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Regulatory Playbook
Inside analysis direct from Washington, DC
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Regulatory Playbook

Inside analysis direct from Washington, DC

Welcome to Pillsbury’s Regulatory Playbook, where you’ll find news and insights on the regulatory trends that are driving markets and shaping businesses. Here, Pillsbury’s market-leading regulatory group illuminates critical developments at the intersection of law and policy. If you need to know what’s happening, why it’s happening and how to respond, consult the Playbook.

Trending Issues

The IRS Issues 83(i) Guidance: Opportunity to “Opt Out”
04.15.2019
Internal Revenue Code Section 83(i) was introduced as part as of the Tax Cuts and Jobs Act of 2017. Under Section 83(i), if certain requirements are satisfied, employees of private companies who receive nonstatutory stock options (NSOs) or restricted stock units (RSUs) may elect to defer federal income tax on the exercise of the NSOs or settlement of the RSUs for up to five (5) years (referred to as an 83(i) election).

Supreme Court: Intentionally Disseminating a False Statement One Did Not “Make” May Still Violate SEC Rule 10b-5
04.03.2019
SEC Rule 10b-5(b) makes it unlawful “[t]o make any untrue statement of a material fact . . . in connection with the purchase or sale of any security.” The Court in Janus Capital Group Inc. v. First Derivative Traders, 564 U.S. 135, 142 (2011) limited “maker” liability under 10b-5(b) to “the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it.” In Lorenzo v. Securities & Exchange Commission, No. 17-1077, 2019 WL 1369839 (S. Ct. Mar. 27, 2019), the Court considers whether one who is not a “maker” of a false statement under 10b-5(b) can nonetheless be primarily liable under 10b-5(a) or 10b-5(c) for disseminating the false statement, knowing it to be false.

SEC Adopts Amendments to Modernize and Simplify Disclosure Requirements
03.27.19
On March 20, 2019, the Securities and Exchange Commission (SEC) adopted technical amendments (the Amendments) to its disclosure rules for public companies, investment advisors and investment companies, which will require changes to almost every common SEC report and filing for public companies.

The SBA Rules When a Letter of Intent Creates Affiliation
03.11.19
In two recent decisions, OHA discussed some of the factors that may differentiate whether an LOI triggers SBA’s “present effect rule” and creates an affiliation between parties negotiating the acquisition of a small business. In Size Appeal of Telecommunications Support Services, Inc., SBA No. SIZ-5953 (2018), OHA determined that the LOI did not create an affiliation, and in Size Appeal of Enhanced Vision Systems, Inc., SBA No. SIZ-5978 (2018), OHA found that the LOI did create an affiliation and drew several distinctions between the two fact patterns.

Private Funds Litigation/Regulatory Year in Review and 2019 Outlook
3.05.19
Despite being a quieter year overall with respect to high-profile enforcement actions against private funds, in 2018 the U.S. Securities and Exchange Commission (SEC) made clear its intent to maintain its regulatory focus on the industry. The SEC investigated and brought cases against private funds related to the allocation of expenses, valuation of fund assets and unregistered broker-dealers, making clear that compliance obligations remain a priority.

OFCCP Conducts Town Hall Meetings for Tech Industry Contractors and Implements Program Changes
3.04.19
In September 2017, OFCCP held three nationwide town hall meetings. The well-attended events provided a forum for contractors to express concerns and challenges with compliance with the rules and regulations OFCCP enforces, including Executive Order 11246 (Equal Employment Opportunity), Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). Since then, OFCCP has seen leadership changes and has issued a number of pro-contractor directives and changes that can be traced back to feedback received at the town halls and elsewhere from the contractor community.

Easing the Prohibitions against Gun-Jumping
2.26.19
Introduction
On February 19, 2019, the Securities and Exchange Commission (SEC) proposed a rule that would generally permit all issuers to “jump the gun”—that is, to make offers to certain institutional investors prior to the filing of a registration statement. This rule would enable any issuer, as well as its proposed underwriters, to “test the waters” to see to what extent these institutions might be interested in investing in the company before a registration statement is filed.

FAR’s Professional Compensation Clause and Keeping Things Real
2.14.19
On January 24, 2019, the Court issued its decision in Sparksoft Corporation v. United States, No. 18-1708C, holding that an agency is required to evaluate the realism of offerors’ proposed compensation plans under FAR 52.222-46, Evaluation of Compensation for Professional Employees, related to the entire contract, including the firm-fixed price (FFP). This case stems from a solicitation issued by the U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS), seeking proposals for information technology operations, maintenance, and ancillary support. The solicitation stated that the contract would consist of both FFP and time-and-materials components, and contained FAR 52.222-46.

Government Contract Acquisitions and the Pending Proposal Problem
2.13.19
GAO’s recent decision in Wyle Laboratories Inc., B-416528.2, raises significant questions as to the viability of proposals that are submitted before or during, and remain pending after, a government contract acquisition. This is the second recent GAO protest decision that highlights the risks of certain government contract M&A deals to pending procurements, and the decision underscores the importance of strategic planning in connection with such deals.

Congressional Blue-Ribbon Committee Recommends Major Changes to Certain Socioeconomic and Small Business Requirements for DoD Procurements
1.29.19
Section 809 of the National Defense Authorization Act (NDAA) for Fiscal Year 2016 directed the Secretary of Defense to establish a panel to study DoD’s procurement practices and recommend legislative and other changes aimed at modernizing those practices. The Panel has released the third volume of its final report, making a total of 58 new recommendations. As we noted in our overview of Volume 3 of the Panel’s report, a number of the recommendations relate to socioeconomic and small business issues. These recommendations attempt to streamline and improve the efficiency and effectiveness of the defense acquisition process by removing barriers to entry, revising outdated and burdensome requirements, and clarifying the preference for procuring commercial items when considering small business set-asides. We discuss Recommendations 64, 65, 79 and 80 below.

Section 809 Panel Recommendations: Overhaul Audit Practices and Increase Reliance on Private-Sector Accounting Rules
1.28.19
As we reported previously, the Congressionally mandated Section 809 Panel (the Panel) recently issued Volume 3 of its Final Report. This volume builds upon the first two volumes of the Final Report by making additional recommendations for improving DoD’s acquisition process. This is the third of four alerts about the substance of Volume 3 of the Final Report. In this client alert, we explore recommendations regarding a broad range of financial issues at DoD.

Section 809 Panel: The Commercialization of Government Contracting
1.24.19
As we previously reported, the Congressionally mandated Section 809 Panel recently issued Volume 3 of its Final Report. Volume 3 of the Final Report makes additional recommendations for improving the Department of Defense’s (DoD) acquisition process. This is the second of four alerts about the substance of Volume 3 of the Final Report. In this client alert, we explore recommendations that the DoD replicate the commercial contracting process.

Section 809 Panel Installment One: Expanding Agency Procurement Discretion, Narrowing Contractors’ Bid Protest Rights Recommended
1.23.19
Section 809 of the National Defense Authorization Act (NDAA) for Fiscal Year 2016 directed the Secretary of Defense to establish a panel to study DoD’s procurement practices and recommend legislative and other changes aimed at modernizing them. The Panel has released the third volume of its final report, making a total of 58 new recommendations. As we noted in our overview of Volume 3 of the Panel’s report, a number of the recommendations relate to bid protests of DoD procurements. Some recommendations may be viewed as innocuous changes that will promote transparency in DoD’s procurement practices. Other recommendations, however, may be viewed as efforts to streamline DoD’s acquisition practices—not by promoting transparency and accountability, but by eliminating avenues of relief for aggrieved offerors. We discuss Recommendations 66–69 and 76 in detail below.

New York Employment Law Outlook 2019
1.16.19
2018 was a year of sweeping change for employers and employees in New York. In the wake of the #MeToo movement, New York State and New York City reacted quickly to pass a series of laws to reduce sexual harassment in the workplace. The New York Paid Family Leave Benefits Law went into effect, providing employees eight weeks of partially paid leave funded by employee paycheck deductions. New York City amended its Earned Sick Time Act to allow employees to take “safe leave” to seek redress for victims or family members of victims of sexual assault, domestic violence, or stalking.

Exchange Act Reporting Companies Receive Green Light to Use Regulation A
1.15.19
Introduction
On December 19, 2018, the Securities and Exchange Commission (SEC) adopted amendments to Regulation A to allow companies subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) to use Regulation A to conduct securities offerings of up to $50 million in a 12-month period without Securities Act registration. Regulation A provides an exemption from the registration requirements of the Securities Act of 1933 to companies organized in the United States or Canada for offers and sales of securities of up to $20 million for Tier 1 offerings and up to $50 million for Tier 2 offerings. Securities sold under Regulation A are deemed sold in a public offering and therefore are not “restricted securities” subject to Securities Act resale limitations. Prior to these amendments, Regulation A was not available to issuers that were already Exchange Act reporting companies, and its use has been modest. Following publication of the amendments in the Federal Register, which is expected to occur shortly, Exchange Act reporting companies will have the additional flexibility to use Regulation A when raising capital through the public markets.

The Brexit Blindspot: Nuclear Retransfers
1.15.19
The UK is scheduled to leave the European Union on March 29, 2019. While the United States and UK governments have taken significant steps to ensure that contracts related to nuclear power stations and the nuclear fuel cycle are not interrupted, little public attention has been paid to the potential delay in commerce caused by the UK no longer being a member of the European Atomic Energy Community (EURATOM). This is particularly important because the U.S. Government will now need to provide its consent for retransfers of certain nuclear materials and components from the EURATOM countries to the UK, after the UK withdraws from EURATOM. While the U.S.- EURATOM Agreement for Cooperation provides a mechanism for the United States to provide its advance consent for these retransfers to the UK, the process itself could likely take at least several months and perhaps a year or more, as explained below. This article provides what we believe will be the potential impediments to commerce. However, the precise manner in which U.S. retransfer consent rights affect nuclear commerce with the UK will vary depending upon the specific circumstances of each proposed retransfer.

Civilian Board of Contract Appeals Releases 2018 Annual Report
12.12.18
This past weekend, the Civilian Board of Contract Appeals (CBCA) released its fiscal year (FY) 2018 Annual Report. The CBCA docketed 409 new matters in FY 2018, a modest increase from 385 docketed in FY 2017. Prior to FY 2018, the Board had experienced docket decreases for each of the previous five years. Also, for the first time since FY 2014, the number of new cases docketed during the year exceeded the number of appeals that the CBCA resolved.

Natural Resources Agency Finalizes Updates to the CEQA Guidelines
12.10.18
At the end of November 2018, the California Natural Resources Agency (CNRA) posted final adopted text for amendments to the regulations implementing the California Environmental Quality Act (CEQA), known as the CEQA Guidelines. The final text is the result of over five years of development efforts by the Governor’s Office of Planning & Research (OPR) and CNRA. The amendments combine changes to transportation impact analysis as directed by Senate Bill 743 (2013) with the most comprehensive update to the CEQA Guidelines since 1998, incorporating statutory changes, court decisions, and comments from public agencies, business and environmental groups, and other stakeholders through multiple rounds of public review. The wide range of issues covered in the amendments includes use of regulatory standards as significance thresholds; environmental baselines; a new metric for analyzing transportation impacts; climate, water supply and energy impacts; and numerous procedural and technical improvements.

GAO Publishes Fiscal Year 2018 Bid Protest Statistics
11.29.18
On November 27, 2018, the Government Accountability Office (GAO) published its annual report on bid protest statistics. The GAO’s report, which is mandated by the Competition in Contracting Act, lists its key statistics for Fiscal Year 2018 bid protest activity. The GAO’s report also includes a chart providing similar bid protest statistics for Fiscal Years 2014-2018. This five-year snapshot provides some valuable insight into current bid protest trends and developments at the GAO.

Groundbreaking Changes Coming Soon to GSA Multiple Award Schedules
11.28.18
Over the next two years, the General Services Administration (GSA) plans to consolidate the agency’s 24 Multiple Award Schedules into a single schedule. The consolidation is part of GSA’s strategy to optimize the federal acquisition process. By FY 2020, GSA plans to have one set of terms and conditions, which should enhance consistency in the acquisition process. With one schedule contract, agencies can buy and vendors can offer a “solutions-based approach” including both products and services.

New Era of Aggressive Oversight Expected from House Democrats
11.20.18
The U.S. House of Representatives will be a hotbed of activity with respect to oversight of the Trump Administration and private sector stakeholders that are aligned with or have benefitted from the Administration’s policies over the past two years. House Democratic committee leaders are eager to shine a light on (and, inevitably, score political points related to) alleged malfeasance or corruption. Attention may come in the form of information requests and subpoenas, congressional hearings, committee investigations, and other forms of public inquiry.

The Qualified Opportunity Zone Program—Thoughts on the Long-Awaited Treasury Guidance
11.14.18
Section 13823 of the Tax Cuts and Jobs Act, P.L. No. 115-97 (2017) added Sections 1400Z-1 and 1400Z-2 to the Internal Revenue Code of 1986, as amended (the “Code”). These provisions created the Qualified Opportunity Zone (“QOZ”) program that has recently generated such a wave of media attention that one might surmise President Trump had sent an angry late-night tweet about it.