The annual conference for the National Society of Compliance
Professionals (NSCP) came during a period when federal rulemaking activity for
the financial industry is particularly high and there are many critical
compliance dates on the horizon in the months and years ahead.
The Securities and Exchange Commission (SEC) is among the busiest in that regard, NSCP Commissioner Mark Uyeda noted in prepared remarks. Uyeda asserted the recent surge in rulemaking is not driven by market crises or fraudulent activities but that the focus on implementing new compliance-based mechanisms is well-times.
Uyeda highlighted three issues facing compliance
professionals:
1.
the large number of new or amended rules
affecting the financial services industry;
2.
the rapid succession of compliance dates
stemming from these rules; and
3.
the implementation challenges for compliance
professionals.
The past two years have seen an influx of SEC rule changes
affecting asset managers, Uyeda said. These rules cover a wide range of areas,
including universal proxy cards, proxy voting advice businesses, shareholder
reports, proxy vote categorization, shortened settlement cycles, and new
disclosures for share repurchases. Additionally, there are rules regarding
large hedge funds and private equity advisers, money market funds, private
funds and more.
The breadth and volume of these rules cover a variety of
areas, such as special purpose acquisition companies, climate-related
disclosures, cybersecurity risk management and the use of predictive data
analytics. Uyeda acknowledged the implementation challenges companies and
regulators are likely to face as a result.
“The sheer volume of rulemaking, combined with the rapid
succession of implementation dates, will stretch the resources of firms,” Uyeda
said. “Most of the rule changes make no distinction between larger and smaller
firms with respect to deadlines. By requiring smaller firms to comply at the
same time as larger firms, it would not be surprising if the smaller firms
incur disproportionate costs, which would create additional barriers to new
entrants and potentially increase the pace of consolidation as firms seek
economies of scale. This would be an unfortunate result for investors and the
broader capital markets.”
Following a rundown of key compliance dates over the past
two years, Uyeda offered a list of rough compliance dates entities should have
on their calendars:
·
November 2023: Investment advisers to document
annual compliance reviews in writing.
·
Early 2024: Beneficial owners to comply with
shortened Schedule 13D filing deadline and amended disclosures.
·
April 2024: Firms to comply with new money
market fund rules.
·
May 2024: Firms to transition to a T+1
settlement cycle.
·
June 2024: Private fund advisers to comply with
Form PF amendments and money market fund reforms.
·
July 2024: Investment companies to comply with
new summary fund shareholder report rule.
·
August 2024: Institutional investment managers
and funds to file first reports on amended Form N-PX.
·
September 2024: Listed closed-end funds,
advisers with over $1.5 billion in private fund assets, and beneficial owners
to comply with various rules.
·
October 2024: Institutional money market funds
to comply with mandatory liquidity fee framework.
·
December 2024: Private fund advisers to comply
with new sections in Form PF.
·
March 2025: All private fund advisers to comply
with new private fund advisers rule.
·
December 2025: Larger investment companies to
comply with amended fund names rule; smaller funds by June 2026.
Under the Investment Advisers Act of 1940 and the Investment
Company Act of 1940, financial companies are required to create written
policies and procedures to prevent violations of federal securities laws, administer
annual reviews and appoint a chief compliance officer. The rules initially were
aimed at establishing robust controls within funds and advisory firms to
safeguard the interests of shareholders and clients.