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The U.S. Securities and Exchange Commission (“SEC”) last week announced settlements with four investment advisory firms regarding alleged violations of the SEC’s pay-to-play rule, illustrating that federal regulators continue to aggressively pursue such cases.   The rule at issue, Rule 206(4)-5 (“the Rule”), prohibits investment advisors from, among other things, receiving compensation from certain government entities for two years after a person affiliated with the investment advisor makes a covered campaign contribution to an official of the government entity.  While the involved firms did not admit or deny the allegations in the settlement orders, an examination of the cases is instructive in assessing the current landscape of SEC pay-to-play rule enforcement.  Together, the four settlements are noteworthy in two major respects: (1) the circumstances of the underlying contributions that highlight the wide-reaching application of Rule 206(4)-5; and (2) the fact that one of the SEC Commissioners issued a sharp dissent that expressed deep concern about the breadth of the Rule.

The settlements involved covered associates at four different firms making contributions to four different recipients: an unsuccessful candidate for Mayor of New York City; the incumbent Governor of Hawaii ; an unsuccessful candidate for Governor of Massachusetts; and to a then-candidate for Governor of California.  In two cases, the firms managed public pension money and, in the other two, the firms managed state university endowments, an often overlooked category of government entity investors. 

While the SEC Rule is intended to prevent fraud, it seems highly unlikely that any of the contributions at issue in these four cases could have influenced state investment decisions: 

  • All four investment advisory firms had preexisting business relationships with the relevant government entities before the prohibited contributions were made and no new business was solicited after the contributions. 
  • One of the donors was not even a covered associate at the time of the contribution.
  • Only one of the four prohibited recipients was an incumbent officeholder at the time of the contribution. 
  • Two of the four recipients failed to win election to the offices they sought. 
  • Two of the cases involved situations where the donor either received a refund or requested a refund. 
  • The contribution amounts were a drop in the bucket in proportion to the tens of millions of dollars raised in these elections – three cases involved a single $1,000 contribution and the fourth involved a contribution of $1,000 and another $400. 

Continue Reading SEC Commissioner Says It’s “Past Time” To Reform Overly “Blunt” Pay-to-Play Rule

This half-yearly update on insurance coverage litigation summarises significant insurance coverage cases in the English courts and provides a detailed analysis of the Corbin & King v AXA Insurance UK Plc case, highlighting the key takeaways for policyholders. In the first half of 2022, the English courts have delivered important judgments on a number of critical issues for policyholders, including Covid-19 business interruption insurance, aggregation clauses, insurers’ implied obligation to pay claims within a “reasonable” time, and the effect of lenders’ mortgagee interest insurance policies; some of which are policyholder friendly, some less so.  

Significant cases 2022 H1

Corbin & King v AXA Insurance UK Plc [2022] EWHC 409 (Comm): In the most anticipated decision of the last half-year relating to Covid-19 business interruption losses, the English High Court determined in favour of a restaurant business, that a prevention of access clause in its policy was triggered by the Government-mandated lockdowns arising from Covid-19 in 2020 and 2021. Given the importance of this case for policyholders, we analyse the court’s findings in further detail below.

Spire Healthcare Limited v Royal & Sun Alliance Insurance Limited [2022] EWCA Civ 17: This decision is the latest word on the interpretation of “aggregation clauses” in insurance policies that require a policyholder to aggregate similar or related losses into a single claim against the insurer, which is then subject to a liability cap on each claim. The Court of Appeal held that several claims against the policyholder could be aggregated into one claim against the insurer on the basis that there was “one source or original cause” of the policyholder’s loss. As a result, the policyholder’s recovery was limited to £10 million, the policy limit per claim.Continue Reading Half Year Review: Insurance Coverage Litigation (H1 2022)

Never in our decades of working on and around Capitol Hill and the White House have we seen as much anti-business sentiment among Republican lawmakers as we do today. And the trend shows no sign of abating.

There was a time when American corporations could count on unequivocal Republican support. To  be a Republican was virtually synonymous with supporting free market principles, capitalism and business. Republican President Calvin Coolidge once said, “the chief business of the American people is business.” Today, however, many Republicans scoff when they’re told that big business’ trade associations are for x or against y. They believe many companies have abandoned their trust in market forces for a “crony capitalism” that protects favored industries. Industries that profit from government programs are viewed with particular suspicion.

Conservatives say that it is not they who have moved away from business, but rather business which has moved away from them. Many Republicans see corporate America as lining up with the Progressive agenda on climate, ESG, mandatory vaccinations, sexual orientation and gender issues, voter ID laws, gun rights, speech restrictions, policing and abortion, leading them to believe that Wall Street is adverse not just to traditional values but also to conservative economic and constitutional principles. Social media companies have gained special opprobrium from Republicans for their content moderation policies, which they believe favor Progressives and suppress conservative content.Continue Reading Republicans Are Moving Away from Big Business

On July 14, 2022, the U.S. Department of Commerce (“Commerce”) issued a request for a range of additional factual information in connection with the agency’s ongoing circumvention inquiries into solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam that employ inputs from mainland China.[1]  The deadline to respond is July 21st.

In the July 14 memorandum, Commerce seeks information about the:  (1) amount of investment necessary to construct and start-up certain facilities, (2) non-financial barriers (e.g., access to inputs, qualified technical employees, technologies, research and development, etc.) that companies typically face to establish and begin certain operations, and (3) research and development (“R&D”) expenses associated with conducting certain operations.  These types of facilities/operations involved in:

  • refining silicon into solar-grade polysilicon,
  • producing ingots from solar-grade polysilicon,
  • producing wafers from solar-grade ingots,
  • producing solar cells from wafers,
  • producing solar modules from solar cells, and
  • the same operations and products as foreign producers and exporters responding to Commerce’s solar circumvention inquiries. 

Continue Reading Commerce Requests Factual Information in Solar Circumvention Inquiries on Level of Investment, Non-Financial Barriers, and Research and Development Expenses

Recent months have seen a growing trend of data privacy class actions asserting claims for alleged violations of federal and state video privacy laws.  In this year alone, plaintiffs have filed dozens of new class actions in courts across the country asserting claims under the federal Video Privacy Protection Act…

Continue Reading Emerging Trends: Renewed Wave of Video Privacy Class Actions

On June 6 and June 9, 2022, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued additional guidance on the sanctions that prohibit U.S. persons from making a “new investment” in Russia and from providing accounting, trust and corporate formation, and management consulting services to any person located in Russia.

Separately, from June 15, 2022, the UK Office of Financial Sanctions Implementation (“OFSI”) gained new powers to impose financial penalties for breaches of UK sanctions regulations (including, but not limited to, the UK sanctions regulations with respect to Russia) on a strict liability basis and to publish reports of cases where it is satisfied that a breach of financial sanctions has occurred but where no penalty is imposed.

This alert summarizes these new sanctions developments.

New U.S. Sanctions Developments

Guidance on the Prohibitions on “New Investment” by U.S. Persons in Russia

On June 6, 2022, OFAC issued guidance in the form of responses to new frequently asked questions (“FAQs”) to clarify certain aspects of the prohibitions on “new investment” in Russia by U.S. persons that were imposed under the following executive orders (“E.O.s”):

  • E.O. 14066, issued on March 8, 2022 (prohibiting new investment by U.S. persons in the energy sector of the Russian Federation, as described in our March 10 alert); 
  • E.O. 14068, issued on March 11, 2022 (prohibiting new investment by U.S. persons in any sector of the Russian Federation economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State); and 
  • E.O. 14071, issued on April 6, 2022 (prohibiting “all new investment in the Russian Federation by U.S. persons, wherever located” as well as “any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by E.O. 14071 if performed by a U.S. person or within the United States,” as described in our April 11 alert.

Continue Reading Recent Developments in U.S. and UK Sanctions: OFAC Guidance on “New Investment” and Prohibition on the Provision of Certain Services to Any Person in Russia; UK Sanctions Enforcement Developments

Trade associations, 501(c)(4) social welfare organizations, other outside groups that pay for
political advertisements, and their donors now have more answers to long-running questions
regarding when donations to these groups are publicly reportable. After postponing
consideration of the issue during its previous meeting, the Federal Election Commission (“FEC”)
approved Wednesday an interim final rule on donor disclosure. The interim rule amends the
federal regulations that describe when outside groups that pay for independent expenditures–
advertisements that expressly advocate the election or defeat of a clearly identified candidate–
must publicly disclose on FEC reports the names of their donors. The amended rule will take
effect 30 legislative days after the FEC transmits the new rule to Congress, which the FEC
anticipates will be September 30, 2022.

The interim rule brings the FEC’s regulations into harmony with a 2018 court decision that
invalidated a long-standing regulation, 11 C.F.R. § 109.10(e)(1)(vi), requiring outside groups to
disclose only those donors who contributed at least $200 to the outside group “for the purpose
of furthering the reported independent expenditure.” The interim final rule strikes the regulation
entirely. However, the FEC added a note to 11 C.F.R. § 109.10(e)(1) that clarifies the remaining
portions of the regulation and the relevant statute are still in effect.

In the wake of the 2018 decision, many questions remained about when these groups must
disclose donor names. The revised regulation itself was not meant to answer those questions; it
was simply meant to harmonize regulations on the books with existing court decisions. Some of
these questions were answered by an unusual guidance document the Commission posted to
its website after the 2018 decision. That guidance, which remains in effect, provides that groups
(other than political committees) that pay for independent expenditures must disclose the names
of donors of over $200 who made contributions “earmarked for political purposes” during the
reporting period.Continue Reading FEC Commissioners Issue New Guidanceon Donor Disclosure for Groups Paying forPolitical Advertisements

Presidential Action Triggered by Crisis in the U.S. Solar Industry

In recent months, the U.S. solar industry has been in the midst of an existential crisis, triggered by the threatened imposition of retroactive and future tariffs on a significant portion of U.S. imports. That crisis began on April 1, 2022, when the Department of Commerce (“Commerce”) initiated an inquiry to determine whether solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam are circumventing antidumping (“AD”) and countervailing duty (“CVD”) orders on solar cells from China. Solar cells from these countries generally accounted for approximately 80% of U.S. solar module imports in 2020.[1] If Commerce finds circumvention, solar cells and modules from the four target countries could not only be subject to combined AD/CVD tariffs approaching 250%, but Commerce’s regulations also allow for the agency to apply these tariffs retroactively to merchandise entering on or after April 1, 2022 (and potentially as far back as November 4, 2021). This threat of AD/CVD tariffs triggered a steep decrease in imports of solar cells and modules from Southeast Asia, and caused parts of the U.S. solar industry to come to a stand-still, furthering domestic reliance on coal.[2] Given this paralysis in the solar industry, lawmakers and others urged the President to provide relief from potential AD/CVD tariffs.[3]

The President’s Response

On June 6, 2022, President Biden issued a declaration of emergency (the “Declaration”)[4] pursuant to section 318(a) of the Tariff Act of 1930, as amended (19 U.S.C. § 1318), and issued a determination pursuant to section 303 of the Defense Production Act of 1950, as amended (50 U.S.C. § 4533) (“the DPA Determination”)[5]. The Declaration finds that an emergency exists “with respect to the threats to the availability of sufficient electricity generation capacity” and authorizes Commerce to issue a moratorium on tariffs on solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam for up to a 24-month period, while the DPA Determination aims to “expand the domestic production capability” for solar cells during this 24-month period. The Declaration itself does not prevent the imposition of tariffs on imported solar cells and modules from the Southeast Asian countries, rather it authorizes the Secretary of Commerce to “take appropriate action” to permit the duty-free importation of solar cells and modules for 24 months after the Declaration’s issue date.[6]Continue Reading President Acts to Prevent Import Tariffs on Solar Cells and Modules from Southeast Asia

The California Privacy Protection Agency (“CPPA”) held a board meeting on May 26th, 2022. At the meeting, Executive Director Ashkan Soltani, Acting General Counsel Brian Soublet, and members of the Board offered insight into the following key topics:

  • Bifurcation of CPRA Rulemaking Process: The Board’s CPRA Rules Subcommittee indicated that
… Continue Reading The CPPA Meets on May 26th, 2022