This month in Washington, D.C., we look at issues including tariffs and trade, SEC support for expanding investor access to private investment products, the DOJ’s new list of 10 priority areas of enforcement, and more. Learn what could have an immediate and long-term impact on your business.
Tariffs & Trade
- Back-and-forth court rulings and moves by the Trump Administration continue to cloud the overall global tariff picture – with efforts to impose additional tariffs expected to continue.
- The Trump Administration said it would cut tariffs on low-value parcels from China to 54% from 120%. According to an Executive Order, the U.S. will slash the “de minimis” tariff on shipments from China, including Hong Kong. There is also an option for a flat $100 fee per postal item.
- The Department of Commerce’s Bureau of Industry Security (BIS) revamped Biden-era rules on artificial intelligence chips and rescinded the “AI Diffusion Rule” on the grounds that it would have stifled American innovation, saddled companies with onerous regulations and undermined diplomatic relations with dozens of countries. In addition, BIS released new guidance to promote the security of American export controls of AI chips, with a specific focus on curbing the risks associated with China’s acquisition of these advanced technologies and ensuring that the U.S. remains the leader of AI growth.
SEC
- Investor Access to Private Investment Products Supported – In a speech, Securities and Exchange Commission (SEC) Chairman Paul Atkins signaled support for expanding investor access to private investment products. Currently, closed-end funds that invest 15% or more of their assets in private funds must restrict sales to investors who satisfy the accredited investor standard. A minimum investment requirement of $25,000 is also required. Atkins said he would direct SEC staff to revisit guidance that limits how much these funds can invest in private markets.
- PCAOB Consolidation Into the SEC Considered – Chairman Atkins said that the Commission would be able to oversee public company auditors if Congress decides to consolidate the Public Company Accounting Oversight Board’s (PCAOB) functions into the SEC, as part of efforts to streamline the federal government and reduce spending. “Congress outsourced those tasks to the PCAOB, and it’s up to Congress to decide where they should be housed. And if they were decided to be merged into the SEC, I think we could handle it and be able to have enough people in the funding to accomplish it because, at least the way the bill is structured, they have thought about that,” Atkins said.
- SEC’s New Approach Voiced – In testimony before the House Appropriations Subcommittee on Financial Services & General Government, Chairman Atkins pointedly noted that he intends to return the SEC’s “rulemaking to regular order. Our comment periods will not be artificially short, and the public will have ample time to provide feedback. The SEC will also be sure to take into consideration how rules overlap and how regulatory burdens build, in keeping with our obligation to consider their costs and benefits.”
- Crypto Regulation Goal Outlined – Additionally, Chairman Atkins outlined his vision for how the SEC should regulate crypto currencies going forward, saying: “I would like the Commission to allow SEC registrants to custody and trade both securities and non-securities under one roof. Enabling this reality could reduce costs for investors while allowing non-security trading to enter a regulated environment at the federal level expeditiously.”
- Earlier in May, Chairman Atkins specifically pointed to a key element of his agenda: “A key priority of my Chairmanship will be to develop a rational regulatory framework for crypto asset markets that establishes clear rules of the road for the issuance, custody, and trading of crypto assets while continuing to discourage bad actors from violating the law. Clear rules of the road are necessary for investor protection against fraud – not the least to help them identify scams that do not comport with the law.”
DOJ
- Areas for Priority Enforcement Focus Identified – Justice Department Criminal Division head Matthew Galeotti outlined 10 areas the Division will focus on, including:
- Health care and federal procurement fraud.
- Trade and custom fraud, including tariff evasion.
- Fraud committed via Variable Interest Entities (VIEs), which the DOJ says are typically Chinese-affiliated companies listed on U.S. stock exchanges, with a focus on elder fraud, securities fraud, and other market manipulation schemes.
- Fraud that victimizes U.S. investors, individuals, and markets including, Ponzi schemes, investment fraud, elder fraud, service member fraud, and fraud that threatens the health and safety of consumers.
- Conduct that threatens U.S. national security, including threats to the financial system by gatekeepers, such as financial institutions and their insiders.
- Material support by corporations to foreign terrorist organizations.
- Complex money laundering, including Chinese Money Laundering Organizations, and other organizations involved in laundering funds used in the manufacturing of illegal drugs.
- Violations of the Controlled Substances Act and the Federal Food, Drug, and Cosmetic Act (FDCA), including the unlawful manufacture and distribution of chemicals and equipment used to create counterfeit pills laced with fentanyl and unlawful distribution of opioids by medical professionals and companies.
- Bribery and associated money laundering that impacts U.S. national interests, undermines U.S. national security, harms the competitiveness of U.S. businesses, and enriches foreign corrupt officials.
- Crypto-related crimes, including crimes (1) involving digital assets that victimize investors and consumers; (2) that use digital assets in furtherance of other criminal conduct; and (3) willful violations that facilitate significant criminal activity.
Galeotti also announced the Department’s revamped whistleblower program, including rewarding people who tip authorities about companies involved in immigration crimes or tariff evasion, procurement fraud and violations that result in support for terrorists, drug cartels and other criminal groups. Additionally, the Department unveiled its updated Voluntary Self-Disclosure Policy (CEP), which outlines the steps companies can take to get leniency.
CPSC
- Trump Fires All Three Democrat Commissioners – President Trump fired the three Democrat members of the Consumer Product Safety Commission (CPSC), leaving the regulator with just two members on its five-member board – both Republicans. The departed members are moving this issue to the courts.
China
- House Committee Contends with Chip Smuggling into China – The House Select Committee on the Chinese Communist Party introduced new legislation “to stop advanced U.S. AI chips from falling into the hands of adversaries like the Chinese Communist Party (CCP).” The Chip Security Act, is a bipartisan effort in response to concerns that U.S. chips were potentially funneled into China through shell companies, where they’re used in military, surveillance apparatus, and AI spheres. The Act calls for the Commerce Department to require location verification for advanced AI chips, enforce mandatory reporting by chipmakers about any diversion of their chips to restricted companies or countries, and study additional safeguards.
- Expansion of AI Safety Institute’s Role Urged – The Select Committee also sent a letter to the Commerce Department in an effort to spur the broadening of the U.S. AI Safety Institute’s (AISI) mission to tackle the growing national security risks presented by China’s artificial intelligence capabilities.
- Move to Delist Chinese Companies Seen as Threat to U.S. National Security Sought – Rep. John Moolenaar (R-Mich.) Chairman of the Select Committee and Sen. Rick Scott (R-Fl.) – along with other House and Senate members – urged SEC Chairman Atkins to begin delisting Chinese companies that pose serious national security and investor protection risks from U.S. stock exchanges.
- Separately, a group of leading Republican state financial officers called on the SEC to initiate an investigation and consider delisting Chinese companies from American stock exchanges, citing concerns over transparency and national security. In a letter to Chairman Atkins, more than 20 officials argued that many Chinese firms listed in the U.S. fail to comply with American auditing standards and could pose risks to investors and the broader financial system. The letter further urged the SEC to take stronger action to protect U.S. markets and investors.
- The Leadership in Critical & Emergency Technology (CET) Act Introduced – Sens. Marsha Blackburn (R-Tenn.) and Peter Welch (D-Vt.) reintroduced the bipartisan “The Leadership in Critical & Emergency Technology (CET) Act,” which would expedite the U.S. Patent & Trademark Office’s (USPTO) patent application process by requiring the Under Secretary of Commerce for Intellectual Property (IP) and Director of the USPTO to establish a pilot program. The pilot program would entail specifically expediting “15,000 patent applications pertaining to certain capabilities in artificial intelligence, semiconductor design, and quantum information science [and] prevent foreign entities of concern from participating in the program,” among other things.
