We’ve previously blogged about some of the new legal and compliance risks that companies face as a result of the Trump administration’s tariff regime. That blog highlighted a DOJ memo stating that its policies on white collar crime identified “trade and customs fraudsters, including those who commit tariff evasion” as a key threat to national security. This Blank Rome memo says that the DOJ is putting its money where its mouth is when it comes to tariff enforcement. Here’s the intro:
The U.S. Department of Justice (“DOJ”) has announced a significant realignment of resources that will fundamentally reshape criminal enforcement of international trade rules. By combining senior prosecutors from its Market Integrity and Major Frauds Unit (“MIMF”) with attorneys reassigned from the soon-to-be-defunct Consumer Protection Branch, DOJ is forging a newly branded “Market-, Government-, and Consumer-Fraud Unit” with a sharpened mandate: focus on customs fraud and tariff evasion.
This initiative—unveiled in speeches, internal memoranda, and follow-on press coverage—signals that trade and customs violations, once largely the province of civil enforcement by U.S. Customs and Border Protection (“CBP”) or DOJ’s Civil Fraud Section, will now also sit squarely on the DOJ’s criminal docket.
The memo says that the DOJ’s action can be expected to result in, among other things, acceleration of investigations, criminalization of historically civil misconduct, heightened prosecutorial interest due to the national security framing of cases, and broader asset seizure and forfeiture efforts.
Shortly after the Trump administration announced its tariff program, warning flags were raised about the possibility of the False Claims Act being used against companies alleged to have engaged in efforts to evade applicable tariffs. Those warnings proved to be prescient, as the intro to this Sullivan & Cromwell memo explains:
On July 15, 2025, the United States Attorney’s Office for the District of South Carolina filed a qui tam intervenor complaint under the False Claims Act in United States ex rel. Joyce v. Global Office Furniture, LLC, et al., alleging that a South Carolina office furniture company, Global Office Furniture, submitted false invoices to Customs and Border Protection (“CBP”), evading at least $2 million in tariffs on imported goods.
The company allegedly engaged in a so-called “double-invoicing scheme,” whereby an importer creates two separate invoices—one reflecting the accurate price that is used to collect payment from the purchaser, and one with a falsely reduced price that is submitted to CBP and used to calculate customs duties. The company’s former office manager filed a qui tam whistleblower complaint under seal on March 30, 2020, leading to both a civil and criminal investigation later that year.
Although the conduct alleged in the complaint predates “Liberation Day” by several years, S&C’s memo says that the complaint confirms that the Trump administration’s focus on tariff and trade issues is reflected in DOJ civil and criminal enforcement priorities, and that companies with international supply chains need to review and consider updating their compliance programs to ensure that customs and tariff-related issues are appropriately addressed.
Last week, Attorney General Pam Bondi issued a memorandum to all federal agencies clarifying the application of federal antidiscrimination laws to DEI programs. The memo highlights five categories of conduct that could give rise to liability for violating federal anti-discrimination laws. This excerpt from a Latham memo on the guidance summarizes the categories of conduct that the DOJ finds to be problematic:
1. Preferential treatment based on protected characteristics, which includes race-based scholarships or programs, preferential hiring or promotion practices, and access to facilities or resources based on race or ethnicity.
2. Prohibited use of proxies for protected characteristics, which could occur when a federally funded entity “intentionally uses ostensibly neutral criteria that function as substitutes for explicit consideration of race, sex, or other protected characteristics.” The Guidance notes that potentially unlawful proxies include requiring narratives related to “overcoming obstacles” or “diversity statements” insofar as they “advantage[] those who discuss experiences intrinsically tied to protected characteristics[.]” Critically, the Guidance suggests that efforts to recruit from particular organizations or geographic areas can constitute unlawful activity if these entities or locations were chosen “because of their racial or ethnic composition rather than other legitimate factors.”
3. Segregation based on protected characteristics, which includes race-based training sessions, segregation in facilities or resources, and implicit segregation through program eligibility. Importantly, DOJ reiterates the administration’s position that “failing to maintain sex-separated athletic competitions and intimate spaces can also violate federal law” when transgender individuals are permitted “to access single-sex spaces designed for females[.]”
4. Unlawful use of protected characteristics in candidate selection, which includes race-based “diverse slates” in hiring, sex-based selection for contracts, and race- or sex-based program participation goals (e.g., requirements that programs have a certain percentage of participants from underrepresented groups).
5. Training programs that promote discrimination based on protected characteristics or promote hostile environments, which include trainings that affirm that “all white people are inherently privileged” or recognize the concept of “toxic masculinity.” The Guidance notes that such trainings “may” violate Title VI or Title VII “if they create a hostile environment or impose penalties for dissent in ways that result in discriminatory treatment.”
The final section of the AG’s memorandum is devoted to a discussion of recommended best practices for entities to employ in order to ensure their programs comply with federal law.
Shareholder engagement has become a more fraught topic following Corp Fin’s issuance earlier this year of updated CDIs suggesting that engagement on certain governance topics could jeopardize a major investor’s ability to report its holdings on the short-form Schedule 13G. Since that’s the case, it will undoubtedly come as welcome news to investors that a recent FTC/DOJ Statement of Interest indicates that corporate governance engagements generally won’t give rise to concerns under the federal antitrust laws. This excerpt from Fried Frank’s memo on the statement explains:
The recent FTC/DOJ Statement of Interest in connection with the State of Texas’ antitrust lawsuit against institutional investors BlackRock, State Street and Vanguard provides valuable insights into the agencies’ interpretation of the antitrust “solely for investment” exemption. Notably, the agencies make clear that investors’ engagement with issuers to influence corporate governance structures and processes is consistent with passive investment under the antitrust laws.
While there has always been an understanding in the investor community that engagement with issuers on certain corporate governance matters would not preclude an investor from relying on the Hart-Scott-Rodino (“HSR”) Act’s “solely for investment” exemption, this is the first time that the antitrust agencies have explicitly confirmed that position to the market. The FTC and DOJ statements provide important clarity on how investors can engage with issuers without losing the ability to rely on the HSR exemption for passive investments.
The memo notes that, with this statement, the antitrust agencies have for the first time issued clear guidance that engagement with and attempts to influence issuers concerning certain corporate governance matters, including board size, compensation policies, and public reporting practices, are consistent with consistent with passive investment.
The most notable change implemented by the SEC’s 2020 amendments simplifying private offering exemptions was the replacement of the SEC’s patchwork approach to determining when one offering will be integrated with another with a single, comprehensive rule addressing integration issues across a full range of possible settings. As Dave observed last year, that was a big relief for most issuers. However, a recent letter from Stan Keller and Richard Leisner to SEC Chairman Paul Atkins and Acting Corp Fin Director Cicely LaMothe raises a remaining area of concern under the new regime that they’d like to see addressed. This excerpt from their letter explains the problem:
Rule 152(a), as now in effect, provides a general principle for determining when, in the absence of a safe harbor under Rule 152(b), two or more offerings need not be integrated and treated as part of the same offering for purposes of qualifying for an exemption from registration. Clause (1) of Rule 152(a) requires that each purchaser in an exempt offering in which general solicitation is not allowed, in the absence of a substantive relationship with that purchaser established before the offering commenced, has not been solicited through the use of general solicitation.
There is no stated time limit on when that general solicitation may have taken place and therefore no cleansing period. Accordingly, if a purchaser was generally solicited some time ago (possibly a year or more before and likely in connection with a different offering), under the language of the rule they remain ineligible to participate in the current offering because that earlier general solicitation will be attributed to the current offering, thus making the exemption unavailable for the entire offering. This requirement also results in negating the availability of the safe harbor under Rule 152(b)(1) premised on a 30-day cooling off period.
The authors suggest that Rule 152(a)(l), like the safe harbor in Rule 152(b)(l), should provide for a cooling off period of an appropriate length in order to have objective certainty as to when a purchaser previously solicited is out of the penalty box.
Richie Leisner observed in an email message to me that this open-ended “penalty box” isn’t a big issue for lawyers with clients that use financial intermediaries in their transactions. However, he noted that “out here in the hinterlands, our clients in most cases are not attractive enough or wealthy enough to involve licensed financial intermediaries. In these circumstances Rule 152 continued to pose a trap for the unwary.”
The letter also asks the SEC to address similar concerns surrounding the provisions of Rule 144(i) that make Rule 144 unavailable for securities of shell companies and impose current information requirements as a condition to use of the rule by holders of securities of former shell companies without any time limitation.
American literature has produced a lot of memorable first lines. From Moby Dick’s “Call me Ishmael. . .” to The Adventures of Augie March’s “I’m an American, Chicago born. . .” opening salvos like these draw readers in and compel them to read on. Everyone has their favorite, but for me, nothing tops this:
“We were somewhere around Barstow on the edge of the desert when the drugs began to take hold. I remember saying something like “I feel a bit lightheaded; maybe you should drive….” And suddenly there was a terrible roar all around us and the sky was full of what looked like huge bats, all swooping and screeching and diving around the car, which was going about a hundred miles an hour with the top down to Las Vegas.”
So, be sure to register for our PDEC Conferences today! We hope to see you there in person, but as always, we have a virtual option for those of you who are unable to travel to Las Vegas for the event. You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271. In the immortal words of Raoul Duke, “buy the ticket, take the ride.”
Last month, the Division of Corporation Finance issued a statement to the effect that certain crypto Protocol Staking activities did not involve the offer or sale of securities for purposes of the federal securities laws. Yesterday, Corp Fin issued another statement expressing the same view with respect to “Liquid Staking”:
It is the Division’s view that “Liquid Staking Activities” (as defined below) in connection with Protocol Staking do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 (the “Securities Act”) or Section 3(a)(10) of the Securities Exchange Act of 1934 (the “Exchange Act”). Accordingly, it is the Division’s view that participants in Liquid Staking Activities do not need to register with the Commission transactions under the Securities Act, or fall within one of the Securities Act’s exemptions from registration in connection with these Liquid Staking Activities.
It also is the Division’s view that the offer and sale of Staking Receipt Tokens, in the manner and under the circumstances described in this statement, do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act, unless the deposited Covered Crypto Assets are part of or subject to an investment contract.
Accordingly, Liquid Staking Providers involved in the process of minting, issuing and redeeming Staking Receipt Tokens, as described in this statement, as well as persons involved in secondary market offers and sales of Staking Receipt Tokens, do not need to register those transactions with the Commission under the Securities Act or fall within one of the Securities Act’s exemptions from registration, unless the deposited Covered Crypto Assets are part of or subject to an investment contract.
I’m not going to pretend that this stuff about “Liquid Staking” and “Staking Receipt Tokens” is anything other than complete gibberish to me, but just in case some of you are also a bit mystified, I did a little digging to see if I could figure out what Corp Fin is talking about. Here’s what I gleaned from Coinbase’s discussion of the topic on its website. “Protocol Staking” is essentially a way of delegating your crypto to a blockchain network to help the network validate and process crypto transactions. In return for being such a standup crypto bro, you get rewarded with additional crypto.
One of the problems with traditional Protocol Staking activities is that you can’t necessarily get your crypto out of the pool on demand. According to this discussion on Chainlink, Liquid Staking addresses this by issuing a new token that represents a claim on the underlying staked crypto asset and that can be traded or otherwise monetized the same way the underlying asset could be.
Anyway, this is the stuff that Corp Fin seems to be talking about, and to the extent laid out in the statement, they’re cool with it. That’s not the case with Commissioner Crenshaw, who issued a statement criticizing Corp Fin’s action and suggesting the SEC’s understanding of how Liquid Staking actually works in practice might be on a par with mine.
Public companies were required to file their insider trading policies as exhibits to their Form 10-K filings for the first time during the 2024 annual reporting season, and this Debevoise memo provides some insights about what the policies filed by 60 of those issuers – including 30 of the S&P 500 – had to say about key terms. In recent years, the SEC has become increasingly skeptical about gifts of securities by insiders, and this excerpt from the memo says that companies appear to be taking that skepticism into account in their insider trading policies:
92% of policies impose some restrictions on the gifting of issuer securities, although the specific restrictions vary. Of those, 77% apply these restrictions to all covered persons prohibiting them from gifting issuer securities while in possession of MNPI or applying window periods or pre-clearance procedures to gifts of securities. Further, a small number of insider trading policies (3%) explicitly prohibit gifting of issuer securities when the donor knows or has reason to believe the donee will sell the securities while the donor has MNPI. For policies that do not restrict gifts for all covered persons, the restrictions typically apply to Section 16 officers and directors.
The memo also addresses practices concerning the persons subject to insider trading policies, the inclusion of issuer transactions within the scope of the policy, prohibited transactions, blackout periods and trading windows, the use of Rule 10b5-1 plans, treatment of shadow trading, and preclearance procedures.
We receive quite a few Regulation FD-related questions on our Q&A Forum. Over the years, we’ve posted several quick surveys on Reg FD issues, but when we checked recently, we were surprised to find that we last addressed Reg FD in a quick survey back in 2017, so I think it’s fair to say that we’re overdue for an updated survey on Reg FD.
Our new quick survey seeks input from our members about a range of Reg FD-related practices, including the use and public disclosure of formal Reg FD policies, whether those policies specify how information is to be disseminated, practices regarding meetings between senior executives and analysts, use of corporate websites for Reg FD compliance, Reg FD training practices and public live-streaming of the annual meeting. Please take a moment to participate in this brief, anonymous survey!
Figma’s prospectus for last week’s blockbuster IPO had a lot of features in common with other recent IPOs, including a founder’s letter, lots of graphics, and multiple classes of stock. However, one of those classes of stock was not like the others. Here’s an excerpt from the prospectus’s description of Figma’s “blockchain common stock”:
Following this offering, our Board of Directors will be authorized, subject to limitations prescribed by Delaware law, to issue blockchain common stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the form, designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations, or restrictions, in each case without further vote or action by our stockholders. Our Board of Directors can also increase or decrease the number of shares of any series of blockchain common stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders.
The number of authorized shares of our blockchain common stock may be increased or decreased (but not below the number of shares thereof then outstanding) by a vote of the holders of stock entitled to vote thereon, without a separate vote of the holders of the blockchain common stock, irrespective of the provisions of Section 242(b)(2) of the DGCL, unless a separate vote of the holders of one or more series is required pursuant to the terms of any applicable certificate of designation. Our Board of Directors may use the undesignated blockchain common stock to issue common stock, or rights or options thereto, in the form of blockchain-based tokens.
Liz noted in Friday’s blog that SEC Chairman Paul Atkins said that the agency was open to working with companies that wanted to “tokenize” securities or engage in other types of innovation. But what’s in it for the companies themselves – why would a hot commodity like Figma want to authorize a class of blockchain common stock?
Well, this excerpt from Tekedia’s article on the Figma IPO explains that tokenization of securities has a lot to recommend it if you’re looking to attract retail investors to a pricy stock or facilitate more efficient trading and settlement:
Tokenized equities, issued on a blockchain, could enable fractional ownership of Figma’s stock, lowering barriers for retail investors. This democratizes access to high-value stocks, traditionally reserved for institutional or high-net-worth investors. Blockchain-based shares could reduce settlement times and intermediary costs compared to traditional stock exchanges, leveraging smart contracts for automation and transparency.
The article also notes that Figma mentioned the possibility of using tokenized shares for employee compensation, which suggests that it may align with tech industry trends toward using crypto-based incentives to attract talent.
