The Office of Information and Regulatory Affairs recently released the semi-annual, Fall 2023 regulatory agenda (“Agenda”). The Agenda outlines the SEC Chairman’s rulemaking priorities over the next 12 months. The Agenda continues to reflect a focus on finalizing various regulatory initiatives previously proposed.  Key initiatives for investment advisers and broker-dealers include, but are not limited to: 

• Digital engagement practices for investment advisers and broker-dealers. Adopting two different rules, one for investment advisers and one for broker-dealers – both of which address conflicts of interest related to the use of predictive data analytics, artificial intelligence, machine learning and similar technologies (often referred to as the “gamification of investing”).
• Safeguarding advisory client assets. The final rule, if adopted, is intended to improve and modernize the regulations around the custody of funds or investments of clients by investment advisers.  If adopted substantially as proposed, the new safeguarding rule would, among other things, significantly expand the scope of the current “custody” rule to include all client assets (including non-securities) and impose new requirements governing the relationship between advisers and qualified custodians.
• Form PF. The SEC and CFTC continue to consider adopting joint final amendments to portions of Form PF applicable to certain SEC-registered investment advisers to private funds, as well as persons registered with the CFTC as a commodity pool operator or commodity trading adviser.
• Outsourcing by investment advisers. The SEC is considering adopting rules that address an investment adviser’s obligations with regard to oversight of third-party service providers.
• Cybersecurity risk management. The SEC continues to consider adopting two different rules, one for investment advisers and investment companies, and one for other market participants including, for example, broker-dealers, clearing agencies, major security-based-swap participants, and security-based-swap dealers – both of which would generally require that such entities adopt written policies and procedures reasonably designed to address cybersecurity risks and report significant cybersecurity incidents to the SEC.
• Regulation S-P. The SEC’s final rule would, among other things, require that investment advisers and broker-dealers adopt written policies and procedures to respond to incidents of unauthorized access to or use of customer information and to provide affected customers with notification of any such breach.
• ESG disclosures. The SEC’s final rule would require, for example, investment advisers and investment companies to enhance their disclosures regarding ESG investment practices.
• Registration requirements for internet advisers. Adopting amendments to the exemption for internet advisers (i.e., robo-advisers) from the prohibition against registration under the Investment Advisers Act of 1940.
• Definition of “dealer.” The SEC is considering adopting final rules to address the definition of “dealer” under the Securities Exchange Act of 1934.  The final rules, if adopted substantially as proposed, would likely cause certain investment advisers and private funds to register as dealers.
• Reporting security-based-swap ("SBS") positions. Final rules would require any person with an SBS position over a certain threshold to promptly file with the SEC a schedule disclosing certain information related to its SBS position(s).
• Securities Exchange Act rule 15c3-3 for broker-dealers (“Net Capital Rule”). Amending the Net Capital Rule to require that certain large broker-dealers compute their customer and “PAB” reserve deposit requirements daily rather than weekly.
• Regulation Best Execution. Final amendments would require that broker-dealers have detailed policies and procedures regarding the duty of best execution (and in particular, a focus on enhanced procedures for broker-dealers when engaging in certain conflicted transactions with retail customers), as well as related review and documentation requirements.
• Exchange Act Rule 3b-16, Regulation ATS, Regulation SCI. The SEC is considering final amendments to Exchange Act 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.  In addition, the SEC is considering final amendments to Regulation ATS and Regulation SCI for ATSs that trade U.S. Government Securities, NMS stock, and other types of securities and to require the electronic filing of a modernized version of Form ATS and Form ATS-R.