In brief

Baker McKenzie’s Government Enforcement Practice Group would like to wish you a Happy New Year. We have all taken some time off for the holidays, and a lot has happened in the interim. Perhaps most significantly, Congress passed, over President Trump’s veto, the National Defense Authorization Act for Fiscal Year 2021 (NDAA). The most ballyhooed aspect of the NDAA, from a white-collar criminal law standpoint, has been the de facto elimination of anonymous shell companies — The Corporate Transparency Act, which is discussed below. However, the NDAA also included a number of other key provisions buried in the text, which are certain to assist the Government in its prosecution of white collar crime as well as increase compliance obligations on businesses. We have put together this note to clients and friends for the purpose of quickly updating you on these developments in a single document.

Corporate Transparency Act’s Anonymous Shell Company Prohibition

One of the most significant provisions of the NDAA is the Corporate Transparency Act (CTA), which is designed to address the abuse of anonymous shell companies for purposes of money laundering. The CTA requires corporations and limited liability companies (LLCs), at the time of formation, to identify their beneficial owners by providing the beneficial owner’s name, address, date of birth, and driver’s license or other identification number and to update this information upon any change. The information will be reported to the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department and will also be available to federal and state law enforcement. Financial institutions that have legally mandated anti-money laundering obligations will also have access to the information provided that they obtain customer consent. While the CTA applies broadly, it contains exemptions for certain businesses including those that already file reports containing similar information with other agencies, such as the SEC, and those that are at lower risk for money laundering. Willful violations of the CTA are subject to criminal penalties, including up to two years incarceration.

SEC Disgorgement and Statute of Limitations

Also buried in the latter part of this 1480-page national defense legislation is a curiously out-of-place Section 6501: “Investigations and Prosecution of Offenses for Violations of the Securities Laws.” Section 6501 appears to have been strategically inserted into the NDAA, with little or no public debate or discussion. Section 6501 gives the SEC explicit authority to pursue disgorgement in federal court, along with a five year statute of limitations on those claims, thus generally confirming the United States Supreme Court’s decision in Liu v. Securities and Exchange Commission, 591 US___ (2020), which held, with some important caveats, that the SEC can seek disgorgement in federal court civil enforcement actions. However, Section 6501 also provides an extended 10 year statute of limitations on a disgorgement claim where scienter is a required element of the underlying violation of law. This 10 year statute of limitations for scienter-based claims expressly overrides — in part — the ruling in Kokesh that the SEC’s ability to obtain disgorgement is limited to the five year statute of limitations in 28 U.S.C. §2462. Although the NDAA’s intent on the statute of limitations question is clear, it does nothing to resolve questions about what fair game for a disgorgement claim is. Specifically, the NDAA requires “disgorgement under paragraph…of any unjust enrichment by the person who received such unjust enrichment as a result of such violation”, but does not define what “disgorgement” or “unjust enrichment” mean. Therefore, in light of Liu’s mandate that actual expenses be offset against the disgorgement amount, the fact-intensive question of calculating disgorgement amounts and offsets will be subject to a case-by-case determination at the district court level. Finally, through a very subtle, but significant, change, Congress removed the requirement that disgorgement “be appropriate or necessary for the benefit of investors.” This seems to be a direct response to questions raised by Liu of whether disgorgement would ever be appropriate to order disgorgement unless it was distributed to investors.

The SEC’s win here goes beyond disgorgement. Congress also expressly provided the SEC with a 10 year statute of limitations in which it can bring a claim for any equitable remedy, “including for an injunction or for a bar, suspension, or cease and desist order”, which appears to have been intended to clear up a host of court rulings that reached different results on whether and to what extent the SEC’s claims for this relief were subject to a five year statute of limitations. All of these dates begin to run on “latest date on which a violation that gives rise to the claim occurs”, providing the SEC with the maximum amount of time to bring its claims. Also, the NDAA does not impact in any way the SEC’s current right to seek and obtain disgorgement in administrative proceedings or the five year statute of limitations applicable to the SEC’s right to seek civil penalties.

Anti-Money Laundering Act of 2020

The NDAA includes the Anti-Money Laundering Act of 2020 (AMLA or “Act“), which contains a number of provisions that amend the US Bank Secrecy Act of 1970 (BSA), the primary US statute prescribing the anti-money laundering/countering the financing of terrorism (AML/CFT) framework in the US With the exception of the USA PATRIOT Act of 2001, the BSA had not previously undergone significant reform since its inception. AMLA is intended to effect “comprehensive reform and modernization” of the BSA to address the modern money laundering and terror financing threat.

The provisions of the Act reflect a number of themes, each an important component of the intended US AML/CFT framework redesign, including the following:

  • Increased BSA Whistleblower Bounties and Retaliation Protections. The AMLA significantly enhanced the whistleblower bounties that a reporter can receive for providing actionable information that leads to an enforcement action for Bank Secrecy Act violations. Prior to the AMLA, the BSA provided for an award of USD 150,000 or 25% of the penalties imposed in a related enforcement action, whichever was lower. The AMLA significantly increased those incentives — essentially bringing BSA bounties in line with those that can be awarded in SEC or CFTC cases under Dodd-Frank. Specifically, anyone who voluntarily provides significant information that leads to an enforcement action by the Treasury Department or DOJ under the BSA resulting in USD 1 million or more in monetary sanctions is eligible for an award of up to 30% of the amount collected in any related enforcement action. The AMLA also includes a private right of action for whistleblowers who have been retaliated against because of their reporting. In addition, the Kleptocracy Asset Recovery Rewards Act, which is also part of the NDAA, allows the Treasury Department to provide rewards to whistleblowers who provide information which results in the restraining, seizure, forfeiture, or repatriation of stolen assets linked to foreign government corruption that come within the US or within the control of a US person. It also authorizes the Treasury Department to provide protection for such reporters, if appropriate.
  • Codification of a Risk-Based Approach to AML/CFT Compliance. Guidance from federal functional regulators and the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has provided for a risk-based approach to AML/CFT compliance for financial institutions covered under the BSA. The Act generally codifies this guidance and states that AML/CFT programs should be: (i) “reasonably designed to assure and monitor compliance with the requirements” of the BSA and regulations promulgated by FinCEN; and (ii) “risk-based, including that more attention and resources of financial institutions should be directed toward higher-risk customers and activities, consistent with the risk profile of a financial institution, rather than toward lower-risk customers and activities.” Although these amendments will not have a significant impact on the approach taken by financial institutions to AML/CFT compliance in light of existing guidance and regulatory expectation, they do reflect a shift in the statutory framework and should at least provide financial institutions with some flexibility in the design of their AML/CFT compliance programs.
  • Modernization of the US AML/CFT Framework. Commentators have long criticized the BSA and its implementing regulations as outdated and ineffective in addressing current threats. The Act seeks to address this issue in a number of areas. An area of significant emphasis is the review and adjustment of the Suspicious Activity Report (SAR) filing regime. The Act includes a requirement for FinCEN to establish streamlined processes to facilitate the filing of non-complex SARs and requires a formal review of Currency Transaction Report (CTR) and SAR reporting requirements to consider modifications to value thresholds for different categories of activities, simplification of SAR narratives for certain customer and transaction types, and consideration of consequences of de-risking. Significantly, AMLA expands the definition of “financial institution” in the BSA to include antiquities dealers. And consistent with previously published guidance from FinCEN with respect to virtual currency services providers, the Act authorizes amendment to the definition of “monetary instrument” to include “value that substitutes for currency.”
  • Coordination Among Key Stakeholders to Facilitate Information Sharing. The Act includes several measures designed to enhance information sharing among regulators, agencies, law enforcement, and financial institutions in an effort to enhance the national effort to combat money laundering and terrorist financing. Specifically, the duties of the FinCEN Director will be amended to facilitate communication with federal functional regulators, financial institutions, and state banking authorities. Further, the Act addresses a frequent criticism of financial institution AML/CFT compliance personnel, and requires FinCEN to provide feedback to financial institutions on the usefulness of SARs filed by such financial institutions in law enforcement investigations.
  • Expanded Subpoena Power. The AMLA provides DOJ with a significant new weapon in its pursuit of criminal activity abroad. Previously, 31 U.S.C § 5318(k) permitted DOJ (and the Department of the Treasury) to subpoena documents from foreign financial institutions that maintain a correspondent bank account in the United States. The information requested, however, was limited to “records related to the correspondent account.” Now, DOJ and Treasury may seek from foreign financial institutions who maintain a US correspondent account “any records relating to the correspondent account or any account at the foreign bank, including records maintained outside of the United States” if the records are the subject of an investigation related to a violation of US criminal laws, a violation of the Bank Secrecy Act, a civil forfeiture action, or a Section 5318A investigation. Thus, the subpoena power under section 5318(k) is expanded to any records, not just those related to the correspondent account, and clearly applies to any crime. With DOJ increasingly using money laundering and more broadly the use of the US financial system as jurisdictional hooks to prosecute crimes committed abroad, such as the FIFA and kleptocracy prosecutions, this expanded subpoena power can only help fuel similar investigations. The AMLA amendments also prohibit the foreign financial institutions from notifying the account holders about the subpoena and increases civil penalties for an institution’s failure to comply. Adding further teeth to the amendments, foreign blocking statutes and data privacy laws cannot be the sole reason for quashing or modifying the subpoena. It remains unclear, however, how these expanded powers will interact with MLAT obligations or whether any internal strictures will be put on section 5318(k) subpoenas, similar to those applying to Bank of Nova Scotia subpoenas.

AMLA is the culmination of years of debate among the legislative, regulatory, and financial institution communities regarding the necessity for changes to the US AML/CFT regulatory framework and should serve to increase the effectiveness of the US regime while allowing financial institutions some flexibility to more effectively address AML/CFT risk.

Certain Cryptocurrency Businesses are a “Financial Institution” under the BSA

AMLA significantly reforms the BSA and other anti-money laundering (AML) laws already on the books to expressly cover crypto-currency transactions for the first time. AMLA does so by expressly modifying several key BSA definitions to include “value that substitutes for currency,” including the definitions of “financial institution,” “money transmitting business,” and “money transmitting service.” This definitional modification effectively results in the BSA regime being extended to a wide swath of businesses that effect transactions for others in cryptocurrency. Notably, the expansion also codifies existing FinCEN guidance requiring virtual currency businesses to register with FinCEN as money transmitters. Along with other key provisions of AMLA increasing the severity of penalties for BSA/AML violations, introducing an AML whistleblower bounty program, and significantly increasing the degree of government resources devoted to BSA/AML enforcement, the expansion of the enforcement framework to expressly include crypto-currency transactions promises to have dramatic effects on the enforcement landscape for financial crimes.

Art and Antiquities Dealers

The NDAA also extends BSA requirements to persons “engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or sale of antiquities” and also requires the Treasury to study and report on, the potential of the art market to be abused for purposes of money laundering and terrorist financing. These provisions are, in part, the result of a 2020 report by the Senate Subcommittee on Investigations entitled “The Art Industry and US Policies That Undermine Sanctions” which documented several cases in which art transactions were used to evade sanctions and highlighted the potential for abuse in the art market. Based on these findings, the Senate report recommended that the BSA be amended to include art dealers as “financial institutions” subject to AML obligations under the BSA. However, the NDAA implements this recommendation only with respect to antiquities dealers. Depending on the outcome of the Treasury report mandated by the NDAA, BSA requirements could subsequently be extended to art dealers as well.

Treasury/FINCEN Foreign Liaisons

The NDAA also creates two new Treasury programs designed to enhance US cooperation with foreign financial intelligence and law enforcement.

First, it requires FINCEN to appoint at least six “Foreign Financial Intelligence Unit Liaisons” who will be stationed at US Embassies to, among other things, “facilitate capacity building and perform outreach with respect to anti money laundering and countering the financing of terrorism regulatory and analytical frameworks” “establish and maintain relationships with officials from foreign intelligence units, regulatory authorities, ministries of finance, central banks, law enforcement agencies, and other competent authorities;” “participate in industry outreach engagements with foreign financial institutions and other commercial actors on anti-money laundering and countering the financing of terrorism issues; and “coordinate with representatives of the Department of Justice at United States Embassies who perform similar functions on behalf of the United States Government.”

Second, it requires Treasury to appoint at least six “Treasury Financial Attaches” who will also be stationed at US Embassies to, among other things, “establish and maintain relationships with foreign counterparts, including employees of ministries of finance, central banks, international financial institutions, and other relevant official entities…conduct outreach to local and foreign financial institutions and other commercial actors” and “coordinate with representatives of the Department of Justice at United States Embassies who perform similar functions on behalf of the United States Government.”

As a result of these programs, we can expect to see closer cooperation and more information sharing between US and foreign law enforcement in combatting money laundering and other forms of financial crime.

Combating Russian Money Laundering Act

The NDAA also includes the “Combating Russian Money Laundering Act” (CRMLA) which allows the Treasury Department to impose special measures on domestic financial institutions and financial agencies “if the Secretary of the Treasury determines that reasonable grounds exist for concluding that one or more financial institutions operating outside of the United States, or 1 or more classes of transactions within, or involving, a jurisdiction outside of the United States, or 1 or more types of accounts within, or involving, a jurisdiction outside of the United States is of primary money laundering concern in connection with Russian illicit finance.” The special measures may include prohibition of certain transactions, enhanced due diligence, and identification of beneficial ownership of anonymous companies. This authority is duplicative of the authority already available to the Treasury Department at Section 311 of the USA PATRIOT Act which provides for the application of special measures to target specific money laundering and terrorist financing threats. However, the CRMLA reflects a clear direction to FinCEN to place greater emphasis on illicit financial transactions involving Russia and to consider whether the imposition of Section 311-type measures might be appropriate. To that end, the CRMLA also requires the Treasury Department to provide, within one year, a report “that shall identify any additional regulations, statutory changes, enhanced due diligence, and reporting requirements that are necessary to better identify, prevent, and combat money laundering linked to Russia, including related to establishing a permanent solution to collecting information nationwide to track ownership of real estate.”

As a result of the CRMLA, US financial institutions and real estate businesses that engaged in business with Russia, or Russia-linked individuals or entities, should expect enhanced scrutiny from the Treasury Department and US law enforcement.

The post United States: Important Government Enforcement Provisions contained in 2021 National Defense Authorization Act appeared first on Global Compliance News.


Over the past two weeks, the Office of Foreign Assets Control (“OFAC”) published a series of FAQs related to Executive Order 13959, “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies” (the “CCMC EO” or the “EO”). That EO aimed to prevent US investors from financing the development of the People’s Republic of China’s military, intelligence, and security capabilities by prohibiting purchases of securities of certain “Communist Chinese military companies.” Our prior blog posts on the EO and on the Defense Department’s announcement of additional companies that would be subject to the EO are available here and here.

The following points in OFAC’s FAQs concerning the scope of the CCMC EO are noteworthy:

Treatment of Subsidiaries and EO Definitions

  • FAQ 857 clarifies that the EO applies to any subsidiary of the identified “Communist Chinese military companies,” provided that such subsidiaries are publicly listed as such by the US Treasury Department. OFAC has published a list of companies subject to the EO here (the “Communist Chinese Military Companies List”). Accordingly, until a subsidiary of a currently-listed Communist Chinese military company is itself publicly listed, the prohibitions of the EO do not apply with respect to securities issued by such subsidiary. However, the FAQ indicates that the Treasury Department intends to publicly list any entity that issues publicly traded securities and that is (i) 50 percent or more owned by a “Communist Chinese military company,” or (ii) determined to be controlled by one or more “Communist Chinese military companies.”  It is therefore, at least, the current intention of the Treasury Department to list majority-owned subsidiaries of and entities controlled by currently-listed Communist Chinese military companies.
  • FAQ 858 clarifies that the EO applies with respect to publicly traded securities (or any publicly traded securities that are derivative of, or are designed to provide investment exposure to such securities) of an entity with a name that exactly or closely matches the name of a listed entity. FAQ 864 indicates that this name-matching guidance also applies to subsidiaries, regardless of whether the subsidiary’s name is expressly listed or not. OFAC has not provided additional guidance on the apparent conflict between the FAQ 864 guidance and the guidance indicating that non-listed subsidiaries are not covered under the EO, as set out at FAQ 867 and discussed above. However, OFAC issued General License 1 to the EO authorizing transactions and activities involving securities of any entity with a name that exactly or closely matches the name of a listed entity through 9:30 a.m. EST on January 28, 2021.
  • FAQ 859 provides that the term “publicly traded securities” will be interpreted to include securities denominated in any currency that trade on a securities exchange or through the method of trading that is commonly referred to as “over-the-counter,” in any jurisdiction.
  • FAQ 860 provides that the phrase “any publicly traded securities that are derivative of, or are designed to provide investment exposure to” will be interpreted to include, but is not limited to, derivatives (e.g., futures, options, swaps), warrants, American depositary receipts (ADRs), global depositary receipts (GDRs), exchange-traded funds (ETFs), index funds, and mutual funds. The effect of this guidance is to bring within the scope of the EO a broad trade of financial instruments and is consistent with OFAC’s position in other contexts.

Permissible and Impermissible Transactions

  • FAQ 861 clarifies that US persons are prohibited from investing in US or non-US funds, such as exchange-traded funds (“ETFs”) or other mutual funds that hold publicly traded securities of a listed Communist Chinese military company, regardless of such securities’ share of the underlying index fund, ETF, or derivative thereof. This guidance is significant as it relates to non-US funds with US person investors, even where securities of listed Communist Chinese military companies constitute a less than predominant portion of the fund’s overall asset pool.
  • FAQ 862 provides that US persons, including US funds and related market intermediaries and participants, are not required to divest their holdings in publicly traded securities (and securities that are derivative of, or are designed to provide investment exposure to, such securities) of the “Communist Chinese military companies” identified in the Annex to the EO by January 11, 2021. However, as further discussed in FAQ 865, if a US person chooses to divest of such securities, such divestment must be completed by November 11, 2021.  By the plain language of the EO, US persons continuing to hold such securities after that date will be required to maintain the position absent further guidance or a modification of the EO.
  • FAQ 863 provides that US persons can engage in activities related to clearing, execution, settlement, custody, transfer agency, back-end services, and other such support services, provided that such services are not provided to US persons in connection with transactions prohibited by the EO. In effect, FAQ 863 authorizes US persons to provide certain types of support to non-US persons in connection with transactions that are otherwise restricted under the EO where engaged in directly by US persons. While FAQ 863 provides guidance on a limited set of facilitation activities, additional guidance on a broad range of other facilitation activities has yet to be published.
  • FAQ 864 clarifies that China Telecom Corporation Limited, China Mobile Limited, and China Unicom (Hong Kong) Limited are subject to the EO because, consistent with the name-matching guidance set out in FAQ 858, they closely match the names of entities included in the Communist Chinese Military Companies List. The FAQ also clarifies that compliance with the EO will be measured by trade date, rather than settlement date.
  • FAQ 865 provides that market intermediaries and other participants may engage in ancillary or intermediary activities that are necessary to effect divestiture during the relevant wind-down periods, or that are otherwise not prohibited under the EO. The FAQ also states that “[t]ransactions by US persons (including investors and intermediaries) involving investment funds that are seeking to divest during the relevant wind-down periods to ensure compliance with the EO are permitted.”  We understand that this section of the FAQ provides authority for US persons to invest in a fund that holds restricted securities (or instruments that are derivative of such securities) provided that the fund intends to divest of such securities during the relevant one-year wind-down period. Under this interpretation, a fund that holds such securities is therefore not “off limits” to investment by US persons as long as the fund intends to divest. FAQ 865 also reiterated the guidance set out at FAQ 862 that US persons are not required to divest of restricted securities, but stated that “[d]ivestment must be completed by November 11, 2021.”  We understand that this last statement is meant to indicate that if a US person chooses to divest, such divestment must be completed by November 11, 2021 (or otherwise by the completion of the relevant wind-down period for securities issued by entities listed in the future).

The post US: OFAC Issues FAQs Clarifying Restrictions on Purchasing Securities of Certain Chinese Companies appeared first on Global Compliance News.


In brief

As a Presidential candidate, former Vice President Joe Biden announced a detailed and ambitious set of tax policy proposals. President-elect Joe Biden’s tax policy plans, like rolling back several provisions of President Trump’s 2017 Tax Cuts and Jobs Act, are potentially derailed given the Republican will control at least 50 Senate seats and possibly 52.


Even if Democrats win both Senate run-off races in Georgia, a 50-50 split in the Senate may require President-elect Biden to modulate his tax proposals to win support from moderates in both parties. We examine who might be included in President-elect Biden’s administration and what tax policy agenda they’ll pursue.

Read the full alert in the North America Tax and News Development Newsletter.

The post United States: Understanding the 2020 election results and their impacts on tax policy appeared first on Global Compliance News.


In brief

On 28 September 2020, the Treasury Inspector General for Tax Administration published the Final Audit Report (“Report“). The Report was originally initiated to determine the effectiveness of the IRS efforts in ensuring compliance with the expatriation tax provisions under sections 887 and 877A, and related efforts to reduce taxpayer’s burden.


Based on the conclusions of the Report, the system lacks a centralized compliance effort aimed at enforcing the expatriate rules.

Read the full alert in the North America Tax and News Development Newsletter.

The post United States: Treasury – More enforcement, centralized compliance effort required for expatriation provisions (Code Section 887A) appeared first on Global Compliance News.


In brief

The SEC recently adopted amendments that dramatically reshape the rules governing investment adviser marketing by creating a single rule (“Marketing Rule”) for investment adviser advertising and referral arrangements. The new approach is an elegant solution designed to fulfill the SEC staff’s objective of retaining a principles-based framework while modernizing the rule to remain flexible to accommodate evolving technologies such as social media. The Marketing Rule is effective within 60 days after publication in the Federal Register, but advisers have 18 months to transition to the new requirements.

Baker McKenzie Webinar Series

We invite you to join us on Wednesday, January 6 at 3 pm EST to discuss this New Framework for Investment Adviser Advertising. This is the first of a series of webinars we will host to discuss the different aspects of the Marketing Rule and help our clients prepare for implementation.

In more detail

The final rule transforms the existing regulatory framework by merging the existing Advertising Rule and Solicitation Rules together to create a single rule that governs the full spectrum of investment adviser marketing activities. At a high level, the new Marketing Rule:

  • Abandons the proposed requirement for advisers to review and approve all advertisements prior to dissemination, a proposed provision that was highly controversial
  • Expands the definition of an advertisement, but excludes one-on-one communications and extemporaneous, live, oral communications
  • Applies to communications to prospective clients and investors and offers of new investment advisory services to current clients and investors; however, does not apply to communications designed to retain existing clients and investors
  • Does not distinguish between retail and non-retail investors However, the Rule does expressly apply to communications directed to investors in private funds managed by the adviser.
  • Eliminates the current prohibitions on the use of testimonials and past specific recommendations, and adopts general content standards based on anti-fraud principles.
  • Requires the presentation of net and gross performance side by side and includes additional guidelines for standardized time periods, related performance and extracted performance, but does not dictate the methodology for calculating performance
  • Does not prohibit the use of hypothetical performance, but requires advisers to adopt policies and procedures reasonably designed to ensure that the hypothetical performance is relevant to the audience, and to disclose the criteria, assumptions, risks, and limitations. The final rule excludes investment analysis tools used by investors from the definition of hypothetical performance.
  • Expands the concept of testimonials and endorsements to include solicitation and referral activities, and removes the disclosure delivery and client acknowledgement requirements that currently apply to referral arrangements
  • Requires that paid testimonials and endorsements (over the USD 1,000 de minimis threshold) include clear and prominent disclosure of the relationship between the solicitor (or, as the Marketing Rule frames the role, “promoter”) and adviser, direct and indirect compensation, and material conflicts relating to relationship and compensation.
  • Expands the disqualification requirements that apply to promoters and covers both cash and non-cash compensation.
  • Eliminates the exception for registration for promoters, forcing them to consider whether their referral activities require investment adviser registration
  • Updates applicable recordkeeping requirements and withdraws various no-action letters that are either incorporated into the Marketing Rule, or will no longer apply

No requirement for prior review and approval of advertisements

The final rule does not require advisers to review and approve all advertisements prior to dissemination or to retain a copy of all written approvals. Instead, advisers retain the flexibility under the Compliance Rule (Advisers Act Rule 206(4)-7) to design appropriate internal controls governing the review and approval of advertisements based on their business.

For advisers, this is a welcome reversal from the proposed rule. Many commentators criticized the proposed pre-use review requirement as being unworkable and costly. However, Commissioners Lee and Crenshaw made clear in their public statement that the decision to eliminate the pre-use review requirement “is a missed opportunity to promote better compliance in this critical area, and will likely place advertisements on the list of examination and enforcement priorities for years to come.”

Expanded definition of advertisement

The expanded definition of an advertisement contains two parts. The first part covers communications that offer investment advisory services with regard to securities. The second part, which is discussed below, covers paid testimonials and endorsements – essentially, referral activity that was previously governed by Advisers Act Rule 206(4)-3.

Under the first part of the definition, an advertisement is “[a]ny direct or indirect communication an investment adviser makes to more than one person . . . that offers the investment adviser’s investment advisory services with regard to securities to prospective clients or investors in a private fund advised by the investment adviser or offers new investment advisory services with regard to securities to current clients or investors in a private fund advised by the investment adviser.” The second part of the definition covers “any endorsement or testimonial for which an investment adviser provides compensation, directly or indirectly.”

The scope of the definition of an advertisement is key because it establishes the universe of communications subject to the Marketing Rule. There was great concern that the proposed rule would have covered virtually every communication with existing and prospective clients and investors; however, the definition of an advertisement in the final rule reflects a more refined and workable approach.

One-on-one communications are not covered. The final rule retains the exception for one-on-one communications – meaning that communications sent to only one person should not be considered advertisements. The concept of a single person extends to multiple investors that share the same household, as well as multiple natural persons representing a single entity or account. The one-on-one exception does not apply to communications (such as form letters and bulk emails) that are nominally “addressed” to one person or include basic information about an investor, but actually are widely distributed. In addition, “duplicate inserts” that are included in an otherwise customized communication would still be subject to the Marketing Rule because they are sent to more than one person.

Communications containing hypothetical performance do not qualify for the one-on-one exception, except in cases where the hypothetical performance is provided in response to an unsolicited investor request (where an investor is seeking the information for their own purposes) or to a private fund investor (because the investor will have the opportunity to ask questions and assess the limitations of this information during a one-on-one interaction).

Direct and indirect communications. The final rule reformulates the proposed concept of communications “by or on behalf of the adviser” to address any “direct or indirect communication an investment adviser makes.” This includes communications sent by the adviser directly, as well as those that are distributed by intermediaries, consultants, other advisers and promoters. Third-party content may also be attributable to the adviser if the adviser explicitly or implicitly endorses or approves the information after its publication (adoption), or involves itself in the preparation of the information (entanglement).

Ultimately, it is a facts and circumstances analysis as to whether a communication was made by the adviser or whether the adviser should be responsible for third-party content.

In the social media context, the final rule aligns with existing guidance around responsibility for third-party content. An adviser will generally not be responsible for hyperlinked third-party content, unless the adviser knows or has reason to know that third-party content is fraudulent or misleading. An adviser will not be responsible for content posted by third parties on the adviser’s own website so long as the adviser does not selectively delete or alter the comments or their presentation, even if the website gives the adviser the ability to do so. Finally, personal social media posts by associated persons generally will not be attributed to the adviser if the adviser adopts and implements policies and procedures reasonably designed to prevent associated persons from using their personal social media accounts to market the adviser’s services.

Communications to existing investors are not covered. The final rule focuses on communications that offer investment advisory services to prospective clients and investors in private funds, and that offer new or additional investment advisory services to current clients and investors. This formulation effectively excludes communications intended to service existing clients and investors or to provide and report on the advisory services.

Brand communications, general educational information and market commentary are not covered. Importantly, the final rule narrows the definition of an advertisement to focus on communications that “offer advisory services.” This means that more general “brand” content relating to statements about a firm’s culture, philanthropy and community activity, as well as displays of the advisory firm’s name that are simply designed to raise the profile of the adviser would not be covered by the Marketing Rule, so long as they do not offer advisory services. Similarly, communications that provide only general educational information and market commentary generally would not be considered advertisements.

Extemporaneous, live, oral communications are excluded. In recognition of the difficulty of ensuring compliance with the Marketing Rule and in an effort not to chill communications with investors, the final rule excludes extemporaneous, live, oral communications. The exception applies to verbal communications that are “live” meaning effectively that the adviser does not have the time to review and edit the communication before dissemination. However, the exception does not apply to instantaneous written communications (e.g., text messages, chat), nor does it cover prepared remarks, speeches, slides or other written materials distributed to investors as part of a presentation or seminar.

Regulatory communications are excluded. The final rule excludes information contained in a statutory or regulatory notice, filing or other required communication; provided, that such information is reasonably designed to satisfy the requirements of such notice, filing or other required communication. Thus, information that goes beyond the explicit requirements of the regulatory requirement would not be covered unless it actually offers advisory services.

“Buh bye” solicitation rule

Rather than retain a separate rule governing solicitation arrangements, the SEC expanded the definition of testimonials and endorsements to include solicitation activities and rescinds the Solicitation Rule (Rule 206(4)-3). Testimonials refer to statements by current clients or investors about the client or investor’s experience with the investment adviser or its supervised persons. Endorsements refer to statements by a person other than a current client or investor that indicate “approval, support or recommendation of the investment adviser or its supervised persons or describes that person’s experience with the investment adviser or its supervised persons.” Importantly, both definitions now cover statements that “directly or indirectly solicits any current or prospective client or investor…or refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser.”

In taking this approach, the SEC eliminates the distinction between paid advertisements and lead generation, on the one hand, and referral or solicitation arrangements, on the other. Under the final rule, any paid testimonial or endorsement (in excess of the USD 1,000 de minimis) is essentially considered a solicitation arrangement that is subject to additional requirements under the Marketing Rule so long as the compensation is paid, directly or indirectly, for the testimonial or endorsement.

Cash and non-cash compensation is covered. The concept of compensation now extends to any type of cash and non-cash compensation that is provided in exchange for a testimonial or endorsement. Non-cash compensation includes directed brokerage, sales awards or other prizes, gifts and entertainment. Compensation does not include regular salary or bonuses paid to an adviser’s personnel for their investment advisory activities, or attendance at training and education meetings, provided attendance at these meetings and conferences is not in exchange for solicitation activities.

The SEC believes the timing of compensation is relevant to determining whether an adviser is providing compensation for the testimonial or endorsement, but it declined to provide guidance around either the timing of the compensation or the establishment of a mutual understanding as to whether any such compensation is provided in exchange for testimonials or endorsements.

Inclusion of one-on-one and extemporaneous, live, oral communications. It is important to note that, unlike the first part of the definition of an advertisement, the second part of the definition (which covers any paid testimonial or endorsement) does apply to one-on-one communications and extemporaneous, live, oral communications.

Clear and prominent disclosure. The new Marketing Rule eliminates the prior requirements that solicitors deliver a separate written disclosure statement and Form ADV to prospective clients at the time of the solicitation, as well as the obligation for advisers to receive and retain a signed client acknowledgement of receipt of those documents. Instead, the adviser or promoter needs to clearly and prominently disclose: (i) whether the person giving the testimonial or endorsement is a client or non-client; (ii) that cash or non-cash compensation was provided; (iii) the material terms of any compensation arrangement, including a description of the compensation and the amount of that compensation; and (iv) any material conflicts on the part of the person giving the testimonial or endorsement. These disclosures must be made at the time the testimonial or endorsement is disseminated.

The clear and prominent standard requires the relevant disclosures to be included within the testimonial or endorsement – so that the statements and the related disclosures are read at the same time. The SEC believes that these disclosure can be provided succinctly within the testimonial or endorsement, while other disclosures that are not “integral” to the testimonial or endorsement can be provided by hyperlink.

Adviser oversight and compliance. Any testimonial or endorsement, regardless of whether it is paid or unpaid, is subject to adviser oversight and compliance. Specifically, an adviser must have a reasonable basis for believing that any testimonial or endorsement complies with the Marketing Rule. This reasonable basis could involve making periodic inquiries of investors or pre-reviewing testimonials or endorsements, or imposing contractual limitations on the content of those statements.

Written agreement. Paid testimonials and endorsements above the de minimis requirement are subject to the further requirement that the adviser enter into a written agreement with the promoter that describes the scope of the solicitation or referral activities and the compensation.

Disqualification and ineligible promoters. The Marketing Rule prohibits investment advisers from compensating a promoter for a testimonial or endorsement if the adviser knows, or in the exercise of reasonable care, should know, that the promoter is subject to certain disqualifying SEC actions or disqualifying events at the time the testimonial or endorsement is disseminated. The rule does not require advisers to monitor the eligibility of promoters on a continuous basis. Employees, officers, and directors of an ineligible person (or any other individuals with similar status or functions) are also considered disqualified persons that may not be compensated by the adviser for testimonials and endorsements. Unlike the proposed rule, the Marketing Rule’s definition for ineligible person does not include a disqualified person’s control affiliates. There are certain exceptions under which the Marketing Rule defers to existing disqualification regimes under the Exchange Act and Rule 506(d) of Regulation D with respect to certain promoters in order to avoid duplicative and inconsistent disqualification provisions. The Marketing Rule also provides for a 10-year lookback for disqualifying events and a conditional exemption that permits a promoter to receive compensation if the SEC has issued an opinion or order to that effect.

Regulatory status of promoters. The SEC withdraws its long-standing position that a solicitor is an associated person of an investment adviser and therefore is not required to register individually under the Advisers Act, solely with respect to its solicitation activities, but does not replace this position with an analogous equivalent for promoters. Rather, the guidance notes that, depending on the facts and circumstances, a promoter may be acting as an investment adviser (e.g., in advising clients on the selection of an investment adviser), or as a broker-dealer (e.g., when soliciting investors for a private fund). There is no presumption of investment adviser or broker-dealer status. Instead, promoters will have to consider whether their activities require registration under federal and/or state securities laws.

Affiliated personnel. Testimonials and endorsements provided by affiliates will not be subject to the requirement for a written agreement or the disqualification requirements, so long as the affiliation between the adviser and its affiliated person is readily apparent to, or is disclosed to, the client.

General (content standards) prohibitions

Rather than continuing to rely on general anti-fraud provisions, the final rule includes a number of “general prohibitions” designed to provide greater clarity around misleading advertising practices. These general prohibitions make it unlawful for an investment adviser to disseminate advertisements that include:

  • Untrue statements or omissions
  • Unsubstantiated statements of material fact
  • Untrue or misleading implications or inferences
  • Statements that discuss potential benefits connected with or resulting from an investment adviser’s services or methods of operation without providing fair and balanced treatment of any material risks or material limitations associated with those benefits
  • References to specific investment advice that are not fair and balanced
  • Statements that include or exclude performance results, or present performance time periods, in a manner that is not fair and balanced
  • Statements that are otherwise materially misleading

Of particular note is that past specific recommendations are no longer prohibited. Rather, the general prohibitions around communications that are not fair and balanced would govern communications that refer to specific favorable or profitable past specific recommendations, including case studies. These provisions prevent “cherry-picking” – the practice of highlighting specific advice without providing sufficient information and context to evaluate the merits of that advice. Advisers have flexibility to determine how best to meet the fair and balanced standard, and although they can rely on practices developed under the no-action letters governing past specific recommendations, they have the flexibility to rely on other practices.

The Marketing Rule abandons the proposed distinctions between retail and non-retail investors; however, the SEC does explain on more than one occasion that the nature and sophistication of the audience is an important factor in considering the relevant facts and circumstances that determine whether an adviser is complying with the Marketing Rule. Depending on the audience, more or less detailed disclosure may be appropriate.

Third-party ratings

The final rule permits advisers to advertise ratings or rankings provided by a third party that is not a related person, so long as the third party provides ratings in the ordinary course of its business. In order to show the ratings, the adviser must have a reasonable basis for believing that any questionnaire or survey used in the preparation of the rating easily permits a participant to provide favorable and unfavorable results, and is not designed or prepared to produce any predetermined result. The SEC clarified that obtaining the actual survey or questionnaire used in the preparation of the rating is not the only way to satisfy this requirement. The adviser could seek representations from the third party or rely on information the third party makes available about its survey methodology.

The advertisement also must clearly and prominently disclose: (i) the date on which the rating was given and the time period on which the rating is based; (ii) the identity of the third party that created and tabulated the rating; and (iii) if applicable, that compensation was provided directly or indirectly by the adviser in connection with obtaining or using the third-party rating. Like testimonials and endorsements, the disclosure requirement applies to both cash and non-cash compensation.

Performance advertising

The final rule does not dictate the methodology required to calculate performance, but it does incorporate specific requirements that apply to performance advertising. Following are some of the most notable changes:

Side-by-side net and gross of fees. The final rule prohibits any presentation of gross performance in an advertisement, unless the presentation also shows net performance with at least equal prominence to, and in a format designed to facilitate comparison with, gross performance. Further, the net and gross performance must be calculated over the same time period using the same type of return methodology. The calculation of net performance may include the deduction of a model fee when doing so would result in performance that is no higher than if the actual fee had been deducted.

Prescribed time periods. Performance returns must be shown for one-, five-, and 10-year time periods (or since inception), and should be shown as of a date that is no less recent than the most recent calendar year-end. The prescribed time periods must be shown with equal prominence. An adviser can always show performance for additional time periods on a supplemental basis. Importantly, private funds are not subject to this requirement.

Related performance. The final rule permits advisers to show “related performance,” meaning the performance of portfolios with substantially similar investment policies, objectives and strategies as those of the services being offered in the advertisement. In order to prevent cherry-picking, the presentation of related performance must include all related accounts – unless the exclusion of a particular account would not result in materially higher performance results and does not alter the presentation of any applicable time periods.

Extracted performance. Advisers may show “extracted performance” also known as a carve out for the performance of a subset of investments from a single account or fund, so long as the extracted performance is also accompanied by the results of the portfolio from which the performance was extracted.

Hypothetical performance

The final rule includes certain conditions that are specific to the use of hypothetical performance. It also retains the three categories of hypothetical performance: performance derived from model portfolios, back-tested performance that is generated by the application of a strategy to prior time periods when that strategy was not actually used to manage client accounts, and targeted or projected performance of a portfolio or advisory services offered by the adviser.

The final rule reflects the SEC’s concern that hypothetical performance “pose[s] a high risk of misleading investors.” This concern is based on the fact that hypothetical performance generally does not reflect investment decisions made in real-time or the investment results of actual client accounts. Further, particularly in the case of back-tested performance, it can be “optimized through hindsight.” Notwithstanding the SEC’s concerns, the final rule permits advisers to show hypothetical performance, subject to the following conditions:

  • Policies and procedures. The adviser must adopt and implement policies and procedures reasonably designed to ensure that the hypothetical performance information is relevant to the likely financial situation and investment objectives of the intended audience of the advertisement. This is a clarification from the proposed rule, which arguably would have required advisers to make the determination that the use of hypothetical performance is appropriate for each individual investor prior to dissemination. Although the SEC provides more flexibility in the final rule, it continues to take the position that advisers generally would not be able to use hypothetical performance in advertisements distributed to a mass audience or intended for general circulation because the adviser would not reasonably be able to form any expectations about the financial situation and investment objectives of a mass audience.
  • Disclosure of criteria and assumptions. Advisers must provide sufficient information to enable the intended audience to understand the criteria used and assumptions made in calculating the hypothetical performance, including any assumptions that future events will occur.
  • Disclosure of risk information. Advisers must provide or, in the case of a private fund investor, offer to provide promptly sufficient information to enable the intended audience to understand the risks and limitations of using hypothetical performance in making investment decisions.

The definition of hypothetical performance expressly excludes interactive tools, where the investor uses the tool (directly, or through an adviser who inputs information into the tool). The use of interactive tools is subject to the general prohibitions, as well as additional conditions that are largely consistent with FINRA Rule 2214.


The Marketing Rule permits advisers to show “predecessor performance,” meaning performance that was not generated by the adviser showing the performance. This commonly occurs when a portfolio management team leaves one advisory firm and joins another, or when there is a significant acquisition, restructuring or reorganization. The SEC adopted the following conditions, which are largely consistent with prior no-action guidance, for the use of predecessor performance:

  • The person or persons who were primarily responsible for achieving the prior performance results manage accounts at the advertising adviser.
  • The accounts managed at the predecessor investment adviser are sufficiently similar to the accounts managed at the advertising adviser that the performance results would provide relevant information to investors.
  • All accounts that were managed in a substantially similar manner are advertised unless the exclusion of any such account would not result in materially higher performance and the exclusion of any account does not alter the presentation of any prescribed time periods; and
  • The advertisement clearly and prominently includes all relevant disclosures, including that the performance results were from accounts managed at another entity.

Amendments to Form ADV

The final rule amends Part 1 of Form ADV to incorporate a new Item 5.L (Marketing Activities) that requires advisers to identify (via a yes/no question) whether their advertisements include: performance results, references to specific investment advice, testimonials, endorsements, third-party ratings, hypothetical performance or predecessor performance. Item 5.L also asks (via a yes/no question) whether the adviser receives cash or non-cash compensation, directly or indirectly, in connection with the use of testimonials, endorsement, or third-party ratings.

The responses to Item 5.L are only required to be updated during the annual update to Form ADV. We expect that these responses will be factored into the risk-based rankings the Division of Examinations (formerly known as OCIE) considers in conducting examinations.


The SEC amends various provisions of the books and records rule (Advisers Act Rule 204-2) to conform to the various provisions discussed above.

Next steps

As noted above, the Marketing Rule contains an 18-month transition period prior to the compliance date. The new requirements discussed above apply to advertisements disseminated on or after the compliance date. However, this also includes any advertisements that are available (e.g., online or through third parties) as of the compliance date. Given the scope of the changes, we would recommend that firms begin to think about the following:

  • Existing Solicitation Arrangements. Review any solicitation arrangements or referral programs currently structured to comply with the Solicitation Rule. Advisers will want to consider how to modify the existing agreements and operational flow to bring them into compliance with the Marketing Rule. Advisers should also consider any indirect compensation and non-cash compensation that will be covered by the Marketing Rule, as well as the regulatory status of their promoters.
  • Online Advertising and Social Media Influencers. Review any online advertising arrangements, relationships with social media “influencers,” or other marketing relationships that involve the payment of cash or non-cash compensation. Although advisers may not treat them as solicitation arrangements under the current rule, these arrangements likely will be considered paid testimonials or endorsements requiring compliance with the Marketing Rule.
  • Placement Agent Agreements. Advisers to private funds should be aware that, unlike the existing Solicitation Rule, the Marketing Rule will apply to the solicitation of interests in private funds. Accordingly, advisers should consider updating placement agent agreements and other referral arrangements relating to the promotion of private funds to reflect the application of the Marketing Rule.
  • Training. Focus on training business, marketing and compliance professionals as to the new requirements so that they can consider how the Marketing Rule will apply to current and future marketing campaigns.
  • Policies and Procedures. Begin updating policies and procedures to reflect changes to the Marketing Rule, including policies and procedures related to the use of hypothetical performance and the retention of books and records.
  • Performance Calculations. Engage with performance calculation teams to advise them of the new requirements for performance advertisements, including the requirement to show gross and net performance and to show standardized performance periods.
  • Existing Advertisements. Identify and start to develop a process for updating existing advertisements that will continue to be available as of the compliance date. Prioritize communications that will trigger the more specific requirements of the Marketing Rule such as advertisements that contain performance presentations (including hypothetical performance), testimonials, endorsements and third-party ratings, among other things.


We encourage clients to reach out to us as you evaluate the impact of the new Marketing Rule on your business and consider next steps for implementation.

The post United States: SEC Adopts New Framework for Investment Adviser Marketing appeared first on Global Compliance News.


Baker McKenzie’s Energy and Environmental Groups held a webinar to examine what is in store for the energy sector under a Biden Administration and his ambitious plan for a “Clean Energy Revolution and Environmental Justice.”

The panel spoke on the potential impacts of the Biden Administration’s immediate and long-term actions on both the conventional and renewable energy sector, as companies seek transformation and diversification in their portfolios and market offerings. The team also discussed expected climate change regulatory initiatives and expanded ESG reporting and disclosure efforts likely to affect the direction and pace of the US energy transition.

The post United States: Recorded Webinar- What Will the Future of Energy Look Like in the US Under a Biden Administration? appeared first on Global Compliance News.


Welcome to Baker McKenzie’s new Labor and Employment video chat series for US employers. Our lawyers will provide quick, practical tips on today’s most pressing issues for US employers navigating the new normal. The videos complement our blog, The Employer Report, which provides written legal updates and practical insights about the latest labor and employment issues affecting US multinationals, at both the domestic and global level.

Please click below to watch the video chats and be sure to let us know if there are additional topics you’d like us to address.

If you’re looking for guidance related to the pandemic, please check out the below Reopening Playbook video chat series. It covers practical topics like masks in the workplace, expense reimbursement requirements, employee testing and screening and much more.

Reopening Playbook Video Chat Series

Quarantine Requirements for When Your Employees Travel to Hotspots (30 July 2020)
Speakers: Elizabeth EbersolePaul EvansRobin Samuel

ICMYI Part 2: Employee Testing & Screening Update — What Can and Can’t Employers Do (23 July 2020)
Contacts: Susan EandiPaul EvansEmily Harbison

Don’t Get Schooled by Employee Childcare Issues: What You Need to Know about Leave Laws as Schools Struggle with Reopening (16 July 2020)
Speakers: Emily HarbisonMichael Brewer and Robin Samuel

ICYMI: Employee Testing & Screening Update — What Can and Can’t Employers Do (9 July 2020)
Speakers: Susan EandiEmily HarbisonRobin Samuel

Employment Lessons from the Early State Reopeners (23 June 2020)
Speakers: Emily HarbisonPaul EvansWilliam Dugan

Employment Litigation Predictions in a COVID-19 World: An Insider’s View from the Plaintiff’s Bar (12 June 2020)
Speakers: Michael BrewerBillie Wenter

Employee Expense Reimbursement: Requirements and Trends in a WFH Environment (12 June 2020)
Speakers: Michael BrewerSusan EandiEmily Harbison

Employers: Protect Your Company IP While Employees Work Remotely (12 June 2020)
Speakers: Bradford NewmanJoseph DengBillie WenterRobin Samuel

How to Think About Moving to Permanently Remote Work (5 June 2020)
Speakers: Susan EandiChristopher GuldbergBetsy MorganGrant Uhler

An Employer Primer on Workshare Programs (5 June 2020)
Speakers: Paul EvansRobin SamuelBillie Wenter

EEOC Guidance: To Keep Employees Home or Not (5 June 2020)
Speakers: Michael BrewerEmily HarbisonMichael Leggieri

Trend Watch: The First Wave of COVID-Related Employment Litigation: What’s on the Minds of Employers and Litigators during COVID-19? (29 May 2020)
Speakers: Michael Brewer, Paul EvansJeffrey SturgeonBillie Wenter

Planning Internships in the Summer of COVID-19 (29 May 2020)
Speakers: Anne BatterEmily Harbison, Benjamin Ho

Masks Unmasked — What Employers Need to Know About Face Coverings (15 May 2020)
Speakers: Michael BrewerJoseph DengSusan Eandi

Best Practices for Navigating the Initial Lifting of Shelter-in-Place Orders (15 May 2020)
Speakers: Michael Leggieri, Teresa MichaudBillie Wenter

Unique COVID-Related Wage & Hour Issues Employers Need to Know (15 May 2020)
Speakers: Paul EvansEmily HarbisonJeffrey Sturgeon

Best Practices for Employers with the Rush to Remote Working (15 May 2020)
Speakers: William DuganEmily HarbisonBrian Hengesbaugh

Practical Tips for Conducting RIFS During these Challenging Times (15 May 2020)
Speakers: Susan EandiBenjamin HoChris GuldbergArthur Rooney

US Immigration Considerations During the Pandemic (7 May 2020)
Speakers: Melissa AllchinWilliam DuganBetsy Morgan

Data Privacy Issues Related to COVID-19 Health Questionnaires and Testing (7 May 2020)
Speakers: Amy de La LamaJoseph DengRobin Samuel

Prediction: COVID-Related Employment Litigation Trends (7 May 2020)
Speakers: Michael BrewerMark GoodmanTeresa Michaud

Importance of Paying Attention to Pay Equity During COVID-19 (7 May 2020)
Speakers: Susan EandiPaul EvansEmily Harbison

Key Benefits Questions Around the CARES Act (7 May 2020)
Speakers: Chris GuldbergBenjamin Ho

The post United States: The Employer Rapport: Quick Chats for the US Workplace appeared first on Global Compliance News.


In brief

Welcome to Baker McKenzie’s new Labor and Employment video chat series for US employers. Our lawyers will provide quick, practical tips on today’s most pressing issues for US employers navigating the new normal.  The videos complement our blog, The Employer Report, which provides written legal updates and practical insights about the latest labor and employment issues affecting US multinationals, at both the domestic and global level.

Please click below to watch the video chats and be sure to let us know if there are additional topics you’d like us to address.

Speakers: Paul EvansBlair Robinson and Autumn Sharp.

Speakers: Elizabeth EbersoleCaroline Pham and Robin Samuel.

Speakers: Susan EandiEmily Harbison and Robin Samuel.

Speakers: Anna Brown, Susan Eandi and Emily Harbison.

Speakers: Caroline BurnettLara GrinesBlair Robinson, Autumn Sharp, Jeff Sturgeon.

Speakers: Caroline BurnettLara GrinesBlair Robinson, Autumn Sharp, Jeff Sturgeon.

Speakers: Caroline BurnettLara GrinesBlair Robinson, Autumn Sharp, Jeff Sturgeon.


If you’re looking for guidance related to the pandemic, please check out the below Reopening Playbook video chat series. It covers practical topics like masks in the workplace, expense reimbursement requirements, employee testing and screening and much more.

Reopening Playbook Video Chat Series

Speakers: Elizabeth EbersolePaul EvansRobin Samuel.

Speakers: Susan EandiPaul EvansEmily Harbison

Speakers: Emily HarbisonMichael BrewerRobin Samuel

Speakers: Susan EandiEmily HarbisonRobin Samuel

Speakers: Emily HarbisonPaul Evans , William Dugan

Speakers: Michael BrewerBillie Wenter

Speakers: Michael BrewerSusan EandiEmily Harbison

Speakers: Bradford NewmanJoseph DengBillie WenterRobin Samuel

Speakers: Susan EandiChristopher GuldbergBetsy MorganGrant Uhler

Speakers: Paul EvansRobin SamuelBillie Wenter

Speakers: Michael BrewerEmily HarbisonMichael Leggieri

Speakers: Michael BrewerPaul EvansJeffrey SturgeonBillie Wenter

Speakers: Anne BatterEmily HarbisonBenjamin Ho

Speakers: Michael BrewerJoe DengSusan Eandi

Speakers: Michael LeggieriTeresa MichaudBillie Wenter

Speakers: Paul EvansEmily HarbisonJeffrey Sturgeon

Speakers: William DuganEmily HarbisonBrian Hengesbaugh

Speakers: Susan EandiBenjamin HoChristopher GuldbergArthur Rooney

Speakers: Melissa AllchinWilliam DuganBetsy Morgan

Speakers: Amy de La LamaJoseph DengRobin Samuel

Speakers: Michael BrewerMark GoodmanTeresa Michaud

Speakers: Susan EandiPaul EvansEmily Harbison

Speakers: Christopher GuldbergBenjamin Ho

The post United States: The Employer Rapport – Quick chats for the US workplace appeared first on Global Compliance News.


In brief

A new global paradigm for global climate action

President Elect Joseph R. Biden comes to office with what has, correctly, been called a “transformational” plan for action to curb climate change and to cope with its unavoidable consequences.

The cornerstone of his policy1 — officially called the Biden Plan for a Clean Energy Revolution and Environmental Justice — is to recommit the United States to the Paris Agreement on climate change, and to set a target for the US to achieve net-zero carbon emissions by 2050. That target is generally accepted as being in line with the goals of the Paris Agreement on climate change which seeks to limit global climate heating to well below 2 degrees Celsius above pre-industrial levels, and ideally, to keep it closer to 1.5 degrees.2


  1. Key aspects of the Biden Climate Plan
  2. Countries race to the “top” for climate ambition
  3. Private sector ramps up climate ambition
  4. Rare phenomenon, race to the top presents enormous risks and opportunities
  5. Conclusion

The impact of the world’s largest economy pivoting to this new policy cannot be understated. It is particularly important given that it tops off two months in which several of the world’s major economies have now announced net-zero commitments.

While the prospects for legislative adoption of the Biden climate agenda by Congress may prove challenging, it provides a clear directional indication of the new administration’s intentions and priorities. To that end, the Biden administration is likely to hit the ground running with orders, actions, policies and proposed regulations aligned with the climate agenda that do not require congressional approval. Such efforts could range from changed federal government procurement policies to enhance renewables and biofuels to new federal building standards and proposals to revisit major regulations involving auto emissions, fuel standards and power plant emissions. Even in the absence of wholesale congressional legislative adoption, other levers are available to the administration to advance materially the objectives set forth in the climate agenda discussed below.

Key aspects of the Biden Climate Plan

The extensive plan covers every part of the American economy, and touches on social, racial, and foreign policy issues. As yet, some aspects remain high-level, with details on the mechanisms to achieve them yet to be announced.

The following are the key elements, along with concrete commitments published to date:

  • Infrastructure & housing policy: commitment to spend US$1.7 trillion over the next 10 years, leveraging additional investments from the private sector, and state and local governments, to total more than US$5 trillion; commitment to reduce the carbon footprint of the US building stock by 50% by 2035.
  • Renewable energy: Clean Energy Revolution legislative package, including investment in clean energy, and climate research and innovation; incentives for rapid deployment of “clean energy innovations” across the economy; doubling offshore wind by 2030.
  • Carbon sequestration: Commitment that all federal funding will reduce climate pollution “as much as possible”; and to natural solutions to removing carbon dioxide from the atmosphere, such as carbon sequestration projects based on forests and agriculture.
  • Adaptation and resilience: The plan commits to creating “clean and resilient” communities; infrastructure spending to achieving coastal restoration including bridges and roads that withstand high winds and don’t wash out in storms and high tides.
  • Disclosure: Requiring public companies to disclose climate risks and greenhouse gas emissions in their operations and supply chains
  • Technology & research: Focuses on electric vehicles; establish a new research body, called ARPA-C, for “Advanced Research Projects Agency focused on climate”, with priorities including green hydrogen, refrigeration and coolants, biofuels, green steel, and nuclear energy.

Countries race to the “top” for climate ambition

In the past two months alone, China,3 Japan,4 and South Korea have all announced aggressive emissions reduction targets.5 China seeks to achieve net-zero emissions by 2060, while both Japan and South Korea have set a 2050 goal for reaching net-zero emissions.

The European Union in September also announced a proposal to increase its climate ambitions, with a new target of reducing emissions by at least 55 percent from 1990 levels by 2030, and a continued commitment to net-zero by 2050.6 In 2019, the United Kingdom enshrined its net-zero by 2050 commitment into law.7

Upon President Elect Biden’s inauguration in January, the United States of America will join the ranks of jurisdictions that have a firm target. These countries comprise some two-thirds of global GDP.8 The total percentage of the world’s economy where a net-zero by 2050 commitment now applies is in fact higher, with several jurisdictions enshrining the target into law, including for instance the United Kingdom and New Zealand.9

Private sector ramps up climate ambition

This year has also seen a ratcheting-up of targets by major emitters in the private sector.

Companies from a range of sectors, including finance,10 energy,11 transportation,12 consumer goods,13 and many others, have announced targets that meet the net-zero by 2050 goal — and often exceed them.

These measures include reaching zero-emissions and even offsetting all emissions caused by the company in the past. Major investment houses are also divesting from thermal coal and making murmurs about other fossil fuels.

A careful reading of the most recent climate plans reveals that big players are now looking closely at supply chains and procurement policies, suggesting plans to push carbon out of the operations of their business partners.

Rare phenomenon, race to the top presents enormous risks and opportunities

We are witnessing, it appears, a rare phenomenal in global politics and policy: a race to the top has broken out on climate action.

Such a race carries tremendous opportunities for business, but an acceleration of climate action also poses risks such as a faster than expected emergence of stranded assets and a decline in some goods and services, as well as rising prices for carbon credits and offsets as demand for them increases.

For instance, the recent announcements by Japan and South Korea will likely mean that those countries will move more quickly to a wider adoption of renewables and hydrogen. They may also look to a greater role for carbon pricing; South Korea already has an emissions trading system, and Japan may expand its voluntary scheme. In both of those jurisdictions, the role of offsets may be key. Under a Biden administration, the US also proposes to explore greater support for offsets, in particular those related to agriculture and forestry. There is also clear support for technologies such as carbon capture utilisation and storage (often referred to by its acronym, CCUS), and other innovative methods to sequester carbon dioxide and other greenhouse gases from the atmosphere.

Biden’s plan includes establishing a new research institute to support this kind of innovation, to be called ARPA-C.

These developments present a host of opportunities and risks for businesses operating in, or with, the United States.

For instance, there is scope for certain businesses to benefit from increased collaboration with, and investment from, the US for the development of a green hydrogen industry. Given that several nations have already made relatively good progress in relation to hydrogen, there may be opportunities for businesses in those places to transfer skills, services, and products to the US. Similar opportunities are likely to arise in relation to the other types of technology that will form part of the response to climate change, both to mitigate and sequester emissions, as well as for adaptation and resilience.

The plan also relies on creating nature-based projects that will sequester carbon dioxide, opening the door for a large expansion of the carbon farming sector in the United States.

To the extent that the US chooses to expand its use of offsets, and depending on how it goes about doing so, there may be opportunities arising from markets in carbon credits.

On the risk side of the ledger, if the US makes it mandatory to report on climate risks, some companies may find themselves either unprepared or with uncomfortable stories to tell. Preparation for this possibility should commence now.

There is also a chance that the Biden administration could enact border adjustment taxes that could account for the emissions produced by particular suppliers of goods. The European Union has signalled that it may adopt this measure, and Japan and Korea could also look to treat products differently depending on their associated carbon emissions. This could pose a risk to the competitiveness of some products.

It is difficult to predict the precise ways these measures could impact specific companies, but it is important to note that these measures are all now under active consideration by major economies.


The debate over climate action has shifted dramatically in the past five years. Major economies are moving beyond the old notion that reducing emissions must come at the expense of economic growth.

Now, the conversation occurring globally — in both the public and private sectors — is over long-terms targets, whether they are sufficient to contain emissions to meet the goals of the Paris Agreement, and the best ways to achieve those goals, with an emphasis on opportunities for economic growth and development.

To discuss this or any climate-related issues, please do not hesitate to contact us.
2 There is debate over this target, and much depends on other actions taken between now and 2050.,President%20Xi%20Jinping%20has%20announced.&text=China%20is%20the%20world’s%20biggest,around%2028%25%20of%20global%20emissions.
8  See eg
9 See eg, Note that Canada also proposes to introduce law to support its policy commitments later this year
10 See eg;
11 See eg;;

The post International: Presumptive Biden victory ushers in ‘race to the top’ climate change appeared first on Global Compliance News.


In brief

Please join us for a new weekly video series, hosted by Baker McKenzie’s North America Government Enforcement partners Tom Firestone and Jerome Tomas.

This weekly briefing is available on demand and will cover hot topics and current enforcement actions related to white collar crime and criminal investigations in the US and abroad to arm you with the information you need to start your business week.

As one of the largest global law firms, we will call upon our exceptionally deep and broad bench of white collar experts throughout the world and particularly in the commercial hubs of Europe, Asia, Africa and Latin America to join our weekly discussion series.

These briefings will cover:

  • High-profile DOJ case updates and implications
  • SEC enforcement developments
  • CFTC enforcement developments
  • Other white collar defense industry developments


4 January 2021

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14 December 2020

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07 December 2020

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23 November 2020

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16 November 2020

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9 November 2020

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26 October 2020

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19 October 2020

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5 October 2020

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29 September 2020

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8 September 2020

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24 August 2020

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17 August 2020

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10 August 2020

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3 August 2020

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27 July 2020

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20 July 2020

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13 July 2020

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6 July 2020

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29 June 2020

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22 June 2020

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17 June 2020

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9 June 2020

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26 May 2020 

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