Who may be interested: Registered Investment Companies, Registered Investment Advisers, Broker-Dealers, Compliance Staff, Boards of Directors
Quick Take: The SEC has formally withdrawn a number of proposed rules issued in 2022 and 2023.
The SEC recently announced the withdrawal of rulemaking proposals issued under the prior administration. In total, the SEC has withdrawn fourteen rule proposals covering a wide range of topics, such as artificial intelligence, environmental, social and governance investment practices (ESG), cryptocurrency, and custody. Several of the more significant withdrawn rule proposals are discussed below.
One key rule proposal that was withdrawn addressed cybersecurity risk management. The proposed rules and amendments would have required registered investment advisers, investment companies and business development companies: (i) to adopt and implement written policies and procedures to address risks relating to cybersecurity, (ii) to disclose information about potential risks and incidents, (iii) to report information confidentiality to the SEC about certain cybersecurity issues, and (iv) to maintain a comprehensive set of records related to cybersecurity.
The SEC also withdrew its proposal to require investment advisers to perform due diligence on any third-party the adviser relied upon to provide investment advice, such as index providers and pricing services.
Another withdrawn proposal would have required investment advisers and investment companies to provide additional disclosures regarding the use of ESG factors in their investment processes. The SEC also withdrew a proposal to modify certain provisions of the custody rule along with proposed requirements addressing how investment advisers safeguard client assets.
Additionally, the SEC withdrew a proposal related to artificial intelligence, which had been pending for nearly two years and would have created new requirements for investment advisers and broker-dealers that use artificial intelligence and predictive data analytics in their operations.
The SEC indicated that if it decides to pursue future regulatory action in any of the areas covered by the withdrawn proposals, it will issue new proposed rules.
The SEC’s notice of the withdrawal of the rule proposals can be found here.