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The SEC's Spring 2024 Regulatory Flexibility Agenda outlines the agency's rulemaking plans for the next twelve months. The agenda includes items such as amendments to shareholder proposals, cybersecurity risk management for investment advisers, enhanced disclosure of environmental, social, and governance investment practices, human capital management disclosure, incentive-based compensation arrangements, corporate board diversity, revisions to the definition of securities held of record, and improvements to Regulation D and Form D. These proposals aim to address various concerns and provide more transparency and protection for investors. [Extracted from the article]

Six trade groups representing private fund and syndicated loan managers have written a letter to the U.S. Securities and Exchange Commission (SEC) urging them to withdraw three proposed rules. The trade groups argue that these rules should not apply to private fund advisers and investment advisers who do not serve "retail customers." The proposed rules include cybersecurity risk management, outsourcing by investment advisers, and conflicts of interest associated with predictive data analytics. The trade groups believe that these rules are based on the same legal basis as the recently vacated private fund adviser rules. The SEC's response to the letter and the future of these proposed rules is still uncertain. [Extracted from the article]

The U.S. Court of Appeals for the Fifth Circuit has vacated the private fund adviser rules adopted by the U.S. Securities and Exchange Commission (SEC) in August 2023. The court ruled that the SEC exceeded its authority in adopting these rules, as they were unauthorized and had untenable legal bases. The rules, which were set to have a compliance date in September 2024, included restrictions on activities, quarterly statements, preferential treatment, private fund audits, adviser-led secondaries, and recordkeeping. It is uncertain whether the SEC will appeal the ruling, but for now, private fund advisers are unlikely to need to follow these rules. However, the SEC may still raise similar requirements in future examinations, and investors may seek certain terms that would have been granted under the disputed rules. [Extracted from the article]

SEC Press Release No. 2021-42, SEC Announces Enforcement Task Force on Climate and ESG Issues (Mar. 4, 2021); see also SEC Press Release No. 2021-119, SEC Issues Agenda for July 7 Meeting of Asset Management Advisory Committee (July 2, 2021). BNY Mellon Investment Adviser, Inc., No. 3-20867 (SEC May 23, 2022) (order instituting administrative and cease-and-desist proceedings); SEC Press Release No. 2022-86, SEC Charges BNY Mellon Investment Adviser for Misstatements and Omissions Concerning ESG Considerations (May 23, 2022). The Securities and Exchange Commission (SEC) has made abundantly clear that it is focused on environmental, social, and governance (ESG) issues. [Extracted from the article]

The procedures are not always clear for financial advisors seeking to reapply with a securities regulator to sell financial products and services after being barred from the securities industry. Advocates should research and use as illustrative authority SEC decisions on prior Rule 193 applications and court opinions reviewing commission decisions on Rule 193 applications. Understand whether the SEC considers your client's bar order "unqualified", whether your client is applying to associate with a self-regulated organization, and the effects these issues have on the applicant's burden in the eyes of the SEC. [Extracted from the article]

November 15, 2022 On May 25, 2022, the US Securities and Exchange Commission (the SEC or the Commission) proposed rules that would require registered and exempt investment advisers (Advisers) as well as registered investment companies (Registered Funds) to provide standardized environmental, social, and governance (ESG) disclosures to their investors and the Commission (referred to herein as the ESG disclosures proposal). If adopted, the proposed ESG disclosure rules will mitigate the current risks related to voluntary disclosures-including greenwashing and lack of consistent, comparable, and reliable ESG data-which will boast investors' confidence in ESG investing. Helee Lev, Conservice ESG, "ESG funds set a new record inflow by doubling in 2021", December 13, 2021; Tim Quinson, "The ESG Market Is Controlled by a Few Big Investors", Bloomberg, December 1, 2021. [Extracted from the article]

Creation of an arbitral forum: Either Congress or the SEC could also create an arbitral forum to administer investment advisor arbitrations and require its use by investment advisors. August 10, 2023 On June 27, 2023, the staff of the U.S. Securities and Exchange Commission (SEC) issued a report to Congress on the use of mandatory, pre-dispute arbitration provisions by SEC-registered investment advisors. [Extracted from the article]

In 2022, the SEC did settle an enforcement action against Perceptive Advisors (the SEC's first SPAC-related enforcement action against an investment adviser) for failing to disclose SPAC-related conflicts of interest. Apr 30, 2023 Another SPAC-related direct breach of fiduciary duty lawsuit was filed on April 3, 2023, in the Delaware Court of Chancery. [Extracted from the article]

On March 15, 2023, the SEC proposed amendments to Regulation S-P to enhance protections for customers of certain covered firms with respect to those customers' information. The current version of Regulation S-P requires broker-dealers, registered investment companies, and investment advisors to have policies in place to protect customer information. However, the current rule does not require that those firms have policies in place covering how they will respond to breaches or to give customers notification of breaches. [Extracted from the article]

In her NASAA presidential address, Ms. Lubin commented that NASAA (an organization of state and provincial securities regulators) viewed expungement as an "extraordinary remedy." It is important that firms and financial advisors remain cognizant of the new hurdles being raised and make informed strategic decisions early in the process-especially when the financial advisors or relevant investment products are being investigated by a state securities regulator. State Efforts to Oppose Expungement Traditionally, state regulators have initiated legal challenges to expungement only after an arbitration panel awarded expungement relief to a financial advisor. [Extracted from the article]

The SEC announced that it is requesting information and public comment on matters related to the activities of certain "information providers", including whether, under particular facts and circumstances, information providers are acting as "investment advisers" under the Investment Advisers Act of 1940. The public comment period will remain open for sixty days following publication of the Request on the SEC's website or thirty days following publication of the Request in the Federal Register, whichever period is longer. [Extracted from the article]

The rule also updates the substance of quarterly reports on Form 13F. The new electronic filing requirements will affect three types of filings that previously were submitted on paper: confidential treatment requests for Form 13F; applications under the Investment Advisers Act of 1940 (Advisers Act); and Form ADV-NR. On June 23, 2022, the SEC unanimously approved final rules requiring the electronic filing of certain documents that previously were submitted on paper by investment advisers, institutional investment managers, and others. [Extracted from the article]

These actions reflect the SEC's continued focus on the cybersecurity risks, practices and disclosures of SEC-regulated entities, from issuers to broker-dealers and other market participants. All Market Entities also would need to give the Commission immediate written electronic notice of a significant cybersecurity incident upon having a reasonable basis to conclude that the significant cybersecurity incident had occurred or is occurring. On March 15, 2023, the SEC for sixty days the comment period on cybersecurity risk management rules and related amendments proposed, in February 2022, under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. [Extracted from the article]

On March 30, 2022, the Division of Examinations of the US Securities and Exchange Commission ("SEC") announced its examination priorities for 2022. Mayer Brown's lava brief y summarizes these "Significant Focus Areas", highlights issues from the Investment Adviser and Investment Company Examination Program and the Broker-Dealer and Exchange Examination Program, and discusses other selected topics for 2022. [Extracted from the article]