The Spring regulatory agenda the SEC released Sept. 4 confirmed that crypto, deregulation and innovative ways to increase capital formation will be the regulatory agency’s top priorities for 2025.
The new agenda includes just 23 pending or potential regulations for 2025, compared to the 34 items listed in the SEC’s Spring 2024 agenda, and includes fewer rule proposals directly targeting funds or fund boards than last year’s agenda.
The new list does go heavy on crypto and capital formation but there are some that could benefit the fund business, according to Carolyn McPhillips, president of MFDF (formerly the Mutual Fund Directors Forum).
Proposed amendments to rule 17a-7 of the 1940 Investment Company Act could allow much greater flexibility in securities transactions between funds and their affiliates, for example, McPhillips said.
“The new valuation rule interfered with a fund’s ability to engage in cross trades of fixed income securities,” McPhillips said. “A rule that would allow funds to regain this important flexibility would be welcome.”
Another fund-focused item on the list is an existing proposal to amend Form N-PORT to change the way funds report portfolio-related information is still on the list of proposed rules, as well.
The vast majority of items on the list are focused on the SEC’s mantra of “innovation, capital formation, market efficiency and investor protection,” however.
“The agenda covers potential rule proposals related to the offer and sale of crypto assets to help clarify the regulatory framework for crypto assets and provide greater certainty to the market,” SEC chair Paul Atkins said in his statement announcing the new agenda. “It also covers a number of envisioned deregulatory rule proposals to reduce compliance burdens and facilitate capital formation, including by simplifying pathways for raising capital and investor access to private businesses.”
The agenda also invites public comment on the Consolidated Audit Trail (CAT) that was a priority for the agency under previous SEC chair Gary Gensler, but was opposed, “rightly” Atkins said, due to concerns about the potential for rising costs and the risk of storing so much sensitive data in one place.
The new agenda also revives a previously shelved proposal to limit shareholder proposals under Rule 14a-8 to “reduce compliance burdens,” according to an analysis from law firm White & Case, which also noted the re-proposal of rules expanding Rule 144 safe harbor for resale of restricted and control securities.
The agenda no longer includes a proposal to regulate cybersecurity, “which had been the subject of a rulemaking petition” from SIFMA and several banking-industry associations, according to White & Case.
It also does not reflect the 14 rule proposals withdrawn by the SEC and a host of others that the agency has backed away from in ways that leave their status in doubt.
The SEC’s deregulatory approach and increasing emphasis on innovative ways to increase capital formation rather than protecting investors fall right in line with the goals of many in the investment industry, but undermine the SEC’s primary role of protecting investors, according to an Aug. 11 analysis of SEC policy changes by Benjamin Schiffrin, director of securities policy at Better Markets.
Those changes “would be sensible priorities if the job of the SEC Chair was to promote the interests of the financial industry, but the job of the SEC Chair is to protect investors,” Schiffrin wrote.
Under Atkins the SEC has become an advocate for the industry at the expense of its important role in protecting investors, Schiffrin said.
The most obvious examples are the agency’s “cheerleading” for the crypto industry and the constant drumbeat from Atkins and other SEC officials who want to allow mutual funds, investment funds and other public investment vehicles greater access to private markets despite their lack of transparency, higher costs and higher levels of risk, Schiffrin wrote.
“Chair Atkins recognizes the decline of the public markets and says he wants to do something about it should be a good thing, except that his plan seems to be to make the public markets more like the private markets,” Schiffrin wrote. “Instead of acknowledging that the reason the public markets have contracted is that the SEC has allowed the private markets to proliferate, he attributes the decline in the public markets to the ‘costs and headaches’ of being a public company. “
Atkins, who said in his announcement that his administration represents “a new day at the SEC” – a catch phrase he’s used frequently during public appearances, said the policy-level priority is to focus the SEC on efficient market growth and operation rather than what he called the regulatory oversteps of the previous administration.
“Importantly, the agenda reflects our withdrawal of a host of items from the last administration,” Atkins wrote. Changes and regulatory proposals the agency withdrew are those “that do not align with the goal that regulation should be smart, effective, and appropriately tailored within the confines of our statutory authority.”
