First 100 Days: Upcoming Regulatory Signals for Private Equity

Regulatory Shifts

Implementation of new Staff Legal Bulletin No. 14M (CF), which rescinds Staff Legal Bulletin No. 14L and eases the ability of companies to exclude shareholder proposals (e.g., climate policy, corporate governance, human capital management) from proxy materials (e.g., “ordinary business” exclusion, economic relevance exclusion)

SEC Division of Corporation Finance bulletin

Statement from Acting Chair

Implementation of new Compliance and Disclosure Interpretations (C&DIs) related to the proxy rules, including C&DIs covering:

• Securities and Exchange Act Sections 13(d) and 13(g) regarding beneficial ownership reporting, rescinding previous interpretations and adding restrictions regarding the use of Schedule 13G (generally for passive investors)
• Communications with other shareholders through “exempt solicitations”, narrowing the permissible uses

SEC Staff Guidance here and here

Execution of passivity agreements (e.g., FDIC)

Attention to perceived potential financial stability risk based on past and anticipated future growth in private credit markets

FRB Financial Stability Report (Nov 2024)

FRB Governor Remarks

SEC Commissioner Remarks

Consideration of regulatory changes regarding:

• Retail investor participation in private markets
• The definition of emerging growth companies

SEC Acting Chair Remarks

Regulatory Modifications

Implementation of Executive Order on “Ensuring Accountability for All Agencies”, which requires all executive departments and agencies to submit all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs

White House

Ongoing enforcement of 2023 Merger Guidelines for FTC, DOJ merger review analysis consistent with applicable law (FTC Chair says “prize stability and disfavor wholesale recission”) though potential for an “iterative and transparent revision process”

FTC Chair Memorandum

DOJ Antitrust Division Memorandum

Potential actions under the Congressional Review Act (e.g., FTC Pre-merger notification, SEC Form N-PORT and N-CEN filings)

Potential changes/extensions to tax laws (e.g., carried interest)

Enforcement Focus

Expected prioritization of SEC enforcement cases with tangible harm to investors and focus on individual liability for “bad actors”

Reported restructuring of the SEC investigations process to require Commissioner approval prior to initiating formal orders of investigation (e.g., subpoena, production of documents, compel testimony)

Potential change in enforcement stance to include re-direction  in cryptocurrency/digital assets enforcement

Implementation of Executive Order pausing investigations and enforcement of the FCPA and directing review/revision of the related guidelines and policies

Implementation of DOJ Memo re-prioritizing enforcement focus of FCPA to foreign bribery that facilitates the criminal operations of Cartels and Transnational Criminal Organizations

DOJ Memo

M&A/Antitrust

Potential adoption of a more “nimble and predictable” approach specifically in the de novo formation and M&A

Continued focus on anti-monopoly/anti-competitive transactions and/or conduct and protection of workers (i.e., labor markets)

Application of “factors and frameworks” under the 2023 Merger Guidelines when reviewing transactions for compliance with the U.S antitrust laws (e.g., series of acquisitions, trends toward consolidation)

FTC Release

Corporate Ownership

• Consolidated Audit Trail
• Regulation 13D-G Beneficial Ownership reporting related to proxy voting
• Beneficial Ownership Information under the Corporate Transparency Act
• Form PF filings

SEC Staff Guidance here and here

FinCEN BOI

Digital/Crypto Asset

Implementation of Executive Order on “Strengthening American Leadership in Digital Financial Technology”

White House

Launch of a Crypto Task Force dedicated to developing “a comprehensive and clear regulatory framework for crypto assets”

Acting SEC Chair

Potential adoption of a more flexible approach to innovation and technology, including digital assets and tokenization

Acting FDIC Chair

AI/Innovation/Tech

Implementation of Executive Orders on “America First Investment Policy” and “Defending American Companies and Innovators”  

White House here and here

Implementation of Executive Order on “Removing Barriers to American Leadership in AI”, including AI Action Plan

Naming of Special Advisor for AI and Crypto with responsibilities for overseeing regulatory frameworks, collaboration with officials and stakeholders, including PCAST, and alignment of AI priorities with administration policies

White House Actions here and here

Implementation of Executive Order on “Strengthening American Leadership in Digital Financial Technology”

White House

Launch of the SEC Cyber and Emerging Technologies Unit to complement the Crypto Task Force and enforce against misconduct related to innovation (e.g., fraud through AI, ML, blockchain technology, disclosure)

SEC Release

Potential adoption of a more flexible approach to innovation and technology, including fintech partnerships

Acting FDIC Chair

Reliance on third parties to support key systems and tools (e.g., AI, cybersecurity)

Incidence and evolution of investment fraud

FINRA

Increasing adoption of data-driven technologies for underwriting and valuation accuracy, as well as private credit manager valuations