Amidst an ongoing shift in the U.S. administration’s approach to regulation, the U.S. Securities and Exchange Commission (SEC) is scrapping an array of proposed rule changes.
In a notice posted in the Federal Register, the SEC formally withdrew a series of rulemaking proposals that were issued between March 2022 and November 2023, saying that it doesn’t intend to pursue final rules under these proposals.
The abandoned policy initiatives cover a wide range of issues, including the requirements for publishing shareholder proposals in proxy filings, various market structure proposals, and a number of rules targeting the brokerage and advisory businesses.
For instance, the SEC has dropped proposals published in August 2023 that aimed to address conflicts of interest in the use of predictive analytics by broker dealers and investment advisers, amid concerns that firms could optimize these tools to put their own interests ahead of clients’ interests — and that the scalability of these sorts of technologies has the potential to cause greater harm than more routine industry conflicts.
“While the presence of conflicts of interest between firms and investors is not new, firms’ increasing use of these [predictive analytics-like] technologies in investor interactions may expose investors to unique risks,” the SEC noted in its original rule proposals. “The effects of such unaddressed conflicts may be pernicious, particularly as this technology can rapidly transmit or scale conflicted actions across a firm’s investor base.”
To address these concerns, the regulator proposed to introduce specific protections designed to address these kinds of conflicts. Now, it’s abandoning that work.
Similarly, the SEC also scrapped proposals that would have introduced new ESG disclosure requirements for certain investment advisers and investment companies; new rules on outsourcing by investment advisers; and, a proposed new rule dealing with cybersecurity risk management for brokers, advisers, exchanges, and other market players.
In terms of market structure, the SEC also withdrew a series of proposals from 2023, including proposed changes to brokers’ best execution obligations when trading for retail clients; proposals that would have required certain retail orders to be exposed to competition before being executed internally; and proposals to prohibit stock exchanges from offering volume-based trade pricing on certain orders.
The SEC said that it decides to pursue regulatory action in any of these areas in the future, it will publish new proposals.