Category: Administrative & Regulatory

Warning Sign? A New Round of FDA Warning Letters Over CBD Consumer Confusion May Signal a Shift in Government Enforcement

FDA warning letters are nothing new in the cannabis industry. In fact, we here at Budding Trends have covered this topic a number of times (here, here, and here). Not resigned to playing the hits, however, the FDA issued a new set of warning letters on November 21 that may signal a shift in enforcement posture away from solely targeting companies that market CBD as a potential medical treatment and towards including companies that market their products in ways that could cause consumer confusion. This is a “Warning Sign” that might cause the cannabis industry “A Rush of Blood to the Head,” much like Coldplay’s multi-platinum album that recently celebrated its 20-year anniversary. So, turn back the “Clocks,” book your flight to “Amsterdam,” and indulge us if you will — just not too much.

Congress legalized the production of hemp and hemp-derived products under the 2018 Farm Bill. But federal legalization did not exempt the hemp industry from federal regulation. Indeed, the FDA and FTC retain overlapping enforcement authority over CBD marketing, with the FDA having primary authority over labeling. Far more than “A Whisper,” the FDA and FTC have not been shy about issuing warning letters to hemp companies that fail to follow the FDA’s labeling requirements and guidance.

Since its first set of warning letters to CBD companies in April 2019, the FDA has focused its enforcement activity on companies that market their CBD products as treatment and cures for a variety of diseases and illnesses. But the FDA’s most recent warning letters took a different tack, focusing on potential health risks from long-term CBD use, consumer confusion leading to unintentional or overconsumption of CBD, and CBD products that could be seen as marketed to children.

The basis of the FDA’s five new warning letters was that CBD is neither an authorized food additive nor generally recognized as safe. The FDA noted it had “not found adequate information showing how much CBD can be consumed, and for how long, before causing harm,” and claimed that “scientific studies show” potential harm to the “male reproductive system” and “liver” from long-term CBD use. In the FDA’s words, “[p]eople should be aware of the potential risks associated with the use of CBD products.”

The products highlighted in the warning letters included gummies, fruit snacks, lollipops, cookies, teas, and other beverages. The FDA said these products were targeted because consumers may confuse them for traditional foods or beverages, “which may result in unintentional consumption of overconsumption of CBD.” Further, the FDA noted that gummies, candies, and cookies are especially concerning because they may appeal to children. Likewise, the FDA cited tea, coffee, sparkling water, beverage “shots,” and honey as products similar to traditional food that may confuse consumers into over-consuming CBD.

Keeping its focus on unintended consumption or unintended overconsumption, the FDA also chastised one company for failing to specifically list CBD as an ingredient on the label of its hemp-infused tea. This is particularly important to note for hemp companies, many of which have sought to avoid listing “CBD” on the product labels for full spectrum hemp extracts in an effort to avoid the FDA and FTC’s seemingly CBD-focused enforcement actions.

Given this new enforcement posture, CBD companies may consider avoiding marketing attempts that seek to link CBD products too closely with traditional foods and beverages. This may include limiting references to the similarity of CBD products to traditional ones. And CBD companies should continue to avoid product labels and marketing campaigns that would be enticing to children, especially for CBD products that are in a form children might be likely to consume (such as gummies and candies).

It remains to be seen where the FDA will draw the line between appropriate marketing and marketing that goes too far towards confusing consumers, but, aside from a falsetto Chris Martin, “nobody said it was easy.” Until then, watch this space and remember to follow the marketing dos and don’ts we provided in one of our previous blog posts.

Article By J. Hunter Robinson and Josh Kleppin of Bradley Arant Boult Cummings LLP

© 2022 Bradley Arant Boult Cummings LLP

Newly Enacted Federal “Speak Out Act” Limits Use of Some Sexual Harassment NDAs

President Biden has signed into law the federal “Speak Out Act” limiting the enforceability of pre–dispute non-disclosure and non-disparagement clauses covering sexual assault and sexual harassment disputes.  The Act takes effect immediately.

The Act places restrictions on the enforceability of pre-dispute:

  • “non-disclosure clauses,” meaning “a provision in a contract or agreement that requires the parties to the contract or agreement not to disclose or discuss conduct, the existence of a settlement involving conduct, or information covered by the terms and conditions of the contract or agreement.”
  •  “non-disparagement clauses,” defined as “a provision in a contract or agreement that requires 1 or more parties to the contract or agreement not to make a negative statement about another party that relates to the contract, agreement, claim, or case.”

Such clauses entered into before a sexual assault or sexual harassment dispute arises are rendered unenforceable.  The Act defines covered “sexual assault disputes” as disputes “involving a nonconsensual sexual act or sexual contact, as such terms are defined in section 2246 of title 18, United States Code, or similar applicable Tribal or State law, including when the victim lacks capacity to consent.” Covered “sexual harassment disputes” are defined as disputes “relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”

A few notes about the Act’s scope and implications:

  • Critically, the Act may have limited implications for many employers for one key reason – the Act only applies to non-disclosure and non-disparagement clauses in pre-dispute agreements, meaning that any non-disclosure/non-disparagement clauses in agreements entered into by employers/employees concerning sexual assault or sexual harassment issues after a dispute has arisen are not impacted by the Act.  Because of this, the Act’s protections would not apply to non-disclosure/non-disparagement clauses in separation or settlement agreements executed after sexual harassment or sexual assault allegations are made, but may be subject, of course, to any applicable state or local laws.
  • The Act explicitly excludes from coverage any efforts by employers to protect trade secrets and proprietary information via non-disclosure or non-disparagement provisions.
  • While the Act does apply to non-disclosure/non-disparagement clauses in agreements entered into before December 7, 2022 (the Effective Date), it would not impact clauses entered into before a dispute arose, but where that dispute was active before the Act’s December 7th effective date.
  • Given the above, employers utilizing non-disclosure/non-disparagement agreements at the outset of employment or during the employment lifecycle should consider creating proper carve-outs for sexual assault and sexual harassment issues given the new Act.

Employers should also be aware of other recent developments in this area.  The Speak Out Act also follows the enactment of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which took effect earlier this year (our post on the law can be found here).  That federal law prohibits employers from compelling arbitration of sexual harassment or sexual assault claims and provides employees the option to pursue those claims in other forums.  Employers should also remain aware that, despite the seemingly narrow implications of this new federal law, several states – including California, Illinois, New Jersey, and New York – have enacted laws in recent years that grant employees broader protections when it comes to certain sexual harassment and discrimination claims, enhancing employees’ abilities to speak out about alleged misconduct.

Article By Corbin Carter and Michael S. Arnold of Mintz

For more labor and employment legal news, click here to visit the National Law Review.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Beware Before You Flare: EPA Revamps Rulemaking to Pave the Way for Methane Emission Reductions

On November 15, 2022, the United States Environmental Protection Agency (US EPA) issued the pre-publication version of supplemental proposed rulemaking for reduction of methane emissions in the oil and natural gas sector. The original proposed rule, published on November 15, 2021, sought to strengthen methane standards for new sources (New Source Performance Standards or NSPS), establish nationwide emission guidelines (EG) for regulation of existing sources, and develop new standards for unregulated sources. US EPA ultimately received more than 470,000 public comments. The rules, once finalized, will be included in 40 CFR Part 60, Subpart OOOOb (NSPS) and Subpart OOOOc (EG).

The agency anticipated a need for additional review in the original proposed rule, in which US EPA stated it would issue supplemental proposed rulemaking under its authority in the Clean Air Act sections 111(b) and (d). While the original rule already had an ambitious target of reducing methane by 74%, the supplemental proposal would reduce methane from covered sources by 87% below 2005 levels. The rule generally governs production and processing (i.e., well sites, compressor stations, and natural gas processing plants) as well as natural gas transmission and storage.

Key changes in the supplemental proposed rule include the following:

  • Super-emitter Response Program: Establishment of a super-emitter response program intended to reduce the risk of such events. Owners or operators that receive certified notifications of emissions greater than 100 kg/hr of methane would be required to take action.
  • Well Closure Plans: EPA will now require owners of well sites to submit a well closure plan that includes steps to plug wells, requires financial assurance, and includes a schedule to complete the closure and perform a final survey.
  • Advanced Methane Detection: In response to comments supporting advanced methane detection technologies, EPA has proposed a matrix where owners and operators have the flexibility to use approved alternative screening approaches with development of a plan and notification to the agency. The agency will further update the proposed protocol for optical gas imaging (OGI) in Appendix K.
  • Leak Inspection: EPA will now require identification and correction of leaks, a source of fugitive emissions, at all well sites, including new and existing. While EPA removed exemptions, the type of leak monitoring will vary depending on site characteristics and equipment in four primary categories: (1) single wellhead-only and small well sites; (2) wellhead-only sites with two or more wellheads; (3) sites with major production and processing equipment; and (4) well sites on the Alaska North Slope.
  • Flares: EPA will require flare flames to be lit at all times. Additionally, in order to flare, owners of oil wells with associated gas will be required to either implement alternatives permitted by the rule (such as routing to a sales line) or certify that alternatives are not safe or technically feasible.
  • Additional Regulated Sources: EPA has added strengthened standards for pneumatic pumps (zero-emission standard), updated standards for wet seal centrifugal compressors, and developed new standards for dry seal centrifugal pumps (currently unregulated).

Given the agency’s significant focus on environmental justice and community outreach, US EPA also seeks to provide more opportunities for vulnerable communities and Tribal communities to participate in the development of state plans. In fact, the agency held a webinar specific to Tribal communities and environmental justice communities on November 17, 2022. During the webinar, US EPA explained how the revised rule requires states to conduct meaningful engagement with vulnerable communities through early outreach and request for input. States developing plans for EG will be required to participate in “timely engagement with pertinent stakeholder representation . . . [i]t must include the development of public participation strategies to overcome linguistic, cultural, institutional, geographic, and other barriers to participation to assure pertinent stakeholder representation.”

The agency is also seeking additional insight from the regulated industry on advanced technologies that can be utilized to reduce methane and utilize associated gas. The original proposed rule requested public comment on a potential standard for oil wells with associated gas that would require owners or operators to route associated gas to a sales line or, alternatively, use it for another beneficial use. During this round of comments, US EPA now seeks to understand emerging technologies “that provide uses for the associated gas in a beneficial manner other than routing to a sales line, using as a fuel, or reinjecting the gas.”

The agency extended the timeline for a final rulemaking to 2023 and has issued new opportunities for public comment and training. Written comments are due to the agency by February 13, 2023 and can be submitted to Docket No. EPA-HQ-OAR-2021-0317. There will also be a series of public hearings on January 10-11, 2023 that require advance registration. To assist in preparation, US EPA published a document highlighting areas where the agency continues to seek public input. We are prepared to assist clients in engaging with the agency by providing comment and preparing for the final rule to be implemented next year.

Article By Jennifer Tharp of Squire Patton Boggs (US) LLP

For more environmental legal news, click here to visit the National Law Review.

© Copyright 2022 Squire Patton Boggs (US) LLP

Mexico’s Minimum Wage Set to Increase on January 1, 2023

On December 1, 2022, Mexican President Andrés Manuel Lopez Obrador announced that, unanimously, the business and labor sectors, as well as the government, had agreed to increase the minimum wage by 20 percent for 2023, which will be applicable in the Free Zone of the Northern Border (Zona Libre de la Frontera Norte or ZLFN), as well as the wage applicable in the rest of the country. The increase will become official when it is published in the Official Gazette of the Federation (Diario Oficial de la Federación).

Before the increase was determined, the Mexican National Commission on Minimum Wages (Comisión Nacional de los Salarios Mínimos, or CONASAMI) applied an independent recovery amount (Monto Independiente de Recuperación or MIR) in accordance with the following:

  • MIR for the ZLFN: MXN $23.68
  • MIR for the rest of the country: MXN $15.72

On top of the MIR, the CONASAMI approved a 10 percent increase from the 2022 rate to the daily minimum wage applicable to the ZLFN and the rest of the country, resulting in MXN $312.41 (approximately USD $16.11) for the ZLFN and MXN $207.44 (approximately USD $10.69) for the rest of the country. The new rates would be effective as of January 1, 2023.

The MIR and the 10 percent increase—combined—would represent a 20 percent increase in the daily minimum wage rate which translates to more than MXN $30 per day.

Finally, Secretary of Labor Luisa Maria Alcalde stated that the above increases would directly benefit 6.4 million workers in Mexico.

Article By Pietro Straulino-Rodriguez, Nora M. Villalpando Badillo, and Ana Paula Delsol Espada of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more labor and employment legal news, click here to visit the National Law Review.

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

What You Need to Know About the DOJ’s Consumer Protection Branch

The Consumer Protection Branch of the United States Department of Justice (DOJ) is one of the most overlooked and misunderstood parts of the country’s largest law enforcement agency. With a wide field of enforcement, the Branch can pursue civil enforcement actions or even criminal prosecutions against companies based in the United States and even foreign companies doing business in the country.

Here are four things that Dr. Nick Oberheiden, a defense lawyer at Oberheiden P.C., thinks that people and businesses need to know about the DOJ’s Consumer Protection Branch.

The Wide Reach of “Protecting Consumers”

According to the agency itself, the Consumer Protection Branch “leads Department of Justice enforcement efforts to enforce consumer protection laws that protect Americans’ health, safety, economic security, and identity integrity.” While “identity integrity” is relatively tightly confined to issues surrounding identity theft and the unlawful use of personal data and information, “health,” “safety,” and “economic security” are huge and vaguely defined realms of jurisdiction.

Under the Branch’s enforcement focus or interpretation of its law enforcement mandate, it has the power to prosecute fraud and misconduct in the fields of:

  • Pharmaceuticals and medical devices

  • Food and dietary supplements

  • Consumer fraud, including elder fraud and other scams

  • Deceptive trade practices

  • Telemarketing

  • Data privacy

  • Veterans fraud

  • Consumer product safety and tampering

  • Tobacco products

Business owners and executives are often surprised to learn that the Consumer Protection Branch has so many oversight powers. But the Consumer Protection Branch’s wide reach is not limited to the laws that it can invoke and enforce; it also has a wide geographical reach, as well. In order to carry out its objective, the Branch brings both criminal and affirmative civil enforcement cases throughout the country. In one recent case, the Consumer Protection Branch prosecuted a drug manufacturer for violations of the federal Food, Drug, and Cosmetic Act (FDCA) after the drug maker hid and destroyed records before an inspection by the U.S. Food and Drug Administration (FDA). The drug manufacturer, however, was an Indian company that sold several cancer drugs in the U.S. The plant inspection took place in West Bengal, India.

The Branch Has Lots of Laws at Its Disposal

The extremely broad reach of the Consumer Protection Branch comes with a significant implication: There are numerous laws that the Branch can invoke as it regulates and investigates businesses. Many of these are substantive laws that prohibit certain types of conduct, like:

Others, however, are procedural laws, which prohibit using certain means to carry out a crime, like:

  • Mail fraud (18 U.S.C. § 1341), which is the crime of using the mail system to commit fraud

  • Wire fraud (18 U.S.C. § 1343), which is the crime of using wire, radio, or television communication devices to commit fraud, including the internet

This can mean that many defendants get hit with multiple criminal charges for the same line of conduct, drastically increasing the severity of a criminal case. For example, in one case, a group of pharmacists fraudulently billed insurers for over $900 million in medications that they knew were not issued under a valid doctor-patient relationship. They were charged with misbranding medication and healthcare fraud, in addition to numerous counts of mail fraud for shipping that medication through the mail.

The Branch Has the Power to Pursue Civil and Criminal Sanctions

Lots of business owners and executives are also unaware of the fact that the DOJ’s Consumer Protection Branch has the power to pursue both civil and criminal cases if the law being enforced allows for it.

This has serious consequences for companies, and not just because the Branch can imprison individuals for putting consumers at risk: It also complicates the strategy for defending against enforcement action.

A good example of how this works in real life is a healthcare fraud allegation that is pursued by the Consumer Protection Branch under the False Claims Act, or FCA, because the alleged fraud implicated money from a government healthcare program, like Medicare or Medicaid. For it to be the crime of healthcare fraud, the Consumer Protection Branch would have to prove that there was an intent to defraud the program. If there is no intent, though, the Branch can still pursue civil penalties.

This complicates the defense strategy because keeping prosecutors from establishing your intent is not the end of the case. It just takes prison time off the table. While this is a big step in protecting your rights and interests, it still leaves you and your company open to civil liability. That liability can be quite substantial, as many anti-fraud laws – including the FCA – impose civil penalties on each violation and impose treble damages, or three times the amount fraudulently obtained.

As Dr. Nick Oberheiden, a consumer protection defense lawyer at the national law firm Oberheiden P.C., explains, “While relying on a lack of intent defense can work with other criminal offenses, it is a poor choice when fighting against allegations of fraud because it tacitly admits to the fraudulent actions. Enforcement agencies like the DOJ’s Consumer Protection Branch can then easily impose civil liability against your company.”

The Branch Works in Tandem With Other Agencies

The Consumer Protection Branch only has about 200 prosecutors, support professionals, embedded law enforcement agents, and investigators. However, between October 2020 and December 2021, the Branch charged at least 96 individuals and corporations with criminal offenses and another 112 with civil enforcement actions, collecting $6.38 billion in judgments and resolutions.

The Branch can do this in large part because it works closely with other federal law enforcement agencies, like the:

By pooling their resources with other agencies like these, the DOJ’s Consumer Protection Branch can bring more weight to its enforcement action against your company.

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more consumer protection legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2022

FDA Issues Warning Letters to 7 Dietary Supplement Companies for Drug Claims

  • On November 17, 2022, FDA posted warning letters to 7 companies for selling different dietary supplements with claims that caused the products to be “drugs” in violation of the Federal Food, Drug, and Cosmetic Act (FD&C Act).  Under the FD&C Act, products intended to diagnose, cure, treat, mitigate, or prevent disease are drugs and are subject to the requirements that apply to drugs, even if they are labeled as dietary supplements.

  • The claims were found on the 7 companies’ websites, social media pages, and/or Amazon or Walmart storefronts, and included a variety of statements regarding the products’ claimed abilities to cure, treat, mitigate, or prevent cardiovascular disease (or related conditions, such as atherosclerosis, stroke, or heart failure).  Six of the companies at issue sell a product(s) containing one or more dietary ingredients identified as Vitamin B3, red yeast rice, pine bark extract, EPA and DHA omega-3 fatty acids, magnesium, zinc, bergamot, Hawthorn berry, Hawthorn extract, Coleus forskohlii, hops, taurine, garlic powder, amino sulfonic acid, Co-Q-10, and/or octacosanol.  The seventh company does not list a dietary ingredient but identifies its product as a “glycocalyx regenerating product” and notes various “pathologies associated with impaired endothelial glycocalyx.”  As noted in the warning letters, FDA has not evaluated whether the unapproved products are effective for their intended use, the proper dosage, potential interaction with FDA-approved drugs or other substances, or whether they have dangerous side effects or other safety concerns.  Further, in addition to characterizing the products as unapproved “new drugs,” FDA’s letters note misbranding charges based on the impossibility of writing adequate directions for a layperson to use the products safely for the intended purpose of treating one more diseases that are not amenable to self-diagnosis or treatment without the supervision of a licensed practitioner.

  • FDA requested that the companies respond to the warning letters within 15 working days and describe how they will address the issues, or provide reasoning and substantiation as to why they believe the products are not in violation of the law.  Failure to adequately address could result in legal action, such as product seizure and/or injunction.

For more Biotech, Food and Drug Law news, click here to visit the National Law Review

© 2022 Keller and Heckman LLP

Following the Recent Regulatory Trends, NLRB General Counsel Seeks to Limit Employers’ Use of Artificial Intelligence in the Workplace

On October 31, 2022, the General Counsel of the National Labor Relations Board (“NLRB” or “Board”) released Memorandum GC 23-02 urging the Board to interpret existing Board law to adopt a new legal framework to find electronic monitoring and automated or algorithmic management practices illegal if such monitoring or management practices interfere with protected activities under Section 7 of the National Labor Relations Act (“Act”).  The Board’s General Counsel stated in the Memorandum that “[c]lose, constant surveillance and management through electronic means threaten employees’ basic ability to exercise their rights,” and urged the Board to find that an employer violates the Act where the employer’s electronic monitoring and management practices, when viewed as a whole, would tend to “interfere with or prevent a reasonable employee from engaging in activity protected by the Act.”  Given that position, it appears that the General Counsel believes that nearly all electronic monitoring and automated or algorithmic management practices violate the Act.

Under the General Counsel’s proposed framework, an employer can avoid a violation of the Act if it can demonstrate that its business needs require the electronic monitoring and management practices and the practices “outweigh” employees’ Section 7 rights.  Not only must the employer be able to make this showing, it must also demonstrate that it provided the employees advance notice of the technology used, the reason for its use, and how it uses the information obtained.  An employer is relieved of this obligation, according to the General Counsel, only if it can show “special circumstances” justifying “covert use” of the technology.

In GC 23-02, the General Counsel signaled to NLRB Regions that they should scrutinize a broad range of “automated management” and “algorithmic management” technologies, defined as “a diverse set of technological tools and techniques to remotely manage workforces, relying on data collection and surveillance of workers to enable automated or semi-automated decision-making.”  Technologies subject to this scrutiny include those used during working time, such as wearable devices, security cameras, and radio-frequency identification badges that record workers’ conversations and track the movements of employees, GPS tracking devices and cameras that keep track of the productivity and location of employees who are out on the road, and computer software that takes screenshots, webcam photos, or audio recordings.  Also subject to scrutiny are technologies employers may use to track employees while they are off duty, such as employer-issued phones and wearable devices, and applications installed on employees’ personal devices.  Finally, the General Counsel noted that an employer that uses such technologies to hire employees, such as online cognitive assessments and reviews of social media, “pry into job applicants’ private lives.”  Thus, these pre-hire practices may also violate of the Act.  Technologies such as resume readers and other automated selection tools used during hiring and promotion may also be subject to GC 23-02.

GC 23-02 follows the wave of recent federal guidance from the White House, the Equal Employment Opportunity Commission, and local laws that attempt to define, regulate, and monitor the use of artificial intelligence in decision-making capacities.  Like these regulations and guidance, GC 23-02 raises more questions than it answers.  For example, GC 23-02 does not identify the standards for determining whether business needs “outweigh” employees’ Section 7 rights, or what constitutes “special circumstances” that an employer must show to avoid scrutiny under the Act.

While GC 23-02 sets forth the General Counsel’s proposal and thus is not legally binding, it does signal that there will likely be disputes in the future over artificial intelligence in the employment context.

Article By Steven M. Swirsky, Adam S. Forman, Nathaniel M. Glasser, Neresa A. De Biasi, and Ridhi D. Madia of Epstein Becker & Green, P.C.

For more labor law legal news, click here to visit the National Law Review.

©2022 Epstein Becker & Green, P.C. All rights reserved.

Latest I-9 Virtual Flexibility Guidance

On Oct. 11, 2022, the Department of Homeland Security (DHS) and U.S. Immigration and Customs Enforcement (ICE) announced an extension to compliance flexibilities governing Form I-9. The extension permits continued remote verification and additional Form I-9 flexibilities until July 31, 2023.

ICE initially implemented the policy in March 2020, presumably responding to increased remote employment due to COVID-19. These flexibilities were narrowly and exclusively applied to employers and workplaces that were 100 percent remote, reflecting the agency’s long-standing resistance to remote I-9 verification. ICE granted some discretion in the physical presence requirements associated with Form I-9, allowing employers to inspect documentation remotely. Employers were instructed to state “COVID-19” in Section 2 on Form I-9.

Many employers have since implemented telework arrangements to adapt to changes brought about by the COVID-19 pandemic. ICE’s guidance since March 2020 has been revised to suggest that positions that are remote, even if other positions at the same employer are not remote, are eligible for remote I-9 verification. Further reflecting the changing nature of the workplace, on Aug. 18, 2022, DHS announced a Notice of Proposed Rulemaking (NPRM) intended to explore alternative regulatory options, including making some of the current pandemic-related flexibilities permanent.

The proposal includes a pilot program and framework allowing the DHS secretary to authorize optional alternative documentation examination procedures in the event of heightened security needs or a public health emergency. Moreover, DHS proposed adding boxes to Form I-9 that allow employers to report alternative procedures used to complete Section 2 or Section 3, as well as updates to form instructions to clarify the purposes of these boxes.

Importantly, this NPRM doesn’t itself adopt a specific remote I-9 procedure – it is intended to formalize DHS’ authority to make some form of remote I-9 verification permanent. Subsequent adoption of I-9 remote verification procedures would require separate rulemaking.

Article By Tejas Shah and Mandira Sethi of Barnes & Thornburg LLP

For more immigration law legal news, click here to visit the National Law Review.

© 2022 BARNES & THORNBURG LLP

SEC Ramps Up Enforcement against Public Companies and Subsidiaries in FY 2022

The SEC imposed $2.8 billion in monetary settlements, the largest total in any fiscal year recorded in the Securities Enforcement Empirical Database.

New York—The U.S. Securities and Exchange Commission (SEC) filed 68 enforcement actions against public companies and subsidiaries in the first full fiscal year of Chair Gary Gensler’s tenure. Monetary settlements imposed in public company or subsidiary actions reached $2.8 billion, according to a report released today by the NYU Pollack Center for Law & Business and Cornerstone Research.

The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2022 Update, analyzes information from the Securities Enforcement Empirical Database (SEED). The 68 enforcement actions in FY 2022, which ended September 30, reflected a 28% increase from the previous fiscal year.

The SEC imposed monetary settlements on 97% of the 75 public company and subsidiary defendants that settled in FY 2022. Both the dollar amount and the percentage were the largest of any fiscal year recorded in SEED, which covers actions beginning in FY 2010.

“The number of defendants that settled in FY 2022 with admissions of guilt increased substantially from the previous fiscal year. This was driven by actions involving Broker Dealer allegations brought by the SEC in September,” said Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and director of the Pollack Center for Law & Business. “The 16 defendants admitting guilt was double the largest number in any previous fiscal year in SEED.”

The $2.8 billion in monetary settlements imposed in public company or subsidiary enforcement actions in FY 2022 was $921 million more than in FY 2021 and $321 million more than in any other fiscal year in SEED. The median monetary settlement in FY 2022 was $9 million, the largest in SEED. The average settlement was $42 million.

“The increase in monetary settlements is consistent with the SEC’s public statements that ‘robust remedies’ are an enforcement priority,” said report coauthor Sara Gilley, a Cornerstone Research vice president. “The $1.2 billion in monetary settlements with 16 public broker-dealer subsidiaries for recordkeeping failures represents 44% of total monetary settlements in the fiscal year.”

Issuer Reporting and Disclosure continued to be the most common allegation type in FY 2022, accounting for 38% of actions. Allegations in the SEC’s Broker Dealer classification were the second most common for the first time since FY 2018. Nearly 70% of the 16 Broker Dealer actions were filed against financial institutions for recordkeeping failures.

Click here to read the full report from Cornerstone Research.

Article By Sara E. Gilley, Lindsay Schick, and Heather B. Lazur of Cornerstone Research

For more securities and SEC legal news, click here to visit the National Law Review.

Copyright ©2022 Cornerstone Research

Biden Administration Proposes That Federal Contractors Must Disclose GHG Emissions

Last Thursday, the Biden Administration proposed that all federal contractors (except those receiving less than $7.5 million annually in contracts) be required to, among other things, disclose their GHG emissions.  Specifically, according to the press release issued by the White House, “Federal contractors receiving more than $50 million in annual contracts would be required to publicly disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions, disclose climate-related financial risks, and set science-based emissions reduction targets” and “Federal contractors with more than $7.5 million but less than $50 million in annual contracts would be required to report Scope 1 and Scope 2 emissions.”  The Biden Administration further announced that “[t]his proposed rule leverages widely-adopted third party standards and systems . . . including the CDP environmental reporting system, the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations, and the Science Based Targets Initiative (SBTi) criteria.”  It should be noted that this proposed rule is also quite similar to the climate disclosures proposed by the SEC–an unsurprising observation, as both were proposed by the Biden Administration and relied upon the same third-party standards (e.g., the TCFD).

The significance of this proposed rule–beyond the regulatory burden imposed upon federal contractors, which is substantial–is that the Biden Administration is signaling its commitment to, and reliance upon, climate-related financial disclosures as a key tool to address the challenge of climate change.  Thus, regardless of the legal challenges that the SEC proposal (and any similar regulatory rule) will be subject to, it is clear that the impetus for these types of disclosures will continue, including through other means at the government’s disposal.  Bearing this in mind, it would be rational for companies to take steps to generate the information necessary for these sort of disclosures, and to prepare to issue them–as this regulatory pressure is unlikely to dissipate soon.

“Today, the Biden-Harris Administration is taking historic action to address greenhouse gas emissions and protect the Federal Government’s supply chains from climate-related financial risks. In support of President Biden’s Executive Orders on Climate-Related Financial Risk and Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, the Administration is proposing the Federal Supplier Climate Risks and Resilience Rule, which would require major Federal contractors to publicly disclose their greenhouse gas emissions and climate-related financial risks and set science-based emissions reduction targets.”

For more Federal Legal News, click here to visit the National Law Review.
©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.