On Wednesday February 9 the SEC has a full agenda for its meeting and fund managers should pay attention. Here are the matters to be considered:
- The Commission will consider whether to propose rules and amendments under the Investment Advisers Act of 1940 (“Advisers Act”) for private fund advisers and whether to propose amendments to the compliance rule under the Advisers Act.
- The Commission will consider whether to propose new rules to address cybersecurity risk management for investment advisers and investment companies as well as related amendments to certain rules regarding adviser and fund disclosures under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
- The Commission will consider whether to propose rules and rule amendments under the Securities Exchange Act of 1934 to shorten the standard settlement cycle for most securities transactions. The proposed rules and rule amendments would be applicable to broker-dealers and certain clearing agencies. The Commission also will consider whether to propose rule amendments under the Investment Advisers Act of 1940 to require investment advisers to maintain certain related records.
- The Commission will consider whether to propose amendments to its whistleblower rules.
For the first item, I don’t have any insight into what is cooking in the SEC’s regulatory kitchen. Whatever is in the oven is coming out hot and for private fund managers. I’m going to guess its related to fees and fee disclosure. I think the Chair Gensler’s November 10 speech at the Institutional Limited Partners Association Summit may give us some insight.
I wonder whether fund investors have enough transparency with respect to these fees. I wonder whether limited partners have the consistent, comparable information they need to make informed investment decisions.
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That’s why I have asked the staff to consider what recommendations they could make to bring greater transparency to fee arrangements.
I’m going to guess that the SEC is going to propose some kind of standard fee disclosure table for private funds like there is in registered funds.
As for item 2 on cybersecurity, I think we can look at Chair Gensler’s January 24 speech at the Northwestern Pritzker School of Law’s Annual Securities Regulation Institute.
Next, I’d like to discuss the broader group of financial sector registrants, like investment companies, investment advisers, and broker-dealers, beyond those covered by Reg SCI.
As I mentioned earlier, this group has to comply with various rules that may implicate their cybersecurity practices, such as books-and-records, compliance, and business continuity regulations. Building upon that, I’ve asked staff to make recommendations for the Commission’s consideration around how to strengthen financial sector registrants’ cybersecurity hygiene and incident reporting, taking into consideration guidance issued by CISA [Cybersecurity and Infrastructure Security Agency] and others.
I’m guessing we will see an expansion of cybersecurity requirements and reporting of cyber incidents to clients and investors.
We’ll have to tune it find out.
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