Recent SEC activity includes the following:
Swap execution. The SEC proposed rules creating a regulatory regime for security-based swap execution facilities. Proposed Regulation SE (17 CFR 242.800 through 835) establishes a process for SBSEF registration and regulation, establishes execution methods, implements the 14 core principles for these entities spelled out in Exchange Act Section 3D(d) and addresses cross-border matters and conflicts of interest. A registered SBSEF must, among other requirements, register with the Commission on Form SBSEF and submit filings for rule and rule amendments and for product listings. The proposed rules affirm that an SBSEF is also a broker under the Exchange Act but exempt it from certain broker requirements.
SPACS. The SEC proposed new rules and amendments concerning disclosures related to SPACs, shell companies, and projections. New subpart 1600 of Regulation S-K would set forth specialized disclosure requirements in connection with initial public offerings by SPACs and in connection with de-SPAC transactions. The release also proposes amendments to forms and schedules to align the disclosures provided in de-SPAC transactions with those in traditional public offerings. A new Article 15 of Regulation S-X would more closely align the financial statement reporting requirements in business combinations involving a shell company and a private operating company with those in traditional initial public offerings; new rule 145a would provide shell company shareholders with protections under the Securities Act. The new rules also address issues relating to projections made by SPACs and their target companies. Finally, the proposed rule would provide a safe harbor from the Investment Company Act's definition of "investment company" for SPACs satisfying certain conditions.
Technical amendments. The SEC adopted technical amendments to correct typographical errors and erroneous cross-references, and to clarify instructions. Corrections are made to rules and forms under the Securities Act, the Investment Company Act, and the Investment Advisers Act. Several of the amendments update or correct cross-references to rules or provisions. The release also updates a number of forms to clarify instructions and to make typographical and other corrections, including removing outdated information.
Dealer-trader definition. The SEC proposed rules regulating significant market participants as "dealers." The rules would require certain market participants to register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws and regulatory obligations, including as applicable, SEC, SRO, and Treasury rules and requirements. In particular, the proposal addresses firms that assume certain dealer functions, including proprietary (or principal) trading firms. New Exchange Act rules 3a5-4 and 3a44-2 would further define the phrase "as a part of a regular business" in Sections 3(a)(5) and 3(a)(44) of the Act to identify certain activities that would cause persons engaging in such activities to be "dealers" or "government securities dealers" and subject to the registration requirements of Sections 15 and 15C of the Act, respectively.
References to credit ratings. The SEC proposed amendments that would remove references to credit ratings from Regulation M. Rules 101(c)(2) and 102(d)(2) currently except nonconvertible debt securities, nonconvertible preferred securities, and asset-backed securities that are rated investment grade by at least one NRSRO. The amendments propose to eliminate the Rule 102 exception. For the Rule 101 exception, the proposal would replace the credit-rating requirement with requirements that the nonconvertible debt securities and nonconvertible preferred securities meet a specified probability of default threshold, and that the asset-backed securities be offered pursuant to an effective shelf registration statement filed on the Commission’s Form SF-3.
Climate-related disclosures. The SEC issued proposed rule amendments to requiring climate-related information. Domestic and foreign registrants would be required to include certain climate-related information in registration statements and periodic reports, including: governance and risk management; the likelihood of a material impact by identified risks on the registrant’s business and financial statements; effects of identified risks on the registrant’s strategy, business model, and outlook; and the impact of climate-related events and transition activities on the line items of a registrant’s consolidated financial statements. A registrant would also be required to disclose its direct and indirect greenhouse gas emissions (Scope 1 (direct), Scope 2 (indirect), and Scope 3 (upstream and downstream activities)). The proposed rules would include a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, and an additional phase-in period for Scope 3 emissions disclosure.
EDGAR update. The SEC has adopted amendments to the EDGAR Filer Manual. The updates to Filer Manual, Volume I: "General Information," Version 40 (March 2022) will be amended to add a link to the Glossary of Commonly Used Terms, Acronyms, and Abbreviations. Amendments to Volume II: "EDGAR Filing," Version 61 (March 2022) and related rules and forms reflect changes including: a new submission form type to EDGARLink Online: 497VPSUB; updates to allow filers to pay filing fees via credit card, debit card, and Automated Clearing House (ACH) debit payment methods; support for the 2022 Variable Insurance Product (VIP) Taxonomy; and a new "Filing pursuant to a Commission substituted compliance order" check box. The EDGAR system was upgraded on March 21, 2022, and the updated Filer Manual volumes are incorporated by reference into the Code of Federal Regulations.
Cybersecurity incident reporting. The SEC proposed rule amendments requiring public companies to report cybersecurity incidents. The proposal would add Item 1.05 to Form 8-K (and make related amendments to other rules and forms) requiring the disclosure of a material cybersecurity incident within four business days after an incident is determined to be material; new Item 106(d) of Regulation S-K would require updated disclosures of previously disclosed incidents. New Item 106 would also require a registrant to describe its policies and procedures for managing risks from cybersecurity threats and to make disclosures regarding the board and management's role and expertise in assessing and managing those risks. Amendments to Item 407 of Regulation S-K and Form 20-F would require disclosure regarding board member cybersecurity expertise.
CAT amendments. The Commission published notice of proposed amendments to the National Market System Plan Governing the Consolidated Audit Trail. The amendment would require CAT reporting firms to report “buy to cover” information to CAT. The proposed amendments also include a provision requiring each reporting firm to indicate where it is asserting use of the bona fide market making exception under Regulation SHO. The amendments are proposed in conjunction with Release No. 34-94313: Short Position and Short Activity Reporting by Institutional Investment Managers (February 25, 2022).
Short sale disclosure. The SEC proposed a new rule and form intended to increase the availability of short sale related data. Under new Exchange Act rule 13f-2, institutional investment managers that meet or exceed a specified reporting threshold would be required to file confidential Proposed Form SHO with the Commission via EDGAR, within 14 calendar days after the end of each calendar month, with regard to each equity security and all accounts over which the thresholds are exceeded. Proposed Rule 205 of Regulation SHO would establish a new "buy to cover" order marking requirement if the purchaser has any short position in the same security at the time the purchase order is entered.
Private fund advisers. The SEC proposed rules enhancing the regulation of private fund advisers. The rules would require registered private fund advisers to provide investors with quarterly statements detailing information about private fund performance, fees, and expenses. The advisers would also be required to obtain an annual audit for each private fund. Next, all private fund advisers would also be prohibited from providing certain types of preferential treatment that have a material negative effect on other investors; other types of preferential treatment are prohibited unless disclosed to investors. Certain activities and practices (e.g., certain fees, expenses, reimbursements, and clawbacks) would also be barred. The proposal would require obtaining a fairness opinion in connection with an adviser-led secondary transaction. Additional conforming amendments would be made to the books and records and compliance rules.
Regulation ATS. The SEC proposed amendments to include Treasury markets platforms within Regulation ATS. First, the proposed amendments would expand Regulation ATS for alternative trading systems that trade government securities, NMS stock, and other securities. The proposed amendments would no longer exempt from Regulation ATS those ATSs that limit securities activities to government securities or repurchase agreements or reverse repurchase agreements on government securities and register as broker-dealers or are banks. The proposal would also require the ATSs to file additional public disclosures, depending on whether they trade government securities, NMS stock, or other types of securities. In addition, all ATSs subject to the Fair Access Rule would need to have written standards for granting, limiting, or denying access to their services. The proposal also expands Regulation SCI to government securities, applying it to ATSs that meet certain volume thresholds in U.S. Treasury Securities or Agency Securities. The proposed amendments would also include Communication Protocol Systems within the definition of "exchange" by amending "exchange" under Rule 3b-16 to include systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities.
Filing fee disclosure and payment. The SEC adopted amendments modernizing filing fee disclosure and payment methods. The amendments affect most fee-bearing forms, schedules, statements, and related rules to require each fee table and accompanying disclosure to include all required information for fee calculation in a structured format. The amendments also add the option for fee payment via Automated Clearing House and debit and credit cards and eliminate the option to pay via paper checks and money orders. With the amendments, filers will find filing fee information in a single location with a structured format that will allow for the quick identification and correction of errors while eliminating the need for filers to enter duplicate fee information in the header and the body of the filing, to avoid the possibility of inconsistent data entry.
Please see the SEC Regulation Tracker for proposal comment deadlines and final rule compliance dates.
Please see the CFTC Regulation Tracker for final CFTC rule compliance dates.
Private fund advisers. The SEC proposed rules enhancing the regulation of private fund advisers. The rules would require registered private fund advisers to provide investors with quarterly statements detailing information about private fund performance, fees, and expenses. The advisers would also be required to obtain an annual audit for each private fund. Next, all private fund advisers would also be prohibited from providing certain types of preferential treatment that have a material negative effect on other investors; other types of preferential treatment are prohibited unless disclosed to investors. Certain activities and practices (e.g., certain fees, expenses, reimbursements, and clawbacks) would also be barred. The proposal would require obtaining a fairness opinion in connection with an adviser-led secondary transaction. Additional conforming amendments would be made to the books and records and compliance rules.
Regulation ATS. The SEC proposed amendments to include Treasury markets platforms within Regulation ATS. First, the proposed amendments would expand Regulation ATS for alternative trading systems that trade government securities, NMS stock, and other securities. The proposed amendments would no longer exempt from Regulation ATS those ATSs that limit securities activities to government securities or repurchase agreements or reverse repurchase agreements on government securities and register as broker-dealers or are banks. The proposal would also require the ATSs to file additional public disclosures, depending on whether they trade government securities, NMS stock, or other types of securities. In addition, all ATSs subject to the Fair Access Rule would need to have written standards for granting, limiting, or denying access to their services. The proposal also expands Regulation SCI to government securities, applying it to ATSs that meet certain volume thresholds in U.S. Treasury Securities or Agency Securities. The proposed amendments would also include Communication Protocol Systems within the definition of "exchange" by amending "exchange" under Rule 3b-16 to include systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities.
Filing fee disclosure and payment. The SEC adopted amendments modernizing filing fee disclosure and payment methods. The amendments affect most fee-bearing forms, schedules, statements, and related rules to require each fee table and accompanying disclosure to include all required information for fee calculation in a structured format. The amendments also add the option for fee payment via Automated Clearing House and debit and credit cards and eliminate the option to pay via paper checks and money orders. With the amendments, filers will find filing fee information in a single location with a structured format that will allow for the quick identification and correction of errors while eliminating the need for filers to enter duplicate fee information in the header and the body of the filing, to avoid the possibility of inconsistent data entry.
Please see the SEC Regulation Tracker for proposal comment deadlines and final rule compliance dates.
Please see the CFTC Regulation Tracker for final CFTC rule compliance dates.