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SEC Fall 2022 Regulatory Agenda

On January 4, 2023, the SEC published its semiannual Fall 2022 regulatory agenda (“Agenda”) and plans for rulemaking.  The Unified Agenda of Regulatory and Deregulatory Actions contains the Regulatory Plans of 28 federal agencies and 68 federal agency regulatory agendas.  My favorite Commissioner, Hester M. Peirce, was quiet about the agenda, not issuing a public statement this time.  Upon publication of the Spring 2022 Agenda, Commissioner Peirce ripped the Agenda as being disconnected with the SEC’s core mission and as being focused on special interest groups instead of a broad range of market participants.  The Agenda is published twice a year, and for several years I have blogged about each publication.

The Agenda is broken down by (i) “Pre-rule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions.  The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that.  The number of items to be completed in a 12-month time frame is 52, close to the 53 items that were on prior Agenda (but much higher than the average 32 items under the Jay Clayton SEC).  Many of the new items are a revisit of previously passed rule changes.

Items on the Agenda can move from one category to the next or be dropped off altogether.  New items can also pop up in any of the categories, including the final rule stage showing how priorities can change and shift within months.  As with the Spring Agenda, there are no items listed in the pre-rule stage.  As many of the proposed items are in fact in the pre-rule stage, it seems the SEC has just changed its usually categorization.

Twenty-three action items are included in the proposed rule stage, down from the 27 on the Spring 2022 list.  The list includes some brand-new topics as well as several from the Spring list.  New to the Agenda and appearing on the proposed list are amendments to the rules of practice, including updating the process for service of SEC Orders Instituting Proceedings to align with the federal court process.  Also new are proposed amendments to the Privacy Act (i.e., Freedom of Information Act or “FOIA”) to update and simplify the processes for submitting and receiving responses to Privacy Act inquiries, requests, and administrative appeals.  It is unclear if any rule changes would impact confidential treatment requests in SEC filings, which, in turn relies on the standards in FOIA.  See more on confidential treatment HERE.

Also new to the Agenda and appearing on the proposed list is the matter of outsourcing by investment advisors.  The SEC is considering proposing rules related to the oversight of third-party service providers.  Likewise, clearing agency recovery and wind-down is new to the list.

Still on the proposed list in the ESG category are corporate board diversity and human capital disclosure.  Although the SEC enhanced human capital disclosure requirements as part of recent Item 101 of Regulation S-K (description of business) disclosures (see HERE), it is now considering rule amendments to further enhance the disclosure requirements.  See also here for more discussion on the evolving human capital disclosures two years after the rule change – HERE.  Corporate board diversity is another hot topic and Nasdaq adopted its own board diversity rules in August 2021 – see HERE) which was recently amended to extend the compliance deadlines – see HERE.

Still in the proposed rule stage are the controversial amendments to the Rule 144 holding period and Form 144 filings.  In December 2020, the SEC surprised the marketplace by proposing amendment to Rule 144, which would prohibit the tacking of a holding period upon the conversion of variably priced securities (see HERE).  The responsive comments have been overwhelmingly opposed to the change.  Many of the opposition comment letters are very well thought out and illustrate that the proposed change by the SEC may have been a knee-jerk reaction to a perceived problem in the penny stock marketplace.  I wholly oppose the rule change and hope the SEC does not move forward.  For more on my thoughts on the damage this change can cause, see HERE.

Revisions to the definition of securities held of record also remain on the proposed list.  Any proposal would relate to the definition for purposes of Section 12(g) of the Exchange Act.  For a review of the current rule, see HERE.

Continuing on the proposed list is equity market structure reform, including related to payment for order flow, order routing, conflicts of interest, best execution, market concentration, and the disclosure of best execution statistics.  Gary Gensler gave a heads-up that this was a priority in his May 6, 2021 speech to the House Financial Services Committee (see HERE).

As I brought up in my blog related to the Spring 2022 Agenda, the SEC is revisiting many rules that were implemented by the prior administration.  Keeping with that redo trend, the disclosure of payments by resource extraction issuers (proposed rules published in December 2019 – see HERE) and finalized in December 2020 (see HERE) was moved to the proposed list in Spring 2022 and remains there in the newest Agenda.

Still on the proposed rule list are changes to Regulation D and Form D, including updating the financial thresholds in the accredited investor definition and “improving protections for investors.” I note that in August 2020, the SEC updated the definition of an accredited investor and specifically decided not to increase the financial thresholds (see HERE).

Also still on the proposed rule list are amendments to the custody rules for investment advisors, which have previously moved from proposed to long-term, back to proposed, back to long-term and has now held as proposed for a full year.  Still on the proposed list after moving from the pre-rule stage to a long-term action item is digital engagement practices for broker-dealers and investment advisors – i.e., gamification.  Under the gamification category, the SEC is considering seeking public comment on potential rules gamification, behavioral prompts, predictive analytics, and differential marketing.  Gary Gensler has been vocal about his concerns with gamification – see, for example HERE.

Other items remaining on the proposed rule list include open-end fund liquidity and dilution management; fund fee disclosure and reform for registered investment companies (which was new to the Agenda in Spring 2022); prohibitions of conflicts of interest relating to certain securitizations; exchange-traded products (which has been on the list for years); the electronic filing of broker-dealer annual reports, financial information sent to customers, and risk-assessment reports and the electronic filing by clearing agencies and security-based swap entities; and additional changes to expanding clearing of government securities.

Also still on the proposed rule list is cybersecurity risk governance, including potential amendments to Regulation S-P and Regulation SCI for broker-dealers and other registered market participants.  For more on Regulation SCI, see HERE.

Still on the proposed list is amendments to Regulation ATS to modernize the conditions to the ATS exemption for all ATSs. This includes considering recommending that the SEC propose requirements to promote pre-trade price transparency across asset classes.  Finally, on the proposed list, and the only Agenda item moving up from the long-term category, is amendments to requirements for filer validation and access to the EDGAR filing system and simplification of EDGAR filings.

In what I think is a record, 29 items are included in the final rule stage, up from just five in the Fall 2021 Agenda and 23 items in Spring.  Gary Gensler’s SEC is busy indeed.  Several items on the final rule list were already adopted prior to the Agenda’s newest publication.

One of the biggest ticket items appearing on the Agenda and remaining in the final rule stage is climate change disclosure.  On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports.  The rules are extremely robust and resulted in my longest blog series to date – eight segments.  I will not bore my regular readers with a rehash – but the entire series can be read here – Part 1 – HERE; Part 2 – HERE; Part 3 – HERE; Part 4 – HERE; Part 5 – HERE; Part 6 – HERE; Part 7 – HERE; and Part 8 – HERE.

Also, a big-ticket item, special purpose acquisition companies (SPACs) moved from the proposed list to the final rule stage.  On March 30, 2022, the SEC proposed rules enhancing disclosure requirements associated with SPAC initial public offerings (IPOs) and de-SPAC merger transactions; requiring that a private operating company be a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination; requiring a re-determination of smaller reporting company status within four days following the consummation of a de-SPAC transaction; amending the definition of a “blank check company” to make the liability safe harbor in the Private Securities Litigation Reform Act of 1995 for forward-looking statement such as projections, unavailable in filings by SPACs and other blank check companies; and deeming underwriters in a SPAC IPO to be underwriters in a de-SPAC transaction when certain conditions are met.  I wrote a six-part in-depth review of the proposed rules which can be read here – Part 1- HERE; Part 2 – HERE; Part 3 – HERE; Part 4 – HERE; Part 5 – HERE; and Part 6 – HERE.

Another hot topic amongst the SEC and marketplace has been share repurchase programs by public companies, including the potential that they unfairly benefit insiders selling into the upmarket created by the repurchase programs.  The SEC proposed rules on the topic in December 2021 – see HERE.

Remaining on the final rule list is cybersecurity risk governance, which could enhance company disclosure requirements regarding cybersecurity risk.  The SEC published the proposals in 2022 (see HERE) but there has been no movement since.  Cybersecurity actually appears three times on the Agenda, once in the proposed rule list described above and twice in the final stage, with the second related to rules to enhance fund and investment adviser disclosures and governance relating to cybersecurity risks.

Moving from the proposed rule stage to the final rule stage are amendments to the rules regarding the thresholds for shareholder proxy proposals under Rule 14a-8 which the SEC proposed in July 2022 (see HERE).  This topic has been painful for the regulatory system and market participants alike.  After years of discussion and debate, the SEC adopted much-needed rule changes in September 2020 (see HERE) but then issued new guidance that wiped out the three prior published guidance bulletins – see HERE.

Also moving from the proposed rule stage to the final rule stage are rules addressing conflicts of interest for clearing agencies of security-based swaps; and registration and regulation of security-based swap execution facilities.  Amendments to Rule 15b9-1 to narrow the availability of the FINRA membership exemption for broker-dealer exchange members that trade proprietarily elsewhere other than on an exchange of which they are a member has moved from a proposed item to the final rule stage.

Also in the final rule stage are amendments to the fund names rule; amendments to Form PF to require current reporting and amending the reporting requirements for large private equity advisers and large liquidity fund advisers and similar amendments for all filers; money market fund reforms; rules related to investment companies and investments advisors addressing environmental, social and governance factors; and potential rule changes to the Advisors Act to address lack of transparency, conflicts of interest, and certain other matters involving private fund advisers.

Remaining in the final rule stage are amendments to beneficial ownership reporting under Section 13 which were proposed in March, 2022 – see HERE.  The proposed amendments would accelerate the filing deadlines for Schedules 13D beneficial ownership reports from 10 days to 5 calendar days and require that amendments be filed within one business day; generally accelerate the filing deadlines for Schedule 13G beneficial ownership reports (which differ based on the type of filer); extend the filing deadline to 10:00 p.m. EST; expand the application of Regulation 13D-G to certain derivative securities; clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; provide new exemptions to permit certain persons to communicate and consult with one another, jointly engage issuers, and execute certain transactions without being subject to regulation as a “group”; and require that Schedules 13D and 13G be filed using XBRL.

Also remaining in the final rule stage is enhanced reporting of proxy votes by registered management investment companies and reporting on executive compensation votes by institutional investment managers; tailored shareholder reports, treatment of annual prospectus updates for existing investors, and improved fee and risk disclosure for mutual funds and ETFs as well as fee information in Investment Company ads; prohibition against fraud, manipulation, and deception in connections with security-based swaps and disclosure of security-based swap positions; removal of references to credit ratings from Regulation M; short sale disclosure reforms; and amendments to the NMS Plan for the consolidated audit trail data security; electronic recordkeeping requirements for broker-dealers and security-based swap dealers and major security-based swap participants.

Still in the final rule stage is company securities lending arrangements.  This rule would implement Section 984(b) of the Dodd-Frank Act.  Section 984 of the Dodd-Frank Act provides the SEC with the authority to increase transparency with respect to the loan or borrowing of securities.  The SEC proposed a rule to increase the transparency and efficiency of the securities lending market by requiring any person that loans a security on behalf of itself or another person to report the material terms of those securities lending transactions and related information regarding the securities the person has on loan and available to loan to a registered national securities association (“RNSA”).  The proposed rule would also require that the RNSA make available to the public certain information concerning each transaction and aggregate information on securities on loan and available to loan.

Shuffling around, amendments to Regulation ATS for the registration of and reporting by alternative trading systems (ATS) for government securities is still on the final rule list after having dropped from to proposed rule stage.  Proposed rules were published in January 2022.  Included in this category are also amendments to Exchange Act Rule 3b-16 regarding the definition of “Exchange.”

Also still in the final stage are amendments to the rules to shorten the standard settlement cycle.  The historical t+3 was shortened to t+2 back in March 2017 (see HERE) and many believe that technology can currently handle t+1 with a goal of reaching simultaneous settlement (t+0).  Further amendments to the definition of dealers are still in the final rule stage.  Proposed rules were published in March 2022 – see HERE.

Finally, items on the final list that have already been implemented include executive compensation clawback rules.  The clawback rules implement Section 954 of the Dodd-Frank Act and necessitate that national securities exchanges require disclosure of policies regarding and mandating clawback of compensation under certain circumstances as a listing qualification (see HERE).  This topic has been batting around since 2015.  Likewise, amendments to Rule 10b5-1 and in particular, a review of affirmative defenses available for insider trading cases remain on the final rule list but have been adopted (see HERE).

Only eight items are listed as long-term actions, the exact same as in Spring.  Continuing their tenure on the long-term action list is conflict minerals amendments; additional proxy process amendments; amendments to Rules 17a-25 and 13h-1 following creation of the consolidated audit trail (part of Regulation NMS reform); portfolio margining of uncleared swaps and non-cleared security-based swaps; and credit rating agencies’ conflicts of interest and transparency.

Amendments to the transfer agent rules also continues on the long-term list.  It has been four years since the SEC published an advance notice of proposed rulemaking and concept release on new transfer agent rules (see HERE).  Former SEC top brass suggested that it would finally be pushed over the finish line last year, but so far it remains stalled (see, for example, HERE).

Rounding out the long-term list is certain information providers acting as investment advisors and incentive-based compensation arrangements related to financial institutions with $1 billion or more in total assets.

Per usual, several items fell off the list, some worth noting and others not that interesting.  On June 3, 2022, the SEC adopted amendments to the EDGAR filing rules, including requiring the electronic filing of Form 144 (see HERE).  The EDGAR amendments appeared on the proposed list for Spring 2022.  Likewise, implementation of Dodd-Frank’s pay for performance, which had jumped from the long-term list where it had sat for years to the final rule stage in Spring 2021 then pushed down to proposed rule stage in Fall 2021 and final rule stage in Spring 2022, has dropped from the list after having been passed into law (see HERE).

Amendments to the proxy advisory rules dropped from the list as well after final rules were published (see HERE).  The new rules undo the recent rule change (see HERE), including removing conditions to the availability of certain exemptions from the information and filing requirements of the federal proxy rules for proxy voting advice businesses; amending the proxy rules’ antifraud provision to remove examples of situations in which the failure to disclose certain information in proxy voting advice may be considered misleading within the meaning of the federal proxy rules’ prohibition on material misstatements or omissions; and documenting the SEC’s view regarding the application of that prohibition to proxy voting advice, in particular with respect to statements of opinion.

Further amendments to exempt offerings, including Rule 701 and the integration rules, disappeared in Spring and remain off the list.  In 2018 the SEC amended Rule 701 and issued a concept release seeking comment on potential further proposals (see HERE and HERE).  Potential amendments to the reporting on proxy votes on executive compensation (i.e., say-on-pay – see HERE) are remain off the priority list.

The Author

Laura Anthony, Esq.
Founding Partner
Anthony L.G., PLLC
A Corporate Law Firm

Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony L.G., PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALG legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.

Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including siting on the board of directors of the American Red Cross for Palm Beach and Martin Counties, and providing financial support to the Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others. She is also a financial and hands-on supporter of Palm Beach Day Academy, one of Palm Beach’s oldest and most respected educational institutions. She currently resides in Palm Beach with her husband and daughter.

Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.

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