The Securities and Exchange Commission has formally withdrawn 14 major proposed rules in a continuation of its shift in priorities under the Trump Administration, Financial Advisor reports.
The SEC announced that is pulling back certain notices of proposed rulemaking issued between March 2022 and November 2023 during the term of former Chairman Gary Gensler under President Biden. The proposals had drawn strong opposition from many Republicans as well as investment advisors.
One of the rescinded rules was a 2022 proposal that would have required investment advisers, investment companies and other businesses, to provide disclosures regarding their investment practices involving environmental, social and governance factors.
Among the other proposals being withdrawn were in the following areas:
-Safeguarding client assets: A proposed revamp of custody rules for investment advisers;
-Cybersecurity: The rule would have required firms, investment advisers and broker/dealers to enhance cybersecurity defenses and report major incidents;
-Best execution and order competition: The proposals would have redefined how brokers ensure retail investors get the best deal on trades and how those trades are routed;
-Outsourcing by investment advisers: The rule would have prohibited advisers from outsourcing certain services or functions without “conducting due diligence,” and would have required the third-party data to be disclosed in Form ADV filings.
-Custody Rule: The proposal sought to expand the definition of custody to include assets like crypto and require written agreements with custodians, even in cases of discretionary authority.
-Predictive data analytics: This rule would have required broker-dealers and investment advisers to evaluate conflicts of interest arising from the use of predictive data analytics and to address such conflicts to ensure firms are not putting their own interests ahead of their investors’ interests.
While no reasons were given for the withdrawals, they were the latest sign of the SEC’s policy shift under new Chair Paul Atkins.
“We are withdrawing these proposals because, as noted above, we no longer intend to issue final rules with respect to these proposals,” the SEC stated in the notice. “If the commission decides to pursue future regulatory action in any of these areas, it will do so by publishing a new proposed rule or other issuance consistent with the requirements of the Administrative Procedure Act, as applicable.”
The SEC’s announcement was praised by those who had opposed the proposed rules in the investment advisory and financial services industries.
“This development is particularly noteworthy for investment advisers who have been preparing for potential compliance requirements tied to these rules,” the Bates Group, a regulatory compliance consultancy, said in a statement. “The withdrawals provide clarity and temporary regulatory relief, enabling firms to reallocate resources and adjust planning and budgeting accordingly.”
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