The SEC has published its semi-annual Fall 2024 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.
The Agenda is broken down by (i) Proposed Rule Stage; (ii) Final Rule Stage; and (iii) 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 30, down from 34 on the Spring 2024 Agenda and 43 on the Fall 2023 Agenda. Many in the industry believe the light Agenda signifies a decision to wait until after the election to push forward new items and I suspect the Spring 2025 Agenda will have significant changes.
Thirteen items are included in the proposed rule stage. New to the Agenda are proposed changes to modernize Foreign Private Issuer’s (FPIs) reporting obligations. The Agenda does not provide specifics as to what these updates may entail. I recently wrote a series of blogs detailing FPI reporting requirements – see HERE; HERE; HERE; and 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.
Still on the proposed list in the ESG category are corporate board diversity and human capital disclosure – although I suspect human capital will be removed on the Spring 2025 agenda and corporate board diversity is moot at this point. Although the SEC enhanced human capital disclosure requirements as part of its Item 101 of Regulation S-K (description of business) amendments, it has been considering rule amendments to further enhance the disclosure requirements. For a discussion on the evolving human capital disclosure requirements, see HERE. Corporate board diversity has been another hot topic and Nasdaq adopted its own board diversity rules in August 2021 – see HERE) which was subsequently overturned by the 5th Circuit Court and then withdrawn completely by Nasdaq (see HERE). I do not expect to see any new DEI measures over the next four years.
As another example of shifting priorities, 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 indicating a revisit and has remained there since. However, as time goes by, it has clearly lost priority and will likely fall off the list in the coming Agendas.
Remaining on the proposed 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). It would be nice to see the SEC finally move forward with some changes here. In December 2024, the SEC settled three enforcement actions for failing to timely file Form D’s signifying an increased interest in the market intel these Form filings provide – 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.
Also, still on the proposed list after spending some time in the final rule stage, is digital engagement practices for broker-dealers and investment advisors including gamification. Proposed rules would relate to broker-dealer and investment advisor conflicts in the use of predictive data analytics, artificial intelligence, machine learning, and similar technologies in connection with investor interactions.
Other items still on the proposed list include incentive-based compensation arrangements related to financial institutions with $1 billion or more in total assets; fund fee disclosure and reform for registered investment companies (which was new to the Agenda in Spring 2022); and potential amendments to the listing and trading rules for Exchange-Traded Products.
In a perfect example of how regulatory matters can jump around, still on the proposed rule list are amendments to the custody rules for investment advisors (safeguarding advisory client assets) which moved from proposed to final last year and which had previously moved from proposed to long-term, back to proposed, back to long-term before jumping back to the proposed rule stage.
The newest Agenda has 17 items in the final rule stage, down from 19 on the Spring list and 29 on the last Fall list.
In what is surely to be some whipsawing, remaining in 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. The new administration will assuredly make some progress in this sector.
In the environmental, social and governance (ESG) category, proposed amendments to the Investment Advisers Act of 1940 and Investment Company Act of 1940 to require investment companies and investment advisers to provide additional information regarding their ESG investment practices, including enhanced disclosure of ESG issues to clients and shareholders remain on the final rule list. Although substantive ESG matters are not likely to be a priority moving forward, disclosures to prevent priority misrepresentations should not be tempered.
Remaining in the final rule stage are proposed rules to establish data standards to promote interoperability of financial regulatory data across numerous agencies including the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Consumer Financial Protection Bureau, Federal Housing Finance Agency, Commodity Futures Trading Commission, Securities and Exchange Commission, and Department of the Treasury.
Continuing in the final rule stage are amendments to require that market entities, including broker-dealers, clearing agencies and national exchanges, to address cybersecurity risks, to improve the SEC’s ability to obtain information about significant cybersecurity incidents impacting market entities, and to improve transparency about cybersecurity risk in the U.S. securities markets; and rules to enhance fund and investment adviser disclosures and governance relating to cybersecurity risks; the matter of outsourcing by investment advisors and rules related to the oversight of third-party service providers; and 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 all on the EDGAR database.
Moving from the proposed list to the final rule stage are proposed rules to include certain investment advisors as “financial institutions” under the Bank Secrecy Act such that these advisors will need to implement procedures to verify the identities of their customers. The proposed rule is an extension of the “know your customer” philosophy but in this case designed to intercept and obstruct terrorism. Also moving from proposed to final is amendments to Regulation ATS to modernize the conditions to the ATS exemption for all ATSs.
Still in the final rule stage are amendments to Exchange Act Rule 3b-16 regarding the definition of “Exchange” which were proposed in April 2023; and amendments to Rule 15c3-3 (the customer protection rule) to require that certain large broker-dealers compute their customer and PAB reserve deposit requirements daily rather than weekly; amendments to the NMS Plan for the consolidated audit trail data security; amendments to certain rules of Regulation NMS to adopt variable minimum pricing increments for the quoting and trading of NMS stocks, reduce the access fee caps, and enhance the transparency of better-priced orders; and amendments to Regulation NMS to prohibit a restricted competition trading center from internally executing certain orders of individual investors at a price unless the orders are first exposed to competition at that price in a qualified auction operated by an open competition trading center. The rule would also include limited exceptions to this general prohibition.
Also still in the final stage are 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); and 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.
Holding steady in the final rule stage is conflicts of interest for clearing agencies of security-based swaps including regarding the registration and regulation of security-based swap execution facilities (“SBSEFs”); and rules related to the disclosure of order execution.
Although amendments to requirements for filer validation and access to the EDGAR filing system and simplification of EDGAR filings are still listed in the final rule stage, the final rules were adopted on September 24, 2024 – see HERE.
Only six items are listed as long-term actions. 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); and amendments to the transfer agent rules. New to the list are proposed credit rating agency amendments to add conflicts of interest and other transparency disclosures; and certain information providers acting as investment advisors.
Per usual, several items fell off the list either because they are no longer a priority or the rulemaking process has been completed.
Although a complete list of the dropped rules is unnecessary, there are a few worthy of pointing out. For the first time in years, many rules related to swaps have dropped from the list including amendments related to the prohibition against fraud, manipulation, and deception in connection with security-based swaps and disclosure of security-based swap positions; and rules addressing the registration and regulation of security-based swap execution facilities.
The most controversial item which is no longer on the Agenda due to final rulemaking 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. Two years later on March 6, 2024, the SEC adopted final rules. I have not reviewed these final rules because soon after adoption, a flurry of litigation ensued, prompting the SEC to stay the rule changes pending the court battles. I suspect the rules will never be enacted.
Another big-ticket item which has been removed from the Agenda are the new rules governing special purpose acquisition companies (SPACs), shell companies and the use of projections. The final rules were adopted on January 24, 2024 and went into effect on July 1st. My whopping ten part blog 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; Part 8 – HERE; Part 9 – HERE; and Part 10 – HERE.
Other completed rules that have been removed from the list include amendments to the definition of a “dealer” – see HERE; and final amendments to the beneficial ownership reporting requirements under Section 13 – see HERE and HERE
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, 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, Linder & Cacomanolis, 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 ALC 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.
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Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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