Page 33 - Investment Advisor February/March 2023

THE PLAYING FIELD

By Melanie Waddell

Here Are the Big Rules on the SEC’s

2023 To-Do List

Advisor custody regs are a priority this year, along with a few controversial rules.

he Securities and Exchange to Gail Bernstein, general counsel for
Commission plans to propose the Investment Adviser Association
Tand finalize some big rules in in Washington.
2023 — some of which are very unpopular Over the past 12 months, Bernstein
with advisors. The agency’s just-released told me, the IAA “has responded to
regulatory flexibility agenda sets out the SEC proposals relating to cybersecurity,
securities regulator’s planned rulemak- outsourcing, private fund advisers, ESG,
ing schedule for the year. However, reg beneficial ownership reporting, short-
flex agendas are placeholders and the ening the settlement cycle and more.”
SEC’s rulemaking agenda can change The proposals, Bernstein said, “impose
throughout the year. new substantive requirements and also
For instance, proposals on the fund implicate new regulatory reporting,
fee disclosure and reform rule — which recordkeeping, and disclosure. Their
will likely rein in 12b-1 fees — along with cumulative impact will place tremendous
the custody rule were expected last year strain on compliance resources at firms,
“Their cumulative but have been pushed to 2023. “The rule- in terms of time, expense, and personnel.”
What’s more, Bernstein continued,
impact will place making focus on advisers and funds is the “there’s also no consideration of wheth-
common theme” for the SEC this year,
tremendous strain on notes Amy Lynch, president and founder er all these proposed requirements are
internally consistent or duplicative, or
of FrontLine Compliance. “It will be a
compliance resources busy year for advisor compliance.” how they would work together, which
Despite pushback, the agency plans
at firms, in terms to move ahead with its rule to prohibit adds to the complexity that firms will
have to work through.”
of time, expense, RIAs from outsourcing certain servic- The outsourcing rule, adds Lynch,
and personnel.” es and functions without conducting “has gotten pushback but so has the pri-
vate funds rule and yet they have that one
due diligence and monitoring of the
—Gail Bernstein service providers. listed as in final stages. That is a surprise.”
Also, “some of the cyber rules are still
In releasing the agenda on Jan. 4, SEC
Chairman Gary Gensler stated that he in proposal and others in final,” Lynch
supports the agency’s short- and long- said. “That seems odd as it would make
term agenda “as it reflects the need to more sense to move forward in tandem
modernize our ruleset, moving delib- on that topic. ESG and the short sale rules
erately to update our rules in light of are in final stages, which is expected.”
ever-changing technologies and busi- See the summary below for a list of
ness models in the securities markets.” rules the agency plans to tackle this year.
Gensler added: “Our ability to meet
our mission depends on having an up-to- 1. Custody Rules for RIAs
date rulebook —consistent with our man- The agency plans to consider in April mod-
date from Congress, guided by economic ernizing the regulations around the custo-
analysis, and shaped by public input.” dy of client assets by investment advisors.
Gensler has an “ambitious” rule- Issa Hanna, partner at Eversheds
making docket this year, according Sutherland in New York, said he hoped

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