Potential 2024 SEC Rule Adoptions
Vigilant Insights
Introduction
With the Fiscal Year 2024 well underway, following two years of record-breaking enforcement numbers from the SEC, it is important for the industry to understand that the SEC will not be taking the foot off the gas in 2024.
There are indications that the SEC is planning on adopting multiple rules in 2024. The majority are planned for the Spring, but this is a dynamic process; some may end up finalized for the fall.
Spring 2024 Potential Adoptions
- Requirements, for Broker Dealers and RIAs that use Predictive Data Analytics and Artificial Intelligence (“AI”), that Firms ensure that conflicts of interest do not arise that place the interests of the Firms ahead of investors in the underlying programing and use of these tools.
- Rules that affect Cybersecurity Risk Management, reporting, and recordkeeping for RIAs, RICs, and Business Development Companies.
- Regulation Best Execution that creates a best execution standard for Broker Dealers and requires compliance departments to create effective policies and procedures to ensure the best execution for their customers.
- Rule 14a-8 Amendments that would increase the difficulty for companies trying to exclude shareholder proposals.
- Liquidity Risk Management for Open-Ended Funds and Swing-Pricing that allegedly strengthens the liquidity risks for Funds along with timely reporting of Fund information.
- Climate Change Disclosure requirements that attempt to standardize reporting on greenhouse gas emissions amongst other major industry impacting implications.
- Expanded requirements for RIAs to exercise due diligence when handling customer assets and utilizing custodians.
- Outsourcing Rule that requires increased due diligence with the use of Third-Party Vendors by RIAs.
- Order Competition Rule requiring certain orders of individual investors to have exposure to competition in fair and open auctions before execution internally by trading centers that restrict order-by-order competition.
- SPAC regulations that would require increased disclosures related to sponsors, conflicts of interests, sources of dilution, and business combination transactions.
- ESG disclosure requirements and standardizations for Funds that claim to use ESG in its investment strategies.
- Regulation SP changes that requires Broker Dealers, RIAs, Investment Companies, and Transfer Agents to create a cybersecurity incident response program which promptly notifies relevant parties when data breaches affect clients.
Fall 2024 Potential Adoptions for Broker Dealers
- A change to the Customer Protection Rule that would require certain Broker Dealers to increase the frequency of computations of net cash owed to customers or other Broker Dealers from weekly to daily.
- Amendments that require electronic filing, submission, or posting of materials required under the Securities Exchange Act and also change requirements related to the FOCUS report.
- A Proposal to increase the risk management and resilience of covered clearing agencies.
Vigilant’s Conclusion
The SEC has showed no intention of reducing the number of rules and amendments being adopted as we begin 2024.
As the regulatory framework increases the burden on compliance programs across the industry, it is vital that Firms are prepared to handle this dynamic environment.
A proactive compliance mindset can lay a strong foundation that allows your compliance department to adjust properly to new rules and amendments.
In such an aggressive regulatory climate, partnering with dedicated compliance professionals can be a cost-effective solution that potentially reduces regulatory burden.
Reach out to Vigilant today to discuss how to best prepare for 2024.