SEC Rulemaking & Guidance

SEC’s Spring 2024 Regulatory Priorities

The SEC’s Regulatory Flexibility Agenda includes 34 items; there are 15 rulemakings in the “proposed” stage and 19 rulemakings in the “final” stage.  Rule proposals that are due to be finalized include:

• Public Company Disclosure Rules – The SEC has a number of disclosure rule proposals on their regulatory agenda that have been pushed back numerous times.  These include Human Capital Management, Board Diversity, and Payments by Resource Extraction Issuers.  The climate disclosure rule was adopted in January but has been delayed due to pending legal challenges.
• Exchange Traded Products – The SEC is considering “areas of focus” for exchange proposals to list and trade ETPs and is considering next steps.  Action was pushed out to April 2025.
• Consolidated Audit Trail – Potential updates to address data security.  Updated due date was pushed to October 2024.  Longer term items include the removal of duplicative rules.
• Reg ATS Modernization – The SEC is considering modernizing the conditions to the ATS exemption for all ATSs, including requirements to promote pre-trade price transparency across asset classes. Action was pushed out to April 2025.
• Other significant items – There are a number of proposals for asset managers (ESG, cyber disclosure, etc.) and broker dealers (Best Execution, Order Competition, Cyber, and Reg NMS amendments).

 The SEC included three items that are targeted to be re-proposed due to industry feedback:  

• Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers – The SEC is considering re-proposing rules related to conflicts in the use of predictive data analytics, artificial intelligence, machine learning, and similar technologies in connection with certain investor interactions.  (Targeted for October 2024).
• Open-End Fund Liquidity Risk Management Programs and Swing Pricing/Hard 4 PM Close; Form N–PORT Reporting – The SEC is considering re-proposing changes to open-end fund’s liquidity and dilution management, including amendments to reporting and disclosure requirements on Forms N-PORT and N-CEN that apply to registered investment companies that report on those forms.  The description of the proposal no longer includes the swing pricing/4 pm hard close provisions.  (Targeted for April 2025), and
• Safeguard Advisory Client Assets – The SEC is considering re-proposing amendments to existing rules and/or adopt new rules “to improve and modernize the regulations around the custody of funds or investments of clients by Investment Advisers.”  (Targeted for October 2024).

 The short-term agenda lists priorities for the next 12 months and the long-term agenda.

lists non-priority items upon which the staff may work. The SEC’s full agenda is available here:

• Short-Term Agenda
• Long-Term Agenda              

SEC Rule Proposal - Joint Data Filing Standards Under the Financial Data Transparency Act of 2022

On Aug. 2, 2024, the SEC proposed joint data standards under the Financial Data Transparency Act of 2022 that would establish technical standards for data submitted to certain financial regulatory agencies.

• Comment Period Due Date: The public comment period for the proposed joint standards will remain open for 60 days following publication in the Federal Register.
• The press release and rule proposal are available here.

SEC Tailored Registration Form for RILAs – Final Rule

On July 1, 2024, the SEC adopted tailored disclosure requirements and offering processes for offerings of registered index-linked annuities (RILAs) and registered market value adjustment annuities. The final rule will require issuers of non-variable annuities to register offerings on Form N-4, the form currently used to register offerings of most variable annuities.

• Compliance Date: The amendments will become effective 60 days after publication in the Federal Register. Filers will have until May 1, 2026, to comply with most of the final amendments to Form N-4 and the related rule and form amendments. For the amendments to Rule 156, insurance companies will be required to comply on the effective date.
• The press release and adopting release are available here.

FINRA

FINRA Foundation Report:  Examines Financial Professional or Artificial Intelligence? Which of These Consumers Trust More

On June 4, 2024, the FINRA Foundation published a survey and report on investor views on the use of AI compared to financial advisors.  The report and its findings are based on an experimental study involving more than 1,000 adults in the U.S. who were asked about the trustworthiness of hypothetical AI-generated financial information versus information provided by a financial professional. The study focused on four topics: homeownership, projected stock and bond performance, portfolio allocation, and savings and debt information.

The Report is available here.

 Regulatory Notice 24-09 - FINRA Reminds Members of Regulatory Obligations When Using Generative Artificial Intelligence and Large Language Models

On June 27, 2024, FINRA published Reg Notice 24-09, reminding members about their obligations when using AI.  The Notice invites industry engagement and provides other applicable resources.

The Notice is available here.

Crypto

Testimony of CFTC Chairman Rostin Behnam on the Oversight of Digital Commodities Before the Senate Committee on Agriculture, Nutrition, and Forestry

On July 10, 2024, Chair Behnam testified before the Senate Agg Committee about the oversight of digital assets.  He called for Congress to act, by providing authority and funding for the CFTC to better regulate the crypto industry and protect retail investors.  

• A webcast replay of the Senate Hearing can be viewed here.
• CFTC Chairman Behnam’s Testimony is available here. 

Note:  Stablecoin and digital asset bills have been introduced in the House and Senate this year, although it’s unclear if the bills will gain enough support to be acted on and enacted this year.

Retirement

DOL’s Spring 2024 Regulatory Priorities

The DOL has published its Spring 2024 Regulatory Flexibility Agenda. Items of note include:

• Disclosure Effectiveness

The DOL has two open projects to improve the understandability and effectiveness of retirement disclosures, including fee disclosure.  The date for action was moved out to July 2024 (although continued stakeholder meetings are expected). 

• Retirement Lost and Found Database

Under Secure 2.0, the DOL has 2 years (12/29/24) to create an online searchable database that allows retirement savers to search for the contact information of their plan administrator in order to make a claim for benefits owing to the individual under the plan.

 The DOL’s full agenda is available here.

 DOL seeks nominations for 2025 ERISA Advisory Council

The DOL announced its Employee Benefits Security Administration is soliciting nominations to fill five, three-year vacancies on the Advisory Council on Employee Welfare and Pension Benefit Plans, known as the ERISA Advisory Council. The deadline to submit nominations is Aug. 26, 2024.

The new release is available here.