Wednesday, January 11, 2023

The SEC Unveils its Agenda for 2023

A Busy Mix of New Business and Old

Author: David Schwartz J.D. CPA


In its recently updated regulatory flexibility agenda, the Securities and Exchange Commission has announced its regulatory priorities for 2023. A mix of old and new business, the Commission's 2023 plans include finalizing 29 existing proposals and placing 23 new proposals up for consideration. 


In a January 4, 2023 press release announcing the updated agenda, SEC Chairman Gary Gensler stated that the agency's agenda "reflects the need to modernize our ruleset, moving deliberately to update our rules in light of ever-changing technologies and business models in the securities markets." Regulatory flexibility agendas are aspirational, and the SEC’s rulemaking agenda could change throughout the year.


Finishing Old Business

The SEC intends to finalize several proposals this year that could reshape large segments of the nation's financial markets. Expanded public disclosures also continue on the agenda for both public companies and private fund managers.


Private fund managers would be compelled to provide investors with quarterly statements detailing information about performance, fees, and expenses. Another rule proposal would shorten the settlement cycle to T+1 from T+2, as well as other rules imposing new short selling and securities loan disclosures. The Commission also plans to finalize its proposal to update the investment company names rule and adopt regulations proposed under the Advisers Act to address lack of transparency, conflicts of interest, and other matters involving private fund advisors. Proposals regarding climate-related disclosures; cybersecurity breach notifications; and environmental, social, and governance (ESG) claims by investment advisers will get attention in 2023 as well.


Some of these proposals, particularly T+1 and the securities lending disclosure rules, drew significant response from institutions and retail investors. Many comments raised critical issues that the Commission must address before finalizing. Whether the Commission can resolve these problems will determine when or if the proposals will see their anticipated final drafts in 2023.


New Business

The Commission's plans for new rules focus primarily on advisers and funds. Among the proposals the Commission has planned in this area are:

  1. Modernizing custody rules for investment advisers;
  2. changes to regulatory requirements relating to registered investment companies' fees and fee disclosures, including 12b-1 fees; and
  3. Vetting of third-party service providers by investment advisers.


The SEC's Division of Investment Management plans to address the "gamification of investing" by proposing two separate rules (one for investment advisers and one for broker-dealers) related to using predictive data analytics, differential marketing, and behavioral prompts.  


Undoubtedly, regulating cryptocurrencies as securities will figure prominently in the Commission's agenda in 2023 as Congress and other regulators seek to determine how to oversee the turbulent industry.


Chairman Gary Gensler summed up the agenda by saying,

"The SEC's regulatory actions on this unified agenda would help make our markets more efficient, resilient, and fair, including through rulemaking items we have been directed by Congress to implement. Taken together, the items on this agenda would advance our three-part mission: to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."