D.C. Insider January 2024

In the January 2024 edition of The ICR D.C. Insider: 2024 election news, another government shutdown looms, the 2024 SEC horizon, developments in China, and more. Read on for insights and analysis about developments in Washington that could have an immediate and long-term impact on your business.

What’s Next In Washington

• The 2024 Election – The November 2024 elections will be the dominant issue in Washington, across the country, and around the world this year. At stake is control of the Presidency, the House of Representatives, and the Senate – where the margins in all three levers of elected power in Washington are so narrow that neither party is a clear favorite. As a consequence, the raft of regulatory agencies – from the SEC to the FTC to many others – are in a sprint to implement as much of their proposed agenda as possible, lest Biden lose the election.
  • At the presidential level, the Supreme Court has agreed to weigh in on whether President Trump should be allowed on the ballot in November and could also decide to rule on whether he is immune from prosecution for actions that occurred while he was in the White House.
  • In the House, Republicans continue their campaign against ESG issues, with House Judiciary Committee Chairman Jim Jordan (R-Ohio) issuing subpoenas to Vanguard and Arjuna Capital for documents and communications related to the Committee’s investigation into the sufficiency of current antitrust laws to address collusive agreements to promote and adopt ESG policies.
  • State-level elections are equally poised to raise issues – and search for corporate examples to make their points – from ESG to DEI.
• A Government Shutdown Looms…Again – Congress faces an avalanche of government funding work as it returns from the holidays – with little time to complete it ahead of looming shutdown deadlines. With the first deadline on January 19^th (which falls right between the Iowa caucuses and the New Hampshire primary), congressional negotiators have finalized a topline spending number as they work through the 12 annual appropriations bills. Approvals for spending at the Departments of Defense, Labor, and Health and Human Services, among other departments and agencies, must be completed by February 2^nd. In the meantime, President Biden’s supplemental request for aid to Ukraine, Israel, and Taiwan, along with a potential agreement on border security, continue to complicate negotiations.
• Unions Carry Momentum into 2024 – President Biden’s appointees to the National Labor Relations Board (NLRB) made significant strides in 2023 on behalf of unions. Among noteworthy developments, they paved the way in 2023 for workplaces to unionize outside of the decades-old secret-ballot election process; made it easier for unions to organize franchise and contract workers; and expanded the type of worker conduct protected by U.S. labor law. Business groups and employers are challenging many of those decisions in court, but in the meantime, companies should expect an uptick in labor organizing.

SEC

• The 2024 Horizon – A number of the Securities and Exchange Commission’s (SEC) marquee policies are scheduled to be completed – and likely challenged – in 2024. These include the climate change disclosure rule, crypto and related issues, and financial advisers’ use of artificial intelligence. A host of additional proposed rules are being considered, including plans on human capital, board diversity, incentive-based compensation, and tightening regulation for the private markets.
  • At the same time, Chair Gary Gensler is facing a growing number of legal challenges as the Commission moves forward with its wide-reaching policy agenda. The SEC faces litigation attempting to overturn a pair of recent rules that require more disclosures around short selling and securities lending. The action was filed in the same conservative appeals court that appears set to kill another SEC rule aimed at getting investors more information about public companies’ share repurchases. Separately, the Commission is fighting lawsuits challenging two additional rules related to private-fund regulation and proxy-voting advice.
• Cyber Disclosure Rule Set for Congressional Scrutiny – Thom Tillis (R-N.C.) has secured the necessary votes to advance a bill (via the Congressional Review Act) to the Senate floor that could eventually overturn the SEC’s recent rule on cyber incident reporting.
• Court Asks for the SEC’s Views on Whether Audit Reports Really Matter – The Second U.S. Circuit Court of Appeals asked the SEC for the agency’s views about whether audit reports by outside accounting firms actually matter, in light of the court’s ruling that, at least in one case, they didn’t. That case, where an insurer overstated profits and an auditor signed off on its books, led to an investor lawsuit against the auditor that was dismissed. In its ruling, the court said the audit report was so general an investor wouldn’t have relied on it.
• PCAOB Budget Approved – The SEC approved the Public Company Accounting Oversight Board’s (PCAOB) 2024 budget and the related annual accounting support fee. The 2024 PCAOB budget totals $384.7 million, and the accounting support fee totals $358.8 million, of which $331.0 million will be assessed to public company issuers, and $27.8 million will be assessed to registered broker-dealers.

DOJ & FTC

• Antitrust Guidelines Finalized – The Department of Justice and the Federal Trade Commission (FTC) finalized 11 key guidelines that will govern how they approach antitrust reviews. First published in July, the guidelines underscore the agencies’ goal of increased merger enforcement.

Additional Key Developments

• China – Key developments include:
  • The House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, led by Chairman Mike Gallagher (R-Wisc.) and Ranking Member Raja Krishnamoorthi (D-Ill.), adopted nearly 150 policy recommendations in a bipartisan report that outlines a strategy to fundamentally reset the United States’ economic and technological competition with China. The recommendations are structured around 3 pillars: reconfigure the U.S.-China economic relationship, curb the flow of U.S. capital and technology to China, and invest in domestic technology and collaborate with allies. The 53-page report has a wide range of recommendations, including:
    • Reduce the de minimis threshold for shipments to qualify for duty-free entry to the U.S.
    • Further cut off the flow of capital and technology.
    • Require publicly traded U.S. companies to disclose ties to China.
    • Revoke normal trade relations with China.
    • Reauthorize the Generalized System of Preferences (GSP).
    • Enact the “Leveling the Playing Field 2.0 Act” to help expand the Commerce Department’s trade remedy enforcement capabilities.
    • Impose new tariffs on older types of Chinese chips.
    • Invest further in U.S. research and manufacturing capacity to counter China’s dominance of sectors like pharmaceuticals and critical minerals.
    • Develop plans to coordinate economically with allies if Taiwan is invaded.
  • The Biden Administration is discussing raising tariffs on some Chinese goods, including electric vehicles, in an attempt to bolster the U.S. clean-energy industry against cheaper Chinese exports. Chinese EVs are already subject to a 25% tariff, which has helped prevent subsidized Chinese automakers from making inroads into the U.S. market. Other targets for potential tariff-rate increases are Chinese solar products and EV battery packs, while tariffs on some Chinese-made consumer products could decrease.
  • The House Foreign Affairs Committee voted on 4 bills to strengthen the Commerce Department’s abilities to police China. Chairman Michael McCaul (R-Texas) has been vocal about his frustration with the Department’s Bureau of Industry and Security (BIS), specifically its licensing procedures and its lack of transparency. Last week the Chairman released a report that called for significant reforms of BIS.
  • The Commerce Department is set to begin collecting information on the production of legacy semiconductors by Chinese companies. This month, BIS will conduct a survey involving more than 100 companies in the automotive, aerospace, defense, and other sectors to gain insights into their processes for the acquisition and utilization of legacy chips. Commerce Secretary Gina Raimondo said, “Over the last few years, we’ve seen potential signs of concerning practices from the People’s Republic of China (PRC) to expand their firms’ legacy chip production and make it harder for U.S. companies to compete,” adding the survey will “inform our next steps.”
  • The Netherlands blocked chip-equipment manufacturer ASML’s exports to China of some lithography systems, which are essential to making advanced microprocessors, in a partial license revocation following U.S. export restrictions.