United States: The SEC “Flexes” Its (De)Regulatory Agenda

By: Jennifer L. Klass, Lance C. Dial, and Pablo J. Man

The SEC’s latest regulatory agenda has officially been unveiled, and according to Chair Atkins the “regulatory agenda reflects that it is a new day” at the SEC. The regulatory agenda not only aims to clarify the regulatory framework for cryptocurrencies but also focuses on proposals to reduce compliance burdens and facilitate capital formation, including by providing investor access to private businesses.

Although Chair Atkins noted that a key priority is, “clear rules of the road for the issuance, custody, and trading of crypto assets,” the SEC’s approach to custody appears to extend beyond crypto assets. The agenda includes potential amendments to both the Advisers Act and the 1940 Act custody rules to “improve and modernize” regulations for the custody of advisory client and fund assets.

The regulatory agenda also contemplates amendments to Rule 17a-7 under the 1940 Act, which permits registered funds to effect cross trades, but since the adoption of Rule 2a-5 under the 1940 Act (regarding mutual fund valuation practices) has not been available for cross trading fixed income securities.

The regulatory agenda reflects the SEC’s significant focus on facilitating capital formation and reducing compliance burdens, for example, by expanding exempt offerings for private companies, increasing the ability to rely on the Rule 144 safe harbor for the public resale of restricted or control securities, modernizing the shelf registration process, and rationalizing disclosure practices for public companies. 

The publication of final rules on AML customer identification programs for investment advisers is also on the list.