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SEC Rulemaking Agenda - What to Expect in 2023

The U.S. Securities and Exchange Commission (SEC) pursues an extensive rulemaking agenda each year that shapes the regulatory landscape for public companies, investment firms, advisors and brokers across industries. In 2022, the SEC continued pushing forward with priorities like cryptocurrency regulation and climate risk disclosure amidst leadership changes.

As we enter 2023, the SEC’s rulemaking docket remains full across ESG issues, market structure, private funds, and other key policy topics. This post will recap major SEC rulemaking activity over the past year and preview the most significant proposals likely coming down the pike in 2023. Staying on top of the SEC’s regulatory schedule helps affected entities proactively prepare for changing compliance obligations.

2022 Rulemaking Review

Major SEC rules adopted in 2022 included:

• - Climate Disclosure: Landmark new requirements for public companies to disclose greenhouse gas emissions, climate risks, and oversight in registration statements and annual reports.
• - Investment Adviser Marketing: Amendments modernizing rules around investment adviser advertisements, including banning performance advertising for private funds.
• - Fund Names: New truth-in-labeling requirements for investment fund names preventing misleading names.
• - Whistleblower Program: Multiple amendments to promote and strengthen the SEC whistleblower program, including higher potential awards.
• - Share Repurchases: Increasing issuer disclosure and governance around stock buyback programs, a signature issue for Chair Gary Gensler.

These impactful regulations indicate the SEC’s focus on ESG, private funds, and investor protections under new Democratic leadership.

2023 SEC Rulemaking Outlook

High-priority rulemaking initiatives expected in 2023 cover:

• - Private Fund Disclosure: The SEC will finalize rules boosting information reported by private equity and hedge funds to regulators regarding fees, leverage, performance and investors.
• - Short Sale Transparency: New proposals are slated requiring large investors to publicly disclose aggregate short positions.
• - Stock Exchange Competition: The SEC may advance rules promoting exchange competition and ordering core data to help investors.
• - SPAC Disclosures: Given concerns over deals, heightened SPAC disclosures and liability around projections are likely coming.
• - Cybersecurity Risks: Enhanced cyber risk governance and incident disclosure rules remain a priority after high-profile attacks.
• - Other ESG Issues: Additional ESG rules are possible around board diversity, political spending, and human capital like workforce practices.

With Democrats retaining SEC control, corporations and financial services providers should prepare for continued expansive policymaking on investor protections, market structure, and public transparency in 2023.

Industry Feedback on Rulemaking

Affected industries are voicing feedback as the SEC pursues its 2023 initiatives:

• - Private Funds Object to Disclosure: Private equity and hedge funds warn public fund details could harm proprietary strategies and investment returns. Reasonable confidentiality accommodations are urged.
• - Short Sale Disclosure Concerns: Large asset managers argue short position details taken out of context could improperly signal negative views and create market volatility. Anonymity is preferable.
• - SPAC Liability Worries: SPAC sponsors caution that increased liability for long-term projections could discourage deals amidst a SPAC slowdown. Good faith projections should be protected.
• - Cyber Rules Burden: Trade groups assert prescriptive cyber rules could require systems overhauls at great cost for smaller firms while providing minimal added protection. Flexibility is advised.

Industry engagement with prudent rulemaking arguments remains vital even with Democrats at the SEC helm. Sweeping regulations often demand reasoned pushback.

Conclusion

The SEC’s 2022 activism ushered in major climate disclosure and fundraising transparency rules. With a lengthy docket ahead in 2023, companies and investment firms should monitor proposals and comment periods closely to shape balanced regulations. While SEC priorities are clear, industry feedback can still mitigate compliance burdens and avoid unintended consequences. Proactive advocacy and engagement with the SEC rulemaking process will be crucial to navigating the year ahead.