Last week, each of the major stock exchanges filed proposed changes to their listing rules governing the adoption of “clawback” policies that will require listed companies to recover erroneously awarded compensation paid to executive officers in the event of a financial statement restatement. The SEC approved these rule changes (including those of the NYSE, Nasdaq and NYSE American) on an accelerated basis on Friday, June 9, 2023. The effect of these changes is to make the effective date of the rules October 2, 2023, giving listed companies until 60 days later, or December 1, 2023, to adopt compliant policies.

We had previously noted that, although the SEC’s final rule had initially suggested that listed companies would have until as late as January 2024 to adopt a clawback policy, a combination of the March 2023 Federal Register publication date of the proposed stock exchange rules and the Exchange Act provisions that impose time limits on the SEC’s review of such rules had created  a situation where, without further amendment, listed companies would have been faced with an early August deadline for adopting their  policies.  These new changes will provide some relief to companies that were working on putting compliant clawback policies in place this summer.

Under the revised rules, companies will be required to

• adopt a policy governing the recovery of erroneously awarded compensation by December 1, 2023;
• comply with that recovery policy for all incentive-based compensation received (as defined in the rules) on or after October 2, 2023;
• provide the disclosures required by SEC and exchange rules on or after October 2, 2023.

If you have questions about the new listing standards, please contact your regular Locke Lord contact or any of the authors.

Public companies planning to grant stock options, SARs or similar option-like instruments to executive officers in 2024 should consider whether to avoid the windows in which a new disclosure requirement under SEC rules applies. See SEC Release 33-11138. Companies may already consider whether they have material non-public information at the time of equity grants and avoid making those grants until that information has been disclosed, but now there is a disclosure requirement during specified windows related to SEC periodic and current report filings.

For calendar year companies, the 2025 annual meeting proxy statement will require disclosure about any grants (of stock options, SARs or similar option-like instruments) to named executive officers that occur in a window beginning four business days before and ending one business day after the filing of the company’s annual report on Form 10-K, quarterly report on Form 10-Q or the filing or furnishing of material non-public information on Form 8-K (typically including each quarterly earnings release).

Under the new rule, Item 402(x) of Regulation S-K (which uses the term options from Item 402(a)(i)), the company is required to make specific tabular disclosures regarding such grants. That disclosure is required to include the percentage change in the company’s stock price from before disclosure to after. Companies should consider the timing of those grants in relation to planned public disclosures – since the tabular disclosure requirement can be avoided if the grants are not made within this specified window.

Companies may decide not to avoid the specified windows before 10-Q filings, for example on the basis that all material information was disclosed in the related earnings release. It is also possible that, even with planning, a company may end up required to include the tabular disclosure if a material development occurs later on the day of grant.

Whether or not those grants are made during the specified window, all public companies will be required to provide narrative disclosure regarding their policies and practices on the timing of those grants in relation to the disclosure of material nonpublic information. Specifically, the narrative disclosure must include how the board or compensation committee takes material nonpublic information into account when determining the timing and terms of those grants and whether the company has timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.

If you have any questions about these changes, your regular Locke Lord contact or any of the authors can discuss these matters with you.

State attorneys general increasingly impact businesses in all industries. Our nationally recognized state AG team has been trusted by clients for 20 years to navigate their most complicated state AG investigations and enforcement actions.

State Attorneys General Monitor analyzes regulatory actions by state AGs and other state administrative agencies throughout the nation. Contributors to this newsletter and related blog include attorneys experienced in regulatory enforcement, litigation, and compliance.

Contact our State AG Team at StateAG@troutman.com.

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Podcast Updates

The 12 Days of Regulatory Insights

We are excited to share our special holiday series, “The 12 Days of Regulatory Insights,” as part of our Regulatory Oversight podcast. This 12-part series covers a variety of critical regulatory topics, offering concise and insightful discussions from members of our Regulatory Investigations, Strategy + Enforcement practice group and State Attorneys General team. We feature guest commentary from several esteemed colleagues across various areas of the firms, as well as attorneys from Locke Lord.

Latest episodes:

• 12 Days of Regulatory Insights: Day 6 – Regulatory Shifts in Consumer Financial Services

• 12 Days of Regulatory Insights: Day 7 – New Rules in Advertising

• 12 Days of Regulatory Insights: Day 8 – Inside the Texas AG’s Office

• 12 Days of Regulatory Insights: Day 9 – Trends in the Tobacco Industry

• 12 Days of Regulatory Insights: Day 10 – Understanding Local Government Dynamics

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State AG Updates

Eighteen State AGs and DeFi Education Fund Sue SEC for Approach to Digital Asset Regulation

By Troutman Pepper State Attorneys General Team

On November 14, a coalition of 18 states, led by Utah Attorney General (AG) Sean Reyes, the outgoing chairman of the Republican AGs Association, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) and its chair, Gary Gensler. DeFi Education Fund, a 501(c)(3) nonprofit organization, also joined the states in this legal action. The lawsuit, filed in the U.S. District Court for the Eastern District of Kentucky, challenges the SEC’s regulatory approach toward digital assets, asserting that the agency has overstepped its authority and infringed upon state sovereignty.

Continue Reading

AGs Take Action Regarding Medicaid Fraud

By Troutman Pepper State Attorneys General Team and Nick Gouverneur

This month, two attorneys general (AGs) have settled False Claims Act investigations with two separate companies in the health care industry. Both settlements were notable in their own right.

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Two Courts Block Kroger-Albertsons Merger

By Barbara Sicalides and Julian Weiss

Within hours of each other, an Oregon federal district court followed by a Washington state court enjoined the $24.6 billion merger of the Kroger and Albertsons grocery chains. The Oregon court adopted the controversial 2023 Merger Guidelines’ market concentration presumption and largely accepted the Federal Trade Commission’s (FTC) and its expert’s arguments for a narrow grocery market. In a loss for the FTC, the Oregon court declined to find that the proposed transaction was likely to substantially harm competition in the labor market alleged.

Continue Reading

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AG Of the Week

Matthew Platkin, New Jersey

Matthew J. Platkin was appointed by Governor Phil Murphy to serve as the state’s 62nd attorney general (AG) on February 3, 2022, and confirmed to that role with bipartisan support by the New Jersey Senate on September 29, 2022.

Before becoming AG, Platkin served as chief counsel to Murphy from January 2018 to October 2020. As chief counsel, he oversaw an office of attorneys that advised the governor on all legal matters, including legislation, executive orders, administrative regulations, and litigation.

In addition to his work in public service, Platkin also worked in private practice, having served as a partner at Lowenstein Sandler in the White-Collar Criminal Defense and Business Litigation practice groups.

Previously, he worked as an associate at Debevoise & Plimpton in New York City, where he focused on internal investigations and civil and criminal matters before the U.S. Attorney’s Office for the Southern District of New York, the U.S. Department of Justice, the New York Department of Financial Services, and various regulatory agencies.

Before law school, Platkin began his career as a policy advisor at the Brookings Institution in Washington, D.C., working with members of Congress on job growth and economic recovery. He also served as an organizer in San Antonio, TX.

Platkin was born and raised in New Jersey, grew up in Morris County, and graduated from Madison High School. He received his bachelor’s degree from Stanford University, and his J.D. from Stanford Law School, where he was an editor of the Stanford Law Review.

He lives in Montclair with his wife, Sophia, and children, Robert and Maya.

New Jersey AG in the News:

• On December 17, Platkin and the New Jersey Department of Labor and Workforce Development jointly announced a $300,000 settlement with a newspaper delivery company that misclassified its workers as independent contractors instead of employees.

• On December 16, Platkin shared the New Jersey Division of Gaming Enforcement’s November total gaming revenue results.

• On December 10, Platkin announced the director of the Division of Law, Michael T.G. Long, is returning to private practice and Deputy Director Michael C. Walters will become acting director.

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Upcoming AG Events

• January: RAGA | Winter National Meeting | Austin, TX

• February: DAGA | Los Angeles Policy Conference | Los Angeles, CA

• February: RAGA | Victory Fund Ski Retreat | Big Sky, MT

For more on upcoming AG Events, click here.

The Centers for Medicare & Medicaid Services has introduced significant updates to the long-term care surveyor guidelines, aiming to enhance the quality and oversight of the survey process.

Here, we delve into some of the key changes that will have the greatest impact on facility operations starting in February 2025, when they take effect.

Click here to read the full article on McKnights Long-Term Care News.

On December 26, 2024, the merits panel of the 5^th Circuit Court of Appeals vacated the Court’s December 23^rd stay of enforcement of the preliminary injunction issued by the United States District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. Garland pending appeal. The December 26^th order stated that it was “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments” in Texas Top Cop Shop, Inc. v. Garland.^[1] The previously issued order by the motions panel of the 5^th Circuit^[2] stayed the nationwide preliminary injunction against enforcement of the Corporate Transparency Act issued by the District Court pending the determination of the appeal.^[3]

The December 26 order of the Court of Appeals merits panel did not address the finding of the 5^th Circuit’s motions panel that found, among other things, that the CTA “was within [Congress’] commerce power”.^[4] When the appeal is finally decided on the merits, the merits panel is not bound by the motions panel’s findings.

The Court of Appeals motions panel order expedited the appeal from the District Court “to the next available oral argument panel.” The Court has entered a briefing schedule and scheduled oral argument on the appeal for March 25, 2025.

Shortly after reach of the 5^th Circuits’ decisions and orders, FinCEN issued Alerts^[5] discussing the effects of the decisions and orders. The initial Alert included a number of extensions and important deadlines for CTA BOI reporting. The December 27^th Alert advised that the nationwide stay against enforcement of the CTA reporting requirements is back in effect pending further court action.

While the preliminary injunction remains in effect, voluntary beneficial ownership reports (including initial reports, amendments and corrections) may be filed by reporting companies.

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On December 23, 2024, the United States 5^th Circuit Court of Appeals granted the government’s motion for a “stay pending appeal”^[1] of the Texas Top Cop Shop, Inc. v. Garland preliminary injunction prohibiting enforcement by FinCEN of the CTA.^[2] The Court of Appeals found, among other things, that the CTA “was within [Congress’] commerce power”.^[3]

The Court of Appeals decision and order effectively reinstated the beneficial ownership information reporting (BOI) deadlines under the CTA and its regulations, including the January 1, 2025 deadline for filings by non-exempt reporting companies existing prior to January 1, 2024. The 5^th Circuit ordered that the appeal be expedited “to the next available oral argument panel.”

Shortly after the 5^th Circuits’ decision and order, FinCEN issued an Alert^[4] discussing the 5^th Circuit’s decision and order and announcing the extension of the January 1, 2025 deadline for filing certain initial CTA Beneficial Ownership Reports to January 13, 2025.

The Alert included a number of other extensions and important deadlines for CTA BOI reporting, including a reminder that as of January 1, 2025, all newly formed entities that are not exempt under the CTA and existing Regulations only have 30 days from the date of formation to make their initial BOI Reports.

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Our eMerge team is excited to share the following updates:

• Generative AI Consulting
• eMerge Service Spotlight
• Thought Leadership
• Speaking Engagements

eMerge attorneys are advising clients on data management and information governance issues associated with the development and use of generative artificial intelligence (AI) tools. This legal work, informed by our own experience in using AI technology and working daily with client data, has allowed us to further reduce risks to clients in this evolving area. We are proud that our attorneys’ practical guidance in eDiscovery and data management has earned them a global ranking from Chambers, along with other notable recognitions.

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Generative AI Consulting

Case Study

When Troutman Pepper litigators reached out to eMerge with more than 100,000 documents that required careful assessment in advance of a rapidly approaching 30(b)(6) deposition in a class action, eMerge quickly devised and executed a first-of-its-kind generative AI-powered strategy to cost-effectively identify key documents and prepare topic-specific deposition outlines.

Marshalling their substantive AI experience, Principal Jason Lichter and Senior Discovery Attorney Katelyn Gillece directed the safe and defensible use of Relativity’s aiR for Review and aiR for Case Strategy applications alongside Fileread, an enterprise generative AI chatbot, to accurately isolate those documents most germane to the topics central to the corporate designee deposition with minimal eyes-on review. In consultation with merits attorneys and internal and external data scientists, Lichter and Gillece engineered and validated prompts that achieved startling accuracy in parsing complex industry-specific concepts, gaining the client’s trust and the case team’s confidence along the way.

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eMerge Service Spotlight

Information Governance Consulting

Troutman Pepper eMerge offers tailored information governance consulting services to help organizations manage and preserve data from messaging applications, collaboration platforms, and mobile devices. eMerge attorneys develop and enforce electronic communications policies and create custom retention and remediation workflows to ensure compliance with legal and regulatory requirements. These services enhance data security, streamline management processes, and mitigate risks associated with data breaches and loss, ensuring that data is appropriately used and easily retrievable when needed, thereby supporting overall organizational efficiency and compliance.

In the last few months alone, eMerge has advised clients on Microsoft Teams meeting recording and transcript retention best practices, mobile device data governance, and AI-aided data classification.

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Thought Leadership

Important Microsoft eDiscovery Updates

Several key Microsoft 365 eDiscovery enhancements have rolled out over the past few months. These improvements are designed to streamline workflows and provide greater insights into your data. We encourage you to explore these new features as they become available and leverage them to enhance your processes. We are available to assist you in maximizing the benefits of these enhancements and navigating known challenges. We will continue to monitor these updates and provide additional information as it becomes available.

Harnessing Generative AI: Innovations and Best Practices

eMerge Managing Partner Alison Grounds joined Partner Brett Mason, host of The Good Bot podcast, where they highlighted the firm’s integration of generative AI and discussed the formation of a task force to consolidate resources and deploy AI effectively across the firm. The conversation also covered best practices for companies looking to implement generative AI, emphasizing the importance of involving the right stakeholders and developing flexible policies that balance innovation with risk management. Alison highlighted the evolving perspectives of clients on AI, noting a shift from initial fear to excitement and proactive engagement. Click here to listen to the podcast episode.

Harnessing Technology in Litigation: Insights From Troutman Pepper eMerge

Principal Jim Calvert joined Partner Steve Hewitson to discuss the transformative role of technology in complex regulatory proceedings and litigation. This insightful discussion covered the benefits of streamlined processes and centralized data management, as well as the exciting developments involving AI. Learn how innovative solutions are building trust, enhancing efficiency, and fostering better outcomes. Click here to watch the video.

Commentary on Proportionality in Cross-Border Discovery

Principal Jim Calvert co-authored the November 2024 The Sedona Conference white paper, “Commentary on Proportionality in Cross-Border Discovery.” The Sedona Conference (TSC) is a nonpartisan, nonprofit 501(c)(3) research and educational institute dedicated to the advanced study of law and policy in the areas of antitrust law, complex litigation, intellectual property rights, and data security and privacy law. Click here for more information.

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Speaking Engagements

2024 DRI Insurance Coverage and Practice Symposium

eMerge Managing Partner Alison Grounds spoke at the 2024 DRI Insurance Coverage and Practice Symposium on the “Weaponization of Discovery in Coverage Cases.” Alison explored the weaponization of discovery by the policyholder bar and how to combat efforts to (1) force settlement by exponentially increasing the costs of litigation through burdensome discovery, and (2) trip up carriers into a discovery sanction. Click here for more information.

Safeguarding Corporate Assets: Leveraging Copyright and Trade Secret Protections to Combat Corporate Espionage

In an era where corporate espionage poses a significant threat to businesses, understanding how to effectively use copyright and trade secret protections is crucial. eMerge Managing Partner Alison Grounds and members of the Corporate Espionage Response team discussed strategies and best practices for preventing and remedying corporate espionage. Click here to view the recording. While we hope you find this presentation informative, CLE credit is not available for this recorded program.

Navigating Ethical Pitfalls With Generative AI

eMerge Managing Partner Alison Grounds and Troutman Pepper ICS Director and Ethics Counsel Jessica Davis discussed the dynamic landscape of generative AI, including its practical applications and potential benefits. They also highlighted the ethical considerations that arise with this technology. The session provided insights on how to navigate and mitigate these challenges, ensuring responsible AI deployment. Click here to view the recording. While we hope you find this presentation informative, CLE credit is not available for this recorded program.

 

Much of the activity surrounding the state insurance regulation of artificial intelligence (“AI”) in the insurance industry this year was prompted by the NAIC Model Bulletin: Use of Artificial Intelligence Systems by Insurers (“Model Bulletin”). The NAIC adopted the Model Bulletin late in 2023 at its Fall Meeting. The Model Bulletin makes clear that existing laws (e.g. unfair and deceptive practices, corporate governance disclosures, rate requirements prohibiting rates from being excessive, inadequate, unfairly discriminatory or discrimination based on protected classes, etc.) continue to apply and will be enforced in connection with the use of AI by insurers. The Model Bulletin provides guidance to insurers with respect to regulators’ expectations for insurers to establish governance and risk management programs relating to the insurer’s use of AI. The Model Bulletin applies to all phases of the insurance life cycle, including product development & design, marketing, underwriting, rating and pricing, and claim adjudication and payment. While the Model Bulletin only applies to insurers licensed in a state, third party vendors (for example, TPAs and claim adjusters) will be impacted by the requirements that insurers conduct due diligence to assess the third party data or AIS and the inclusion of certain provisions in the third party vendor contracts. Broadly, the Model Bulletin addresses:

• Program Guidelines
  • General Guidelines
  • Governance
  • Risk Management and Internal Controls
  • Third-Party AI Systems and Data
• Regulatory Oversight and Examination Considerations
  • Information and Documentation Relating to AI System Governance, Risk Management, and Use of Protocols
  • Third-Party Systems and Data

The guidance contained in the Model Bulletin is principles based rather than prescriptive in nature.

STATES ADOPTING THE MODEL BULLETIN IN 2024

So far during 2024, 21 states have issued bulletins which are substantially similar to the Model Bulletin. North Carolina and Massachusetts are the most recent states to issue guidance based upon the Model Bulletin. The chart below lists all states that have adopted the Model Bulletin in 2024:

STATES ISSUING GUIDANCE SUBSTANTIALLY SIMILAR TO MODEL BULLETIN IN 2024
Alaska: Bulletin B 24-01 – February 1, 2024 Arkansas: Bulletin 13-2024 – July 31, 2024 Connecticut: Bulletin No. MC-25 – February 26, 2024 District of Columbia: Bulletin 24-IB-002-05/21 – May 21, 2024 Illinois: Company Bulletin 2024-08 – March 13, 2024 Iowa: Insurance Division Bulletin – November 7, 2024 Kentucky: Bulletin No. 2024-02 – April 16, 2024	Maryland: Bulletin No. 24-11 – April 22, 2024 Massachusetts: Bulletin 2024-10 – December 9, 2024 Michigan: Bulletin 2024-20-INS – August 7, 2024 Nebraska: Guidance IGD-H1 – June 11, 2024 Nevada: Bulletin 24-001 – February 23, 2024 New Hampshire: Bulletin Docket #INS 24-011-AB – February 20, 2024 North Carolina: Bulletin 24-B-19 – December 18, 2024 Oklahoma: Bulletin No. 2024-11 – November 14, 2024	Pennsylvania: Insurance Notice 2024-04, 54 Pa.B. 1910 – April 6, 2024 Rhode Island: Insurance Bulletin No. 2024-03 – March 15, 2024 Vermont: Insurance Bulletin No. 229 – March 12, 2024 Virginia: Administrative Letter 2024-01 – July 22. 2024 Washington: Technical Assistance Advisory 2024-02 – April 22, 2024 West Virginia: Insurance Bulletin No. 24-06 – August 9, 2024

STATES ADOPTING AI REGULATIONS OR OTHER GUIDANCE IN 2024

Two states, Colorado and New York, saw regulatory activity in connection with insurers’ use of AI that differed from the Model Bulletin.

Colorado

The Colorado Division of Insurance (“Colorado Division”) promulgated regulations in late 2023, 3 CCR 702 Reg. 10-1-1 et seq. – Dated July 23, 2023 – “Governance and Risk Management Framework requirements for Life Insurers’ Use of External Consumer Data and Information Sources, Algorithms, and Predictive Models” implementing in part Colo. Rev. Stat. s 10-3-1104.9. This regulation applies only to life insurers issuing individual life policies and to all phases of the insurance life cycle. In 2024, the Colorado Division held stakeholder meetings and/or issued draft regulations for comment relating to governance and risk management framework requirements applicable to private passenger auto insurers, and health insurers. Throughout 2024, the Colorado Division contended with whether to put forward separate regulations for private passenger auto insurers and health insurers with respect to governance and risk management framework requirements or to integrate the requirements into the existing regulations applicable to life insurers. On December 6, 2024, the Colorado Division released for comment proposed amendments to 3 CCR 702 Reg. 10-1-1 (relating to life insurers) to incorporate additional requirements for life insurers and to expand the regulation to be applicable to private passenger auto insurers and health insurers. Also, in 2024 the Colorado Division continued its work on developing regulations relating to quantitative testing of algorithms and predicative models used by life insurers to ensure that their use is not unfairly discriminatory based upon race or ethnicity, which have not yet been adopted. See DRAFT PROPOSED 3CCR 702-10 – Algorithm Predictive Model Quantitative Testing Regulation. This proposed regulation has prompted significant scrutiny and comment from insurers and interested parties including the development alternative proposed regulations by the American Council of Life Insurers. The regulations proposed and adopted are detailed and prescriptive in nature.

New York

In July of 2024, the New York Department of Financial Services (“NYDFS””) finalized and adopted Circular Letter 2024-7 – “Use of Artificial Intelligence Systems and External Consumer Data and Information Sources in Insurance Underwriting and Pricing” (“NY Letter”) after receiving and considering comments from the insurance industry. While the NY Letter touches on many of the same principles as the Model Bulletin, it is narrower in its application and does not follow the Model Bulletin. On its face, the NY Letter applies to use of ECDIS and AIS in connection with underwriting and pricing, whereas the Model Bulletin applies to all phases of the insurance life cycle. However, insurers would be wise to consider applying the guidance to its use of AI across all of its insurance practices. In the NY Letter, the definition of artificial intelligence differs from the Model Bulletin. Likewise, the definition of ECDIS is different than that which exists in the Colorado regulations. The NYDFS’ definitions appear to be simpler; however, as states continue to adopt their own guidance and regulations, insurers will have to grapple with whether the differences in definitions are intentional or a difference without a distinction. The NY Letter requires insurers to oversee third party vendors and insurers are responsible for outcomes of that use. Insurers must incorporate certain provisions into their third party vendor contracts. The NY Letter is also principles based rather than prescriptive oriented.

Expected Future AI Trends in State Insurance Regulatory Compliance

As we head into 2025, we anticipate the following:

• More states will adopt the Model Bulletin.
• Regulators will increase their focus on insurers’ use of third party vendors as the NAIC Third-Party Data and Models (H) Task Force moves forward in its efforts to develop and propose a framework for the regulatory oversight of third-party data and predictive models.
• The NAIC Market Conduct Examination Guidelines (D) Working Group will “coordinate with the Innovation, Cybersecurity and Technology (H) Committee to ‎develop market conduct examiner guidance for the oversight of regulated entities’ ‎use of insurance and non-insurance consumer data and models using algorithms and ‎artificial intelligence (AI)”.‎
• Regulators will exercise greater scrutiny over insurance company filings related to the use of new technological innovations, including artificial intelligence, predictive models and algorithms.
• Regulators will continue to explore how best to regulate insurers’ use of AI given the regulators’ limited resources and other demands on those resources.
• Regulators will continue to hire subject matter experts to assist with the development of regulation of new technologies and AI in the insurance industry.
• Class action litigation will increase in connection with the insurance industry’s use of artificial intelligence and technological innovations that may result in business practices that allegedly result in unfair discrimination or bias against the insurance buying public or claiming that AI used for insurance claims resulted in an unfair claims settlement practice.

On November 27, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) sanctioned 21 high-ranking Venezuelan officials aligned with Nicolás Maduro. These sanctions, issued under Executive Order 13692 (“Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela“), target individuals responsible for repressing civil society, violently suppressing protests, and undermining Venezuela’s democratic election process.

The sanctioned officials include members of the Bolivarian National Guard, Bolivarian National Police, Bolivarian National Intelligence Service, and various government ministries. These actions follow reports of mass arrests, suppression of peaceful assembly, and the issuance of an arrest warrant for President-elect Edmundo Gonzalez Urrutia, forcing him to flee Venezuela.

Implications for U.S. Persons

As a result of the sanctions, all property and financial interests of these individuals and entities they control (50% or more ownership) within the possession or control of U.S. persons are blocked. U.S. persons are prohibited from engaging in transactions with the designated parties unless authorized by OFAC. Non-U.S. financial institutions and others conducting business with these individuals risk secondary U.S. sanctions or enforcement actions that could freeze their assets or cut them off from U.S. financial systems and U.S. dollars.

Moving Forward

OFAC’s actions emphasize the United States’ commitment to promoting democratic governance and accountability. In parallel, the U.S. Department of State has imposed visa restrictions under Presidential Proclamation 9931 on nearly 2,000 Maduro-aligned individuals for their roles in undermining democracy, corruption, or human rights abuses.

Businesses with ties to Venezuela should update their compliance programs to ensure adherence to OFAC regulations and these new sanctions. Maintaining a comprehensive Venezuela compliance program, including thorough due diligence, is essential to avoid inadvertent OFAC violations. Companies should also monitor OFAC developments, as sanctions evolve based on changes or shifts in U.S. foreign policy objectives.

Conclusion

This paper is intended as a guide only and is not a substitute for specific legal or tax advice. Please reach out to the authors for any specific questions. We expect to continue to monitor the topics addressed in this paper and provide future client updates when useful.

On December 16, 2024, the California Air Resources Board (CARB) requested public feedback to “help inform its work to implement” the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) (see our summary of these 2023 laws here). The “information solicitation” was issued shortly after California State Senator Scott Wiener and Senator Henry Stern, who authored the bills, penned a letter to CARB expressing their frustration with CARB’s apparent lack of momentum in advance of a July 2025 statutory deadline to adopt regulations governing the greenhouse gas (GHG) and climate risk disclosures that large entities “doing business in California” must make beginning in 2026. CARB is accepting comments in response to the solicitation for 60 days, through February 14, 2025.

This is the first opportunity companies potentially subject to these laws have had to comment on CARB’s implementation of the controversial climate disclosure requirements. While CARB is requesting any feedback relevant to implementing SB 253 and SB 261, it has posed questions about 13 specific topics in its solicitation, including whether to adopt the interpretation of “doing business in California” found in the California tax code, and how CARB should track parent/subsidiary relationships to assure companies that report under a parent are clearly identified and included in any reporting requirements. Notably, CARB is not specifically requesting comment on whether subsidiaries that do not independently meet the reporting thresholds should be covered or excluded from the laws. Many of the questions in the solicitation seek basic background information on GHG reporting, including the appropriate timeframes and frequency of reporting, when data is available from prior years, and what software systems are used for reporting. CARB’s information request seeks similar input on the mechanics of climate-related financial disclosures.

CARB’s solicitation indicates it is trying to quickly get up to speed on the GHG and climate-disclosure landscape. Companies with real-world information regarding the challenges and issues associated with assembling and reporting information on GHG emissions and climate-related risks can help shape CARB’s decision-making as it begins to develop draft regulations, and should strongly consider providing feedback in response to the solicitation. Additionally, companies that have questions regarding the scope and applicability of SB 253 and 261 have the opportunity to make CARB aware of open questions not addressed by the legislation and to suggest reasonable solutions for consideration by CARB as it builds out its climate-related disclosure program.