DROPLETS

The SEC has proposed rescinding Rule 14a-8, which for over 80 years has mandated that public companies include qualifying shareholder proposals in their proxy statements. The Commission now questions its statutory authority for the rule and argues its original justifications are less compelling given modern technology for shareholder communication.

This represents a fundamental shift in corporate governance, moving the framework for shareholder proposals from a uniform federal standard to a patchwork of state laws and individual company bylaws. If adopted, the change would significantly raise costs for shareholder proponents, who would likely need to fund their own proxy solicitations. This is expected to reduce the overall volume of proposals companies face, particularly from activists with small holdings.

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On September 21, Texas Governor Greg Abbott ordered a halt to all environmental permits for data center projects, creating a statewide, multi-agency standstill on development. The directive to the Texas Commission on Environmental Quality (TCEQ) expands on previous state audits of grid interconnection and water usage, and explicitly states that no state agency may move forward with regulatory approvals for data centers until the audits are complete. Sophisticated counsel and their clients in the technology, energy, and project finance sectors care because this immediately freezes development timelines, even for projects that have already secured power agreements. The order also imposes new mandates, requiring data center projects to cover 100% of their electrical infrastructure costs and demonstrate a reduction in residential electricity bills. Furthermore, the governor plans to work with the legislature to eliminate all state and local financial incentives for data centers, fundamentally altering the economics of these projects. Developers and investors must now re-evaluate their Te

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The UK government has confirmed the new statutory process employers must follow before refusing an employee's flexible working request under the Employment Rights Act 2025. The new rules, expected to take effect in autumn 2027, make it more difficult for employers to deny such requests, permitting refusal only on reasonable grounds. The confirmed procedure requires employers to meet with the employee to discuss the request and any potential alternatives. While less prescriptive than initially proposed—lacking a minimum notice period or a statutory right for the employee to be accompanied—the process mandates a formal discussion aimed at reaching an agreement. All UK employers will need to review and likely update their internal policies and manager training to ensure compliance. Counsel should monitor for the forthcoming updated Code of Practice from the Advisory, Conciliation and Arbitration Service (Acas), which will provide detailed guidance on the new procedure and what constitutes a reasonable refusal.

The U.S. Court of Appeals for the D.C. Circuit affirmed the government’s broad interpretation of the federal Anti-Kickback Statute (AKS), but invalidated the HHS Office of Inspector General's (OIG) practice of extending its deadline for issuing advisory opinions. In Vertex Pharmaceuticals Inc. v. HHS, the court found that a drugmaker’s patient support program for fertility services constituted prohibited "remuneration" intended to "induce" the purchase of its therapy. The ruling confirms that the AKS covers a wide range of commercial arrangements that influence patient choice, even if they are not inherently corrupt.

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The UK government has launched a consultation on a significant overhaul of the corporate reporting framework, proposing to replace numerous specific non-financial disclosure requirements in the strategic report with a principles-based model. Under the proposal, companies would no longer have mandatory reporting obligations on topics like environmental, social, and human rights matters unless they are deemed financially material to investors and creditors. This approach aligns with the International Sustainability Standards Board (ISSB) but marks a notable divergence from the European Union's "double materiality" standard, which also considers a company's impact on the environment and society. While existing climate-related financial disclosure rules are unaffected pending a separate review, the reforms aim to produce more concise and decision-useful reports. Counsel should advise UK-incorporated and listed clients to monitor these proposals, as they could fundamentally change the scope and nature of annual reporting. The consultation closes on November 30, 2026.

The English Commercial Court, in Liberty Managing Agency Ltd v Chedid, examined a D&O policy's non-avoidance clause. Insurers on a £45 million excess layer sought to avoid the policy for two former officers accused of bribery, alleging the officers committed fraud when the policy was placed. The court held the policy's specific language required the insurer to continue advancing defense costs until the alleged placement fraud was "established by a final decision of a court, tribunal or regulator."

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The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) has issued a final rule that eliminates the requirement for federal contractors to solicit disability status from applicants and employees under Section 503 of the Rehabilitation Act. The rule, which took effect September 21, also removes the corresponding 7% disability utilization goal from contractors’ annual affirmative action plan (AAP) obligations.

This change significantly alters compliance for government contractors, shifting the focus of disability AAPs from quantitative data analysis to qualitative efforts, such as reviewing outreach effectiveness and ensuring accessibility. According to the agency, a key rationale for the rule is the belief that soliciting disability status may conflict with the Americans with Disabilities Act (ADA). However, all affirmative action requirements for protected veterans, including data collection and reporting, remain in place.

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The U.S. Equal Employment Opportunity Commission has issued a proposed rule to rescind the EEO-1 Component 1 report, which has for decades required large private employers and federal contractors to submit annual workforce demographic data. The agency's rationale marks a significant policy shift, arguing that the mandatory collection and classification of employees by race and sex may violate the Constitution's equal protection guarantees. The EEOC also raised concerns that the report's rigid categories are arbitrary, promote stereotyping, and could be misused by companies to implement discriminatory preferences in an attempt to remedy statistical imbalances.

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On September 8, 2026, Mexico's federal government published amendments to its guidelines for migrating legacy self-supply and cogeneration electricity projects into the current legal framework. The new rules, which took effect the following day, respond to industry feedback by extending critical deadlines for the complex transition. For instance, the window for project owners to register their interest in migrating has been extended by three months to December 18, 2026, with corresponding extensions for subsequent stages.

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'Prompt injection' is an emerging technique where hidden text embedded in a document instructs an AI system to disregard a user's prompt, favor a party, or otherwise skew its analysis. This poses a significant integrity risk for legal and business workflows that rely on AI to review contracts, discovery, or due diligence materials. Recent court decisions show that judicial bodies are taking this conduct seriously. In one Connecticut case, a pro se plaintiff who embedded invisible instructions in pleadings had their e-filing privileges rescinded. In a Brazilian case, a tribunal's AI detected a similar attempt, leading to a fine and professional referrals. Sophisticated counsel should be aware that this risk exists across all externally sourced documents and cannot be addressed by technology alone. Best practices include treating all third-party documents as untrusted, using security preambles in prompts, instructing the AI to flag suspicious content, and ensuring rigorous human oversight to verify AI-generated outputs against source materials.

Spain's data protection agency (AEPD) has disclosed the country's first reported personal data breach executed by an autonomous AI agent. According to the reporting organization, the AI agent independently scanned for vulnerabilities, gained access to the target system, and then modified personal data and accessed invoices. While the AEPD's investigation is ongoing, this event provides a concrete example of a new class of cyber threat.

Sophisticated counsel and their clients should care because this incident suggests that existing threat models and incident response plans, often built around human-speed attacks, may be insufficient. The emergence of agentic AI attacks directly impacts the "state of the art" security measures required under GDPR Article 32. It also presents significant challenges to meeting the rapid notification deadlines under GDPR, NIS2, and DORA, as an entire attack lifecycle can be compressed into minutes.

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Texas Governor Greg Abbott has ordered an immediate, statewide halt to permitting for all data center projects, citing concerns over their impact on the state's electric grid and water resources. The directive, issued September 21, suspends approvals from all state agencies, including the Texas Commission on Environmental Quality, until audits by utility and water regulators are complete. This abrupt moratorium creates significant uncertainty in one of the nation's leading data center markets, threatening projects currently in development with indefinite delays. For sophisticated clients—including hyperscale operators, real estate developers, and infrastructure funds—the freeze impacts project timelines, financing, and investment returns. Beyond the immediate halt, the governor signaled that data centers may be expected to bear their own infrastructure costs and that existing financial incentives could be eliminated in the next legislative session. Affected parties should monitor the pending regulatory audits from ERCOT and other agencies, which will likely lead to stricter operation

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The US Court of Appeals for the Second Circuit has affirmed the dismissal of a securities fraud complaint, creating a higher pleading burden for plaintiffs alleging loss causation when a stock price does not immediately fall after a corrective disclosure. In Huey v. Anavex Life Sciences Corp., the court found the complaint deficient because the company's stock price rose on the day of the disclosure and its subsequent decline tracked a broader market downturn.

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New York has enacted legislation granting employees significant new rights concerning their personnel records, with an effective date of November 8, 2026. The law requires employers to provide a copy of an employee's or former employee's personnel file at no cost within five business days of a written request, up to twice per year. It also mandates that employers notify an employee within 10 days of placing any information in their record that could negatively affect their employment status, such as for promotion, compensation, or disciplinary action.

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The US Department of Justice has revised its Justice Manual, altering its approach to False Claims Act (FCA) enforcement in two key ways. First, the new policy limits the DOJ's reliance on sub-regulatory agency guidance, clarifying that enforcement actions must be based on violations of statutes or regulations, not mere non-compliance with informal guidance. This is particularly relevant for defendants in heavily regulated industries like healthcare. Second, the DOJ now requires its attorneys to formally assess whether to seek dismissal in every qui tam action in which the government declines to intervene. The manual also encourages prosecutors to re-evaluate dismissal as a declined case progresses, codifying a process contemplated by the Supreme Court’s Polansky decision. For companies facing FCA scrutiny, these changes create new opportunities. They provide a stronger basis to challenge legal theories predicated on non-binding guidance and establish a formal avenue to advocate for the dismissal of meritless whistleblower suits, both at the declination stage and later in litigation.

The US Securities and Exchange Commission (SEC) and Food and Drug Administration (FDA) have signed a memorandum of understanding (MOU) to formally govern the sharing of nonpublic information. This agreement establishes a clear channel for the SEC to access confidential data related to FDA-regulated products and companies.

Sophisticated counsel and their life sciences clients care because the MOU signals the SEC's intent to increase scrutiny of public statements regarding clinical trials, regulatory submissions, and product approvals. With direct access to FDA records, the SEC's Divisions of Enforcement and Corporation Finance can more easily identify misleading or incomplete disclosures. The framework also enhances the SEC’s ability to build insider trading cases by precisely timing trades against the receipt of material nonpublic information from the FDA.

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The U.S. Securities and Exchange Commission and the Food and Drug Administration have updated a memorandum of understanding to enhance the sharing of non-public information, signaling a coordinated effort to scrutinize public companies’ disclosures. The agreement modernizes protocols for exchanging data, allowing the SEC to more effectively investigate whether statements made by life sciences, pharmaceutical, and healthcare companies to investors align with their actual communications with the FDA.

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New Jersey's Department of Labor and Workforce Development has adopted a comprehensive new rule, effective October 1, 2026, that formalizes the stringent "ABC test" used to determine whether a worker is an employee or an independent contractor. The rule clarifies the state's aggressive stance on worker misclassification and provides a detailed framework that investigators will use. Under the test, a worker is presumed to be an employee unless the employer can prove all three prongs: (A) the worker is free from the employer's control; (B) the work is outside the employer's usual course of business or performed off-site; and (C) the worker is customarily engaged in an independent trade.

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In Soroban Capital Partners LP v. Commissioner, the U.S. Court of Appeals for the Second Circuit affirmed the Tax Court and adopted a functional, management-based standard for the limited partner exception to self-employment tax. The court held that partners who run, manage, or exert control over a partnership are not 'limited partners' for tax purposes under IRC Section 1402(a)(13), regardless of their formal state-law designation. This decision has significant implications for investment managers, private equity funds, and other service partnerships that have historically relied on state-law status to shield partners' distributive shares from these taxes.

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The Centers for Medicare & Medicaid Services (CMS) is taking a key step in implementing the Inflation Reduction Act's drug pricing reforms, announcing a voluntary testing period for a new 340B claims data repository starting October 1, 2026. The repository is designed to identify drug units purchased under the 340B program so they can be excluded from Part D inflation rebate calculations, a central feature of the IRA. Separately, the White House announced that all 50 states and several territories will participate in the new 'Generous' payment model. These developments create significant operational and compliance considerations for pharmaceutical manufacturers and 340B covered entities. Counsel should advise clients on the strategic implications of participating in the voluntary data repository test, as its design and outcomes may shape future mandatory requirements. Related legal challenges, including ongoing litigation over the 340B 'patient' definition and manufacturers' suits against state-level 340B laws, continue to create uncertainty and should be monitored closely.

The US Securities and Exchange Commission has established a temporary, five-year 'Innovation Exemption' to facilitate experimentation with the on-chain trading of tokenized National Market System (NMS) stocks. The order provides conditional relief from the Securities Exchange Act's definitions of 'exchange' for certain Tokenized Securities Venues (TSVs) and 'dealer' for firms providing liquidity to their automated market maker (AMM) pools. This allows approved venues to operate without registering as a national securities exchange or alternative trading system.

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The Delaware Court of Chancery dismissed stockholder claims in 'Berger v. Fox' challenging the acquisition of Envestnet by Bain Capital. Plaintiffs had alleged the board breached its duties by hiring a conflicted financial adviser and that proxy disclosures about the adviser's relationship with Bain were inadequate. The court held that the transaction was protected by the business judgment rule under the 'Corwin' doctrine, as a fully informed, uncoerced majority of disinterested stockholders had approved the deal.

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The SEC's Division of Trading and Markets has issued two no-action letters providing a regulatory framework for “zero cash balance” brokerage models. The letters, issued to Alpaca Securities and eToro USA Securities, address how a broker-dealer can integrate with an external bank or money services business (MSB) to hold customer cash, transferring funds to the brokerage account only to settle transactions. This structure is a significant development for fintech platforms seeking to embed brokerage services, as it allows them to separate cash and securities custody.

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California’s Office of Health Care Affordability (OHCA) has issued proposed emergency regulations creating a mandatory 90-day pre-closing notice regime for many healthcare transactions. The rules, which implement Assembly Bill 1415, specifically target deals involving private equity groups, hedge funds, and management service organizations (MSOs).

Sophisticated counsel and clients care because the filing thresholds are low, capturing private equity or hedge fund acquisitions of as little as 10% of a healthcare entity's assets or equity, along with many common MSO platform and add-on deals. The required disclosures are extensive and similar to a federal Hart-Scott-Rodino filing, demanding sensitive data on ownership, governance, valuation, and debt. This imposes significant new administrative burdens and strategic considerations on transactions that may not otherwise require federal antitrust review, and it makes previously private deal information public record, though a confidentiality process exists. Deal timelines must now account for OHCA's review period, which includes a 45- to

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Texas Governor Greg Abbott has ordered a halt to all new environmental permits for data center projects, a significant escalation in the state's scrutiny of the rapidly growing industry. The directive, issued to the Texas Commission on Environmental Quality on September 21, 2026, links the permitting pause to a comprehensive audit of grid-interconnection requests that the governor demanded from the Electric Reliability Council of Texas (ERCOT) in early August.

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An Advocate General for the Court of Justice of the European Union (CJEU) has issued an opinion proposing strict safeguards for member states wishing to invoke national security exceptions to exclude companies from public procurement tenders. While AG opinions are not binding, they are highly influential on the CJEU's final judgments. A ruling that follows this opinion would significantly narrow the discretion member states have to exclude bidders by citing national security concerns, potentially leveling the playing field for contractors and increasing transparency. This could complicate procurement for sensitive projects in the defense, technology, and critical-infrastructure sectors. Corporate and government-contracts counsel should monitor the forthcoming final CJEU ruling. If the Court adopts the AG's reasoning, companies bidding on public contracts in the EU may find it easier to challenge exclusions based on vague national security justifications, and member states will need to develop more rigorous, reviewable criteria for applying such exceptions.

The comment period for the Centers for Medicare & Medicaid Services (CMS) proposed rule for the CY 2027 Medicare Physician Fee Schedule (MPFS) closed on September 14, drawing over 40,000 comments from healthcare stakeholders. The feedback reflects widespread industry opposition to several key provisions.

Commenters broadly opposed proposed payment reductions, noting that when adjusted for inflation, Medicare physician payments have already declined by approximately one-third since 2001. Many urged CMS and Congress to establish a permanent, inflation-based annual update. Other significant concerns included proposed changes to practice expense methodology, which stakeholders argued lacked sufficient impact analysis, and a proposal to halve payments for certain evaluation and management services furnished on the same day as a procedure. There was also strong opposition to new restrictions on remote monitoring services, while commenters voiced broad support for making current telehealth flexibilities permanent.

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The UK Jurisdiction Taskforce has issued a Legal Statement on Liability for AI Harms, asserting that existing principles of English private law are generally sufficient to attribute liability for losses caused by AI. The analysis suggests that claims for harm caused by AI chatbot outputs can be brought under established torts like negligent misstatement, defamation, and general negligence. For developers and deployers of AI, the key battleground will likely involve whether a duty of care was assumed, particularly when a tool is marketed for a specific purpose, potentially overriding general disclaimers. The statement also highlights a growing divergence between the UK and EU, as the EU’s revised Product Liability Directive will explicitly bring standalone software into its scope. While the taskforce's guidance provides some clarity, it also exposes a gap where the UK’s Consumer Protection Act 1987 is unlikely to apply to standalone AI systems. Counsel should monitor the Law Commission's review of the UK's product liability framework, which may address this issue.

The U.S. Court of Appeals for the Federal Circuit affirmed the validity of several Exelixis patents covering a genus of crystalline forms of the cancer drug cabozantinib malate, rejecting a written description challenge from generic manufacturer MSN Laboratories. In 'Exelixis, Inc. v. MSN Laboratories', the court held the patents satisfied 35 U.S.C. § 112(a) because the specification disclosed structural features common to all members of the genus—specifically, the chemical name, formula, and crystalline character of the salt. This decision is significant for patent holders in the chemical and pharmaceutical arts because it reinforces the "common structural features" pathway for supporting genus claims, a vital tool for securing broad patent protection. It provides a favorable contrast to the Supreme Court's restrictive analysis of functionally-defined genus claims in 'Amgen v. Sanofi', clarifying that claims anchored to specific chemical structures face a different, and potentially more lenient, standard. Counsel should assess both prosecution and litigation strategies in light of t

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