approximately 50 percent of global crude oil production.  Because Chevron is one of the 10 largest oil enterprises in the world and the fourth largest public, non-state-owned oil company, the Complaint alleges, Mr. Hess’s “participation on Chevron’s Board of Directors would amplify Mr. Hess’s supportive messaging to OPEC and others … increasing the likelihood of a lessening of competition in the relevant market [for the production and sale of oil].” Compl., ¶ 11.  The Consent Order would prohibit Mr. Hess from serving on the Chevron Board or in an advisory capacity, with certain limited exceptions.

This matter is notable because the Complaint does not allege that the merger of Hess and Chevron would harm competition in any relevant market.  Its focus is entirely on preventing a single person with an alleged demonstrated affinity for price stability from sitting on the Board of Directors of the combined company.  In doing so, the FTC raises concerns similar to those behind the Department of Justice’s reinvigorated enforcement of Section 8 of the Clayton Act, which prohibits many director and officer interlocks between competitors; and the case stakes out the FTC’s position that a company is only as competitive as the people who run it.

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