On June 12, the SEC withdrew 14 proposed rules stating that it did not intend to issue final rules with respect to the proposals and that if the SEC decides to pursue future regulatory action in any of these areas, it will do so by publishing a new proposed rule or other issuance consistent with the requirements of the Administrative Procedure Act. The withdrawals—which are another signal that, under recently-confirmed Chairman Atkins, the SEC is resetting its substantive regulatory agenda—include:
- Large Security-Based Swap (“SBS”) Position Reporting: Proposed Rule 10B-1 under the Exchange Act (promulgated pursuant to Section 763(h) of the Dodd-Frank Act), which would have required any person with an SBS position that exceeded a threshold to promptly file with the SEC a schedule disclosing information related to that position.
- Exchange Definition and ATS Regulation: Proposed amendments to Rule 3b-16 under the Exchange Act, which defines terms used in the statutory definition of “exchange” under section 3(a)(1) of the Exchange Act. Those amendments would have included, within the “exchange” definition, parties that “make available” systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities. By design, the amendments would have brought many decentralized finance protocols and more traditional communications services within the “exchange” definition. Also withdrawn was a proposal, initially from 2020, that would have subjected ATSs for trading government securities or repurchase agreements on government securities to Regulation ATS and, in some cases, Regulation Systems Compliance and Integrity (“Reg SCI”).
- Equity Market Structure: Proposed rules regarding U.S. equity market structure regulation:
- Proposed Rule 615 (the order competition rule) of Regulation National Market Structure (“Reg NMS”), which generally would have required that individual investor orders be exposed to order-by-order competition in SEC-compliant auctions before such orders could be internalized by wholesalers (among others);
- Proposed Regulation Best Execution, which would have applied an SEC-level best execution requirement to broker-dealers in addition to existing FINRA and MSRB best execution requirements; and
- Proposed Rule 6b-1 under the Exchange Act, which would have, among other measures: (i) prohibited national securities exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal orders in listed stocks and (ii) imposed additional requirements on exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in listed stocks for the account of a member.
- Investment Adviser-Related Proposals
- Safeguarding Client Assets: Proposed Rule 223-1 under the Advisers Act, which would have made significant changes to the SEC’s existing custody regulations including: (i) expanding the custody rule to apply to all client “assets,” not just client “funds and securities”; (ii) expanding the additional advisory activities covered by the rule (including explicitly covering discretionary trading authority); and (iii) creating extensive new requirements for advisers and qualified custodians (including entry into written agreements with prescriptive requirements).[1]
- Outsourcing: A proposed rule under the Advisers Act, which would have prohibited advisers from outsourcing specified services or functions without first meeting several additional requirements, including due diligence and monitoring.[2]
- Environmental, Social and Governance (“ESG”) Disclosure: Proposed rule amendments under the Advisers Act and Investment Company Act, which would have required registered investment advisers, specified types of exempt advisers, registered investment companies and business development companies to provide additional information regarding their ESG investment practices.
- Predictive Data Analytics: Proposed rules under the Exchange Act and Advisers Act, which were intended to address potential conflicts of interest associated with the use of predictive data analytics and similar technologies by broker-dealers, investment advisers, and their associated persons in interactions with investors.[3]
- Reg SCI: A proposed expansion of Reg SCI, which would have, among other changes, broadened the range of firms that must comply with Reg SCI to include larger broker-dealers (among others).
- Cybersecurity Risk Management: Two proposed rules, which would have revised the cybersecurity risk management obligations of a wide range of firms, including registered investment advisers, registered investment companies, business development companies, broker-dealers, clearing agencies, national securities exchanges, SBS data repositories, SBS dealers and transfer agents, including by imposing requirements for incident reporting, disclosure and written policies and procedures.
- Shareholder Resolutions: A proposed rule, which would have significantly narrowed three of the 13 substantive bases for excluding shareholder proposals provided for in Rule 14a-8 under the Exchange Act: (i) substantial implementation; (ii) duplication; and (iii) resubmission.[4]
- Consolidated Audit Trail (“CAT”): Amendments proposed in 2020 to the NMS plan governing the CAT, which would have imposed additional requirements regarding data security for information submitted to the CAT.
ENDNOTES
[1] For additional information regarding the proposed Safeguarding Rule, please see our March 1, 2023 Client Memorandum: sc_publication_sec_proposes_significant_changes_investment_adviser_custody_rule.pdf.
[2] For additional information regarding the proposed outsourcing by investment advisers rule, please see our November 4, 2022 Client Memorandum: sc-publication-sec-proposes-new-requirements-for-outsourcing-by-investment-advisers.pdf.
[3] For additional information regarding the proposed predictive data analytics rule, please see our August 17, 2023 Client Memorandum: https://www.sullcrom.com/SullivanCromwell/_Assets/PDFs/Memos/sc-publication-pda-proposed-rules.pdf.
[4] For additional information regarding the proposed shareholder resolution rules, please see our July 21, 2022 Client Memorandum: sc-publication-sec-proposes-to-narrow-bases-for-excluding-shareholder-proposals.pdf.
This post comes to use from Sullivan & Cromwell LLP. It is based on the firm’s memorandum, “SEC Withdraws 14 Proposed Rules,” date June 18, 2025, and available here.