Our Take: financial services regulatory update – March 21, 2025
Change remains a constant in financial services regulation. Read "our take" on the latest developments and what they mean.
Current topics – March 21, 2025
- 1. SEC Acting Chair outlines agenda at investment management conference
- 2. OCC to remove reputation risk from examinations
- 3. CDFI Fund activities under review
- 4. FinCEN focuses on southwest border
- 5. On our radar
1. SEC Acting Chair outlines agenda at investment management conference
- What happened? On March 17th, SEC Acting Chair Mark Uyeda gave a speech at the Investment Company Institute’s Investment Management Conference, setting forth his views on how the agency should reform its rulemaking process, review existing rules, promote efficiency, set enforcement priorities and support innovation, particularly with regard to investment managers.
- What did Uyeda say? Uyeda suggested changes in the following areas:
- Reforming the rulemaking process. Criticizing “rulemaking shortcuts” taken by the agency under the previous Administration, Uyeda called for adhering to a 60-day minimum comment period for proposed rules rather than the 30- or 45-day comment periods over the past four years. Prior to issuing proposals, Uyeda stated that the agency will engage in more public engagement including through requests for information, concept releases and public roundtables. He also noted that he has asked SEC staff to develop recommendations on amending the definition of “small” entities, currently defined as those with net assets of $50 million or less, when considering how they will be impacted as part of a cost-benefit analysis.
- Reviewing existing rules. Uyeda suggested withdrawing or reproposing certain existing proposals that may not “prioritize effective and cost-efficient regulations that respect the limits of statutory authority,” including proposals around safeguarding advisory client assets, outsourcing by investment advisers, ESG disclosures and digital engagement practices. He specifically noted that he has directed SEC staff to work closely with the crypto task force to consider alternatives to the safeguarding proposal and to develop recommendations around reproposing N-PORT reporting requirements.
- Promoting efficiency. Uyeda stated that he would like to explore how firms can trim their summary prospectuses to 3-4 pages as opposed to the “bloated 12-15 pages often seen today.” He also expressed his support for changes to require funds to deliver concise information directly, with additional detail available online for those that want additional information.
- Protecting seniors. Regarding enforcement priorities, Uyeda highlighted fraud targeting seniors as a particular priority. He explained that illicit actors have become much more sophisticated and technological in recent years and exploit seniors’ use of smartphones and social media.
- Supporting innovation. Uyeda called for a flexible approach to facilitate innovation, including through an exemptive application process under which the SEC can review new ideas from market participants. In particular, he highlighted the ability for funds to offer both mutual fund and ETF share classes. He also highlighted the need for innovative products to help manage retirement finances.
- What’s next? On March 27th, the Senate will consider Paul Atkins’ nomination to be SEC Chair.
Our Take
Uyeda has set the SEC’s direction. Although he is only in an Acting Chair capacity, Uyeda has charted a course that is in line with the Administration’s priorities and will likely be continued by Paul Atkins once he is confirmed as Chair. The tone struck by Uyeda is a sharp contrast to that of the previous Administration, sending a message to the industry that the agency has opened its doors for discussion, feedback and engagement. Firms were encouraged to consider engaging in dialogue with the SEC around recent rulemaking and other activity that have created pain points and operational difficulties. As part of this effort to engage in dialogue with the industry, we expect to see the agency work with firms that sponsor mutual funds on a path for “retail-ization” of alternatives, such as inclusion of private equity, credit, and other private funds within ’40 Act mutual funds. The SEC will also likely grant more deference to mutual fund boards of trustees.
More changes on the way. In addition to the rule changes Uyeda mentioned in his speech (detailed above), we also expect that the SEC will revisit its proxy rules and allow for electronic delivery of mutual fund filings. While Uyeda’s remarks were targeted toward investment managers, his speech provides an early indication of broader SEC strategy that will affect rulemakings for broker-dealers and securities-based swap dealers.
Focus will remain on fraud. The new direction of the SEC does not mean that the agency will slow down its enforcement related to instances of investor harm. In fact, Uyeda’s comments on senior financial exploitation suggest a reinvigorated focus in this area, both for protecting seniors from scams and from investment advice that from firms with undisclosed conflicts of interest. As such, firms should ensure that they maintain their practices to prevent and detect investor harm and confirm that their senior financial exploitation practices are up-to-date. To do so, they should review the December 2024 Interagency Statement on Elder Financial Exploitation to understand whether their program adheres to best practices.
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