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6 Big Rules the SEC Finalized in 2023

By Melanie Waddell

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The Securities and Exchange Commission lived up to its promise of passing some pretty big rules in 2023, with more likely on tap to get the commission’s approval in 2024.

Karen Barr, president and CEO of the Investment Adviser Association in Washington, told ThinkAdvisor in a recent interview that the rules passed this year include an “incredibly challenging if not impossible timeline” for implementation.

A couple of controversial rules that were on the SEC’s plate this year didn’t get finalized, including the custody/safeguarding rule and the agency’s rule to address predictive data analytics.

The custody/safeguarding rule “is an extremely complicated rule proposal with significant impacts on advisors and recordkeepers,” Barr said.

The SEC understands “how complex and unworkable some of the specific requirements are,” she added. The agency is “going to take their time to get it right.”

The predictive data analytics rule, meanwhile, “is really a mess,” Barr opined. The plan, intended to reduce conflicts of interest tied to firms’ use of artificial intelligence, would have “an impact on every single investmetnt advisor whether or not they use AI,” and the SEC should withdraw it, she said.

A cybersecurity rule for advisors, meanwhile, will likely get SEC approval soon in the new year, Barr relayed.

See the gallery for the six big rules the agency approved in 2023.

1. Shortening the Securities Transaction Settlement Cycle (T+1)

Approved: Feb. 15

The rule amendments shortened 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).

The compliance date for the rule is in May 2024, earlier than IAA thought it should be, according to Barr. The rule “is a big deal,” she said.

2. Form PF Amendments

Approved: May 3

The agency adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisors to private funds.

Private funds managed by RIAs “hold approximately $21 trillion of gross assets, including $20 trillion reported on Form PF — nearly the size of the $23 trillion U.S. commercial banking sector,” SEC Chairman Gary Gensler said at the time.

The final rule requires, for the first time, that large hedge fund and private equity fund advisors make current reports on certain events to the commission.

3. Money Market Funds

Approved: July 12

The rule removes the liquidity fee and redemption gate provisions in the previous rule, and  requires certain money market funds to implement swing pricing policies and procedures. The commission also increased the minimum liquidity requirements for money market funds, as well as reporting and disclosure amendments.

4. Cybersecurity

Approved: July 26

The new rule requires public companies to disclose a material cybersecurity incident on Form 8-K within four business days of it being deemed material.

5. Private funds

Approved: Aug. 23

The new rules ”protect investors who directly or indirectly invest in private funds by increasing visibility into certain practices involving compensation schemes, sales practices, and conflicts of interest through disclosure.”

Several private fund industry groups filed an action in federal appellate court challenging the rules, which they say fundamentally interfere with the relationship between fund managers and the sophisticated limited partners in private equity, venture capital and hedge funds.

6. Investment Company Names

Approved: Sept. 20

The sweeping changes address certain broad categories of investment company names that are likely to mislead investors about investments and risks.

Investment company names include those of mutual funds, ETFs and business development companies. The number of funds that are now subject to the rule increases to 10,300 from 8,100.

Fund groups with net assets of $1 billion or more have 24 months to comply with the amendments, and fund groups with net assets of less than $1 billion have 30 months to comply.

The rule’s 80% investment policy requirement applies to any fund name with terms suggesting that the fund focuses on investments that have, or investments whose issuers have, particular characteristics.

Melanie Waddell

@Think_MelanieW

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