⚠️ Basel Baggage, Policyholder Panic & Dye-Job Deception | Marketing’s Most Wanted

Hi Marketing Wranglers,

The cracks in outdated frameworks are starting to show and regulators are finally taking notice.

This week, the Fed signaled a massive overhaul of how big banks manage capital, with potential ripple effects on how financial strength gets marketed. Meanwhile, the insurance industry faces its own reckoning as the Risk-Based Capital model is exposed as dangerously out of step with today’s risks. Over in the CPG world, Texas is forcing food brands to confront a harsh truth. Turns out, calling your cereal “healthy” won’t fly if it’s loaded with artificial dyes.

🚨 In This Week’s Issue

🏦 Basel III Endgame: The Fed wants a unified capital rulebook, here’s what it means for bank marketers stuck in disclosure limbo.

🛡️ RBC Reform or Regulatory Disaster: Insurance execs say the current model could collapse under modern risk.

🚨 CFPB Walks It Back: Why industry pushback saved state enforcement notice rules and what that means for compliance clarity in 2025.

🥣 The Dye Lie: Texas takes on General Mills over deceptive “healthy” claims and sets the tone for a new era of food marketing scrutiny.

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🥣 Artificial Dyes and Health Claims: Texas Takes Aim at General Mills

Texas Attorney General Ken Paxton is escalating his campaign against misleading food marketing. This time, he is focusing on General Mills, the maker of Trix and Lucky Charms cereals. In a public statement, Paxton announced he is taking legal action against the company for misrepresenting artificially colored cereals as “healthy” and a “good source” of vitamins and minerals, even though they contain petroleum-based synthetic dyes like Red 40 and Yellow 6.

This move is part of a broader investigation into how companies use and promote artificial dyes in children’s food products. Many of these items rely heavily on health-forward branding but have largely avoided deep regulatory scrutiny until now.

The Legal Issue: Health Claims vs. Ingredient Truth

At the center of the case is the mismatch between marketing language and product formulation. Paxton’s office reports that General Mills pledged in 2015 to remove artificial dyes and did so for six cereals. However, the company quietly reintroduced the dyes two years later without adding any health warnings for consumers.

Despite the reintroduction of these ingredients, the cereals still feature prominent claims like “a good source of vitamins and minerals”. Texas regulators argue that this kind of branding misleads consumers, especially parents, by downplaying the potential risks associated with artificial dyes. These risks include:

• Hyperactivity and ADHD-related disorders
  

• Endocrine system disruption
  

• Autoimmune conditions
  

• Childhood obesity and cancer
  

The company does not include warning labels on any of these products and continues to offer dye-free versions in other countries. This has intensified criticism that U.S. consumers are being treated differently than international ones.

Regulatory Momentum Is Growing

This enforcement action is not an isolated case. Paxton previously launched a similar investigation into Kellogg’s over the continued use of petroleum-based dyes in cereals marketed as “healthy.”

Together, these cases show that state attorneys general are prepared to treat artificial dyes as a consumer deception issue. Paxton is using the Texas Deceptive Trade Practices Act to investigate possible violations, and this may encourage other states with strong consumer protection laws to take similar action.

Marketing Compliance: The New Risk Landscape

This wave of regulatory attention creates significant challenges for marketing teams. Even when companies do not make explicit “dye-free” claims, general wellness language is now under scrutiny. This includes terms like:

• “Healthy”
  

• “Nutritious”
  

• “Good source of…”
  

• “Made for kids”

When products contain ingredients that are widely criticized for potential health impacts, any health-forward branding could expose companies to litigation or regulatory enforcement.

Selling cleaner versions of the same products abroad while maintaining dye-filled formulations in the U.S. also adds risk. Regulators and consumers can argue that this disparity reflects unfair or deceptive marketing.

What Brands Should Be Doing Now

This moment should serve as a trigger for internal reviews. CPG brands can reduce their exposure by:

1. Reviewing all product formulations for artificial dyes and other additives

2. Auditing marketing claims to ensure they align with what the product actually contains

3. Evaluating international product versions and making sure health-related claims are consistent across regions

4. Considering the addition of front-of-pack warnings if artificial dyes remain in use

5. Engaging legal teams to vet packaging, promotional language, and brand positioning strategies
   

Bottom Line

Marketing compliance is no longer limited to regulatory fine print. If a product includes artificial dyes but promotes itself as “healthy,” regulators may now consider that a legal violation. The investigations into General Mills and Kellogg’s show that state attorneys general are willing to use deceptive marketing laws to hold brands accountable.

For companies in the food and beverage space, this is a clear warning. Ingredient transparency, message accuracy, and consistency across markets are now essential. The old approach of making health claims while hoping no one checks the label is coming to an end. What follows is a new phase of compliance risk and consumer scrutiny.

Read more on The Dallas Morning News.

🏦 Basel III Endgame: Fed Opens the Door to Rethinking Bank Capital Rules

The Federal Reserve just opened the door to completely rethinking how big banks handle capital requirements. At a conference packed with regulators, bankers, and analysts, the message was clear: the current system isn't working, and Basel III's long-delayed finale needs to finally happen.

But this isn't just regulatory inside baseball. The outcome could reshape how major banks compete, communicate their financial strength, and even pitch themselves to customers in 2026.

The "Everything Must Work Together" Moment

Fed Chair Jerome Powell kicked things off by calling for something revolutionary in banking regulation: a capital framework that actually functions as a unified system instead of a collection of random rules duct-taped together.

Risk-based capital requirements, leverage ratios, stress tests, and surcharges for megabanks all need to stop working against each other.

"We need to ensure that all the different pieces of the capital framework work together effectively," Powell said, promising the Fed is "open to hearing new ideas and feedback."

Translation: They know the current system is broken, and they're finally admitting it.

The Basel III To-Do List Nobody Wants

Remember the Biden-era Basel III proposal that would have jacked up capital requirements for big banks by 19%? It got shelved faster than a bad earnings report, leaving U.S. rules embarrassingly out of sync with global standards.

Now industry leaders are pushing regulators to finish the job, but smarter this time. Here's what they're demanding:

Finish Basel III Without the Pain: Former Fed vice chair Randal Quarles warned against "going in the wrong direction" and called for "a sane and smart" implementation. Apparently, asking banks to hold dramatically more capital isn't considered sane.

Balance Safety with Reality: Goldman Sachs' Sheara Fredman pushed for reforms that "appropriately balance safety and soundness with economic growth." Because what good is a perfectly safe bank that can't lend money?

Show Your Work This Time: Dan Hartman from law firm Nutter reminded everyone that regulators got roasted in 2023 for "not showing their work" and expects a more "carefully calibrated" approach. Imagine that: stakeholders wanting to understand the rules they have to follow.

Don't Go Rogue Globally: Bank of England's Phil Evans warned that ditching Basel III entirely would jack up costs for U.S. banks and destabilize global markets. Because banking isolation isn't exactly a winning strategy.

The "This Whole Thing Is Broken" Faction

Not everyone thinks the framework just needs gentle tweaking. Some want to blow it up entirely.

Wells Fargo Securities' Mike Mayo delivered a verbal haymaker, calling the current system "too confusing, too constraining, and too costly." His argument? All this complexity doesn't just frustrate bankers; it undermines investor confidence and slows banks' ability to compete with nimble fintechs and international rivals.

Treasury Secretary Scott Bessent was even blunter, calling the framework "antiquated" and urging regulators to scrap the "flawed" dual-requirement structure that forces banks to comply with both old and new rules simultaneously. Because nothing says efficiency like following two conflicting sets of regulations.

Marketing Teams, Take Heed

Here's where it gets interesting for marketing professionals. A reworked capital framework could completely change how banks talk about financial strength and stability.

Simpler Rules, Clearer Stories: If regulators actually create a coherent system, it becomes much easier to craft investor and customer narratives around risk management and competitiveness. No more explaining why your bank follows seventeen different capital ratios that sometimes contradict each other.

Compliance Headaches (For Now): Until regulators finalize Basel III, marketing teams are stuck in regulatory limbo. Every potential capital rule change triggers new disclosure reviews and risk messaging updates. It's like trying to write marketing copy on a moving train.

The Competitive Messaging Opportunity: Banks that can clearly explain their capital position in simple terms will have a massive advantage. While competitors struggle with regulatory complexity, clear communicators can build trust with investors and customers who actually understand what they're being told.

The 2026 Question Mark

The Fed promises to listen better this time around. But whether that translates into actual clarity or just another layer of regulatory complexity remains the million-dollar question.

For banking marketers, the stakes are high. Get this right, and you'll have clearer rules, better stories, and more confident messaging. Get it wrong, and you'll spend 2026 explaining why your bank's capital ratios look like alphabet soup.

The good news? Even regulators admit the current system is a mess. The bad news? They're the ones who have to fix it.

One thing's certain: The Basel III endgame is finally moving toward an actual ending. Whether that's a happy ending for banks and their marketing teams remains to be written.

Read more on Banking Dive.

🛡️ RBC Under Fire: Can New Rules Catch Up With 2025 Risks?

The Risk-Based Capital Model Governance Task Force just launched its review of insurance's decades-old RBC framework, and industry executives are sweating. With private equity reshaping the landscape and complex reinsurance deals concentrating risk in new ways, critics are sounding the alarm: the current RBC formula is dangerously behind the times.

Translation? Policyholders might be the ones left holding the bag when something goes wrong.

Old Formula, New Problems

The RBC system was born in the 1990s, back when people still used fax machines and thought the internet was a fad. It was designed to ensure insurers hold enough capital to protect policyholders from insolvency, with regulators targeting RBC ratios of 400% to 450%.

But the insurance world has transformed dramatically since then:

Private Equity Takes Over: PE firms now control $700 billion in insurance assets (7.1% of the industry), up from 5% just five years ago. These aren't your grandfather's mutual insurance companies.

Offshore Reinsurance Explosion: Reserves ceded overseas have nearly quadrupled to more than $450 billion since 2019, according to Fitch Ratings. Risk is being shipped around the globe faster than Amazon packages.

The problem? The RBC formula is still calculating risk like it's 1995.

The Valmark CEO's Wake-Up Call

Larry Rybka, CEO of Valmark Financial Group, isn't pulling punches. In a blistering comment letter, he argues the framework has completely failed to keep up with reality.

"The entrance of private-equity sponsors into the insurance marketplace, combined with sophisticated reinsurance structures, has created new and material solvency risks that the current formula does not adequately capture," Rybka wrote.

His evidence? The collapse of PHL Variable, now under Connecticut regulatory oversight. His warning? "Policyholders will only get the minimum state guarantee."

Ouch.

The Heavy Hitters Taking Charge

The NAIC isn't treating this like routine paperwork. The task force is led by two influential state commissioners: Ohio's Judith French and Wisconsin's Nathan Houdek. According to law firm Mayer Brown, this high-profile leadership "signalizes the priority that is being given to the risk-based capital system at the highest levels of the NAIC."

Even the Capital Adequacy Task Force is considering limits on public RBC disclosures, showing just how sensitive regulators are getting about these numbers.

The task force is collecting comments through July 24 on proposed RBC principles and 10 key questions covering capital, risk, and analysis levels. This isn't a casual consultation; it's a full regulatory rethink.

Rybka's Four-Point Reality Check

Rybka doesn't expect regulators to adopt his suggestions, but his four-point reform plan is getting serious industry attention:

1. Stricter Reinsurance Rules: Higher RBC charges for liabilities ceded to reinsurers that aren't U.S.-licensed, equivalently regulated, or fully collateralized. No more shipping risk offshore and pretending it disappeared.

2. Transparency Revolution: Public disclosure of reinsurance counterparties, contract terms, and any side agreements. Let the market see where the risk really lives.

3. End Capital Games: A substance-over-form test for risk transfer, with no RBC credit when it's just financial engineering. If you're not really transferring risk, you don't get credit for it.

4. Complex Credit Reality Check: Higher RBC factors for exposure to below-investment-grade corporate debt held through CLOs, BDCs, or other opaque vehicles. Because complexity doesn't make risk disappear.

Rybka's pessimistic prediction? "I want to be on the record pointing to the NAIC's inaction before the next larger carrier fails." If state regulators don't act, he expects federal intervention.

The Marketing Earthquake Coming

For insurance marketers, RBC reform isn't just regulatory housekeeping. It could completely reshape how carriers talk about solvency and strength.

The Winners: Well-capitalized insurers with transparent structures could turn tougher RBC rules into a massive marketing advantage. "We don't need accounting tricks to look strong" becomes a powerful message.

The Losers: Smaller or PE-backed insurers might find themselves under uncomfortable scrutiny. Complex reinsurance arrangements and opaque ownership structures could become marketing liabilities instead of financial engineering victories.

The Messaging Shift: If new rules highlight offshore reinsurance risks or private-equity ownership concerns, expect a complete overhaul of financial stability messaging strategies in 2026.

The Stakes Are Real

This isn't just an academic exercise in regulatory reform. Real policyholders are depending on these companies to be there when claims need to be paid. Real investors are betting billions on insurance stocks. Real agents are selling policies based on carrier strength ratings.

The RBC framework was built for a simpler time when insurance companies looked more like traditional mutual organizations than private equity portfolios. Now it needs to catch up with 2025 reality before more carriers collapse and leave policyholders scrambling for state guarantee funds.

The question isn't whether RBC reform is needed. The question is whether regulators will act fast enough to prevent the next PHL Variable disaster.

More details on Insurance Newsnet.

🚨 CFPB Backs Down: Why State Enforcement Notification Rules Survived Industry Pushback

The Consumer Financial Protection Bureau just performed a regulatory U-turn. After proposing to scrap notification rules that require states to give the CFPB a heads-up before launching enforcement actions, the Bureau withdrew its plan on July 21 following what it diplomatically called "significant adverse comments" from stakeholders.

The Rules That Wouldn't Die

The 2012 notification requirements might seem like bureaucratic paperwork, but they serve a specific purpose. State attorneys general and regulators must notify the CFPB at least 10 days before filing enforcement actions under federal consumer financial protection laws.

The notice isn't just a heads-up email. It must include:

• The parties involved in the case

• Factual allegations forming the basis of the complaint

• A copy of the complaint itself

These procedures were designed to prevent the regulatory equivalent of a three-car pileup: overlapping investigations, conflicting enforcement strategies, and duplicative litigation that wastes everyone's time and money.

The CFPB's Logic (And Why It Didn't Work)

In May 2025, the CFPB made what seemed like a reasonable argument. The Consumer Financial Protection Act already requires coordination between state and federal regulators, so why pile on additional notification requirements? The agency argued the 2012 rules were redundant red tape that imposed compliance costs without delivering meaningful benefits.

It was a classic regulatory efficiency play: cut unnecessary rules, reduce compliance burden, streamline operations. What could go wrong?

Industry Groups Call Timeout

Apparently, everything. Several industry trade associations came out swinging against the proposed repeal, and their arguments were hard to ignore.

The Uncertainty Problem: Without mandatory pre-filing notices, financial institutions could face a coordination nightmare. Imagine getting hit with overlapping investigations from multiple states while the federal government pursues its own parallel track. That's not efficiency; that's chaos.

The Transparency Issue: The notification process gives everyone visibility into what's coming down the pipeline. Remove that early warning system, and financial institutions lose crucial planning time for compliance and legal responses.

The Coordination Benefit: The current rules give the CFPB a chance to intervene or coordinate with states before actions get filed. This prevents the kind of conflicting enforcement strategies that make national financial institutions' compliance teams break out in cold sweats.

For companies operating across multiple states, the notification system isn't bureaucratic overhead. It's a lifeline that helps prevent regulatory disasters.

Round One Goes to Industry

The CFPB's withdrawal doesn't mean they're giving up. The agency made it clear they'll review stakeholder feedback and may try again with a different approach in future rulemaking. But for now, the 2012 procedures stay in place.

State officials must continue providing advance notice before initiating enforcement actions under the Consumer Financial Protection Act. Financial institutions can breathe easy knowing they'll still get that crucial 10-day heads-up before state enforcement hammers fall.

What This Means for Compliance Teams

Status Quo Continues: The notification requirements remain unchanged. State attorneys general and regulators must still give the CFPB 10 days' notice before filing enforcement actions.

Keep Monitoring: Financial institutions should maintain their current processes for tracking state-level enforcement actions and preparing for coordinated federal-state investigations.

Stay Alert: The CFPB signaled this isn't over. Compliance teams should watch for future rulemaking proposals that might take a different approach to the same problem.

Plan for Both Scenarios: Smart compliance programs will prepare for a world where notification rules might eventually change, even if they're staying put for now.

The Bigger Picture

This episode highlights a fundamental tension in financial regulation: the push to streamline rules versus the need to maintain coordination and transparency. The CFPB thought they were cutting unnecessary red tape. Industry groups saw essential coordination mechanisms.

In this case, the industry won because they made a compelling argument about real-world consequences. Regulatory efficiency sounds great in theory, but not if it creates chaos in practice.

The notification rules survived because they actually serve a purpose beyond bureaucratic box-checking. They provide predictability, coordination, and transparency in a system where multiple regulators can pursue overlapping enforcement actions.

The Rulemaking Isn't Over

Don't expect this to be the end of the story. The CFPB will likely come back with a revised approach that tries to address industry concerns while still achieving their streamlining goals. Maybe modified notification requirements, different timing rules, or alternative coordination mechanisms.

For now, though, the 2012 rules live to fight another day. Financial institutions can continue planning around existing notification procedures while keeping one eye on future regulatory changes.

Want to know more? Check out Sheppard Mullin.

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