SEC Rulemakings and Other Actions

SEC Published Fall 2023 Regulatory Priorities

The SEC’s Regulatory Flexibility Agenda includes 29 rule proposals that are due to be finalized, including: Climate Change Disclosure (for corporate issuers); Fund Liquidity, Swing Pricing/Hard Close, and 14a-8 Amendments (to update certain substantive bases for exclusion of shareholder proposals). The dates for final rulemaking for most of these proposals have been pushed out to April 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 short-term agenda can be viewed here.

The long-term agenda can be viewed here.

SEC Adopts Rule to Prohibit Conflicts of Interest in Certain Securitizations

On November 27, the SEC adopted Securities Act Rule 192, which is intended “to prevent the sale of asset-backed securities (ABS) tainted by material conflicts of interest.”

• Specifically, Rule 192 prohibits a securitization participant, for a specified period of time, from engaging, directly or indirectly, in any transaction that would involve or result in any material conflict of interest between the securitization participant and an investor in the relevant ABS.
• Rule 192 provides exceptions for risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities of a securitization participant. These exceptions permit certain market activities, subject to satisfaction of the specified conditions, which will allow securitization participants to continue important risk management, liquidity commitment and market-making activities.

Compliance Date:

Rule 192 will become effective 60 days after publication in the Federal Register. Compliance with Rule 192 will be required with respect to any ABS the first closing of the sale of which occurs 18 months after the date of publication in the Federal Register.

The press release is available here.

SEC Guidance on Universal Proxy Rules

On November, 17, the SEC’s Division of Corporation Finance provided updated guidance on the Universal Proxy Rule: these new interpretations provide the SEC’s view on how proxy cards should be treated when they are submitted in situations of under-voting, over-voting, and unmarked cards. See new FAQs 139.07, 139.08, and 139.09.

The SEC guidance is available here.

SEC Postpones Effective Date of Share Repurchase Disclosure Modernization Rule

On October 31, the U.S. Court of Appeals for the Fifth Circuit granted a petition for review and remanded to the SEC Commission “to correct the defects” the court identified in the Repurchase Rule by November 30, 2023. In light of the court’s decision, the SEC issued an order postponing the effective date of the Repurchase Rule. The Repurchase Rule is stayed pending further Commission action.

The SEC Announcement is available here.

SEC Issues New Process for Rule 14a-8 Submissions and Related Correspondence

The Division of Corporation Finance receives requests from companies to provide informal, non-binding staff views regarding companies’ intentions to exclude shareholder proposals from their proxy statements under Exchange Act Rule 14a-8. Emailed materials will no longer be accepted. Going forward, Rule 14a-8 submissions and related correspondence must be submitted using the SEC’s online shareholder proposal form, available at https://www.sec.gov/forms/shareholder-proposal.

The SEC Announcement is available here.

SEC’s Office of the Investor Advocate 2023 Report on Activities

On Dec 5, the SEC’s Office of the Investor Advocate published their 2023 Report. Notable highlights from the report include:

• Empirical research findings about investors’ comprehension of registered index-linked annuities as well as policy recommendations;
• Research findings about investment advisory agreements use of mandatory arbitration clauses, including suggested approaches on combating abusive use of those clauses;
• Metrics measuring the activities of the Office including the substantial uptick in investor engagement, investor submissions, and inquiries; and
• Topical discussions of private markets, cybersecurity, and equity market structure.

The press release and report are available here.

SEC Investor Advisory Committee – December Meeting (Panels on Financial Literacy and Use of Complex Investment Products by Self-Directed Investors)

On December 7, the SEC Investor Advisory Committee (IAC)held a virtual public meeting. The IAC hosted two panels:

• Practical Applications for Enhancing Financial Literacy
• Examining the use of Complex Investment Products and Strategies by Self-Directed Investors – Is the Current Approach Working?

The press release, full agenda and replay of the webcast are available here.

Retirement

DoL Publishes Fall 2023 Regulatory Priorities

The DoL has published its Fall 2023 Regulatory Flexibility Agenda. Items of note:

• Retirement Security Rule: Definition of an Investment Advice Fiduciary (comments due January 2, 2024)
• Improving Participant Engagement and Effectiveness of ERISA Retirement Plan Disclosure: “Consistent with section 319 of SECURE Act 2.0, this regulatory action is to explore ways to improve the effectiveness of retirement plan disclosures required under Title I of the Employee Retirement Income Security Act (ERISA), balanced with the cost to plans and plan participants and beneficiaries of providing such disclosures. The Department of Labor’s Employee Benefits Security Administration (EBSA) intends to start by consulting with a diverse set of stakeholders, including participant representatives, employers sponsoring ERISA retirement plans, as well as retirement plan service and investment providers, to explore alternatives for improving the understandability and effectiveness of such disclosures. More specifically, the review would explore whether, and how, the content, design, and delivery of such disclosures may be reimagined, improved, consolidated, standardized, and simplified to enhance participants’ disclosure experiences, promote greater participant engagement, and improve outcomes. The recently enacted SECURE 2.0 Act of 2022 contains multiple reporting and disclosure provisions, including new disclosure requirements for defined benefit and defined contribution retirement plans covered by ERISA, as well as provisions relating more generally to effectiveness, simplification, and consolidation of applicable disclosures. The review undertaken by this regulatory project will take into account these new provisions individually and in the aggregate.”

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 short-term agenda can be viewed here.

The long-term agenda can be viewed here.

DoL Holds Hearing on Proposed Fiduciary Rule

On November 20, the DoL announced its Employee Benefits Security Administration (EBSA) will hold a virtual public hearing on December 12, 2023 through December 13, 2023, continuing (if necessary) on December 14, 2023, for the public to provide input on the Department’s proposed Retirement Security Rule: Definition of an Investment Advice Fiduciary, proposed amendments to Prohibited Transaction Exemption (PTE) 2020–02, proposed amendments to PTE 84–24, and proposed amendments to several other existing administrative PTEs available to investment advice fiduciaries.

The announcement of the hearing is available here.

IRS issues Long-Term, Part-Time Employee Rules for Cash or Deferred Arrangements Under Section 401(k)

On November 27, the IRS issued a notice of proposed rulemaking and of a public hearing – the notice sets forth a proposed regulation that would amend the rules applicable to plans that include cash or deferred arrangements under section 401(k) to provide guidance with respect to long-term, part-time employees. The proposed regulation reflects statutory changes made by the SECURE Act and the SECURE 2.0 Acts.

Dates:

• Written or electronic comments must be received by January 26, 2024.
• A public hearing on this proposed regulation has been scheduled for March 15, 2024, at 10 a.m. ET.
• Requests to speak and outlines of topics to be discussed at the public hearing must be received by January 26, 2024.
• Requests to attend the public hearing must be received by 5 p.m. ET on March 13, 2024.

The IRS Notice is available here.

FINRA

Proposed Rule Change to Amend FINRA Rule 2210 (Communications with the Public) to Permit Projections of Performance in Institutional Communications and Specified Communications to Qualified Purchasers

On November 13, FINRA filed a proposed rule change with the SEC to amend FINRA Rule 2210 (Communications with the Public). The proposed rule change would allow projections of performance or to provide a targeted return with respect to a security or asset allocation or other investment strategy in an institutional communication or a communication distributed solely to qualified purchasers that promotes or recommends specified non-public offerings, subject to conditions to ensure these projections are carefully derived from a sound basis.

Dates:

If the SEC approves the proposed rule change, FINRA will announce the implementation date of the rule change in a Regulatory Notice.

The announcement and text of the proposed rule change are available here.

FINRA Proposes Rule Change to Shorten the Standard Settlement Cycle for Most Broker-Dealer Transactions

FINRA is proposing a rule change to amend its rules to conform to exchange act rules 15c6-1 and 15c6-2 to shorten the standard settlement cycle for most broker-dealer transactions from two business days after the trade date (“T+2”) to one business day after the trade date (“T+1”).

Dates:

FINRA has filed the proposed rule change for immediate effectiveness. The operative date of the proposed rule change will be May 28, 2024, or such later date as may be announced by the SEC for compliance for Exchange Act Rules 15c6-1 and 15c6-2.

The proposed rule change is available here.