SEC Rulemaking & Guidance

SEC’s Private Fund Advisor Rule - Vacated

On June 5, the 5^th Circuit Court of Appeals vacated the SEC’s Private Fund Advisor Rule.  The rule would have required private fund advisers registered with the Commission to: (1) provide investors with quarterly statements, (2) obtain an annual audit for each private fund, (3) obtain a fairness opinion or valuation opinion, and (4) prohibit certain activities, such as preferential treatment unless they are disclosed, and require all registered advisers to document in writing the annual review of their compliance policies and procedures.  The decision means that the entire rule has been rescinded.  The Court concluded: “The Commission has exceeded its statutory authority in adopting the Final Rule… Because the promulgation of the Final Rule was unauthorized, no part of it can stand. Accordingly, we VACATE the Final Rule.”  [As of the date of the publication, the SEC has not indicated if it will appeal the decision.]

• The entire court decision is available here: https://storage.courtlistener.com/recap/gov.uscourts.ca5.215539/gov.uscourts.ca5.215539.123.1.pdf

 Implementation of T+1 Settlement Cycle

On May 28, the industry transitioned to a T+1 settlement cycle.  Last year (on Feb. 15, 2023), the SEC adopted a set of rule amendments and new rules to facilitate the shortening of the standard settlement cycle for most broker-dealer transactions from two business days after the trade date (or T+2) to one business day after the trade date (or T+1). The new rules also update the processing of institutional trades with new processing and recordkeeping requirements for broker-dealers and registered investment advisors, respectively. Further, the rules established a new requirement to facilitate straight-through processing by central matching service providers.

See Chairman Gensler’s Statement.

SEC Adopts Rule Amendments to Regulation S-P to Enhance Protection of Customer Information

On May 16, the SEC announced the adoption of amendments to Regulation S-P to modernize and enhance the rules governing the treatment of consumers’ nonpublic personal information by certain financial institutions. “The amendments update the rules’ requirements for broker-dealers (including funding portals), investment companies, registered investment advisers, and transfer agents (“covered institutions”) to address the expanded use of technology and corresponding risks that have emerged since the original adoption of Regulation S-P in 2000.”

The press release is available here.

SEC and FinCEN Propose Customer Identification Program Requirements for Registered Investment Advisers and Exempt Reporting Advisers

On May 13, the SEC and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) jointly proposed a new rule that would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish, document, and maintain written customer identification programs (CIPs).

The press release is available here.

Other SEC Activities

SEC Investor Advisory – June 6 Meeting

On June 6, the SEC’s Investor Advisory Committee held a virtual public meeting. The committee hosted two panels: (1) Examining the New Frontier for Investment Advice; and (2) AI Regulation: Embracing the Future.  The committee also discussed potential recommendations regarding the Protection of Self-Directed Investors when Trading Complex Products and Utilizing Complex Strategies, andFinancial Literacy and Investor Education.

The press release, agenda, and draft recommendations are available here.

SEC Staff Publishes New Investment Adviser Statistics Report

On May 15, the SEC published a new report of Investment Adviser Statistics. The report is based on aggregated data filed by investment advisers on Form ADV and will be updated on an annual basis. “It is designed to give the public a view into the investment advisory industry, with insights into areas such as business activities, client composition and the types of funds advised.”

The report can be read here.

Registered Fund Statistics

On April 18, 2024, the SEC Division of Investment Management’s Analytics Office published a report providing statistics and trends for SEC-registered investment companies that file reports of portfolio holdings on Form N-PORT each month. These reports reflect data collected through Form N-CEN and Form N-PORT filings received through April 18, 2024, for reporting periods from March 2019 through September 2023.

The report can be read here.

SEC Seeks Candidates for Small Business Capital Formation Advisory Committee

On May 14, 2024, the SEC announced it is seeking candidates to fill a limited number of vacancies on the agency’s Small Business Capital Formation Advisory Committee. The committee provides advice and recommendations to the Commission on rules, regulations, and policy matters relating to small businesses.

The press release is available here.

SEC Announces Departure of Policy Director Heather Slavkin Corzo and Appointment of Corey Klemmer to the Role

On May 17, 2024, the SEC announced that Policy Director Heather Slavkin Corzo will leave the agency and Corey Klemmer, most recently the Corporation Finance Counsel to Chair Gary Gensler, has been appointed the new Policy Director.

The press release is available here.

SEC Names Nathaniel H. Benjamin as Director of the Office of Minority and Women Inclusion

On May 3, 2024, the SEC announced Nathaniel H. Benjamin has been appointed the Director of the Office of Minority and Women Inclusion (OMWI). Mr. Benjamin joins OMWI from AmeriCorps, where he was the Chief Diversity and Inclusion Officer.

The press release is available here.

FINRA

Podcast: Insider Trading Detection – FINRA’s Vital Role in Ensuring Market Integrity

The May 14 episode of the FINRA podcast features Sam Draddy, Senior Vice President of the Market Abuse Unit within FINRA's Market Regulation and Transparency Services and Karen Braine, Vice President of the Insider Trading Detection Program.  They discuss how they connect trading data and information from public sources and from companies and FINRA firms to pull together actionable intelligence pertaining to insider trading.

The podcast is available here.

Remote Inspections Pilot Program – FAQs

On May 13, FINRA published a list of FAQs and answers regarding the organization’s Remote Inspections Pilot Program, a voluntary, three-year Pilot Program to allow eligible firms the option of fulfilling their obligation under Rule 3110(c)(1) by conducting inspections of some or all branch offices, including offices of supervisory jurisdiction (OSJs) and non-branch locations (i.e., unregistered offices or non-registered locations).

The FAQs and answers can be found here.

Advertising Regulation – FAQs

On May 10, 2024, FINRA published a list of FAQs and answers regarding its advertising regulation, Rule 2210. The new guidance covers the responsibility and supervisory requirements for the use of AI technology in client communications. 

The FAQs and answers can be found here.

Retirement

Department of Labor Announces Updates to Improve Retirement Plan Assets Distribution to Workers and Retirees of Bankrupt Companies

On May 16, the DOL announced its Employee Benefits Security Administration (EBSA) will publish interim final rules and an amendment to the prohibited transaction class exemption (PTE) that better protect workers’ retirement savings by making it easier for Chapter 7 bankruptcy trustees to distribute assets from bankrupt companies’ retirement plans. Comments are due July 16, 2024.

The press release is available here.

The notice of an amendment to prohibited transaction exemption (PTE) 2006–06 is available here.

The rulemaking amending the Abandoned Plan Program regulations is available here.