Q4 2023 Newsletter

FinTech Law & Joot

FinTech Law is an innovative, technology-driven law firm that provides legal and consulting services to startups, crypto-related and other technology companies, investment advisers, broker-dealers, private funds, registered funds, and other financial services companies.

Joot is a technology-driven compliance company that provides services to registered investment advisers and registered investment companies, such as mutual funds, closed-end funds, and ETFs. Joot’s clients include retail advisers, institutional managers, private fund managers, and mutual fund advisers.

For more information, please visit us online at fintechlegal.io and joot.io or contact us at info@fintechlegal.io.

Multiple Rules Planned for Finalization by SEC in Near Term

The Regulatory Flexibility Act (“RFA”) requires each federal agency in April and October of each year to publish in the Federal Register an agenda identifying rules that the agency expects to consider in the next twelve months that are likely to have a significant economic impact on a substantial number of small entities. The publication of the agenda does not preclude an agency from considering or acting on any matter not included in the agenda, and an agency is not required to act on any matter that is included in the agenda.

The Office of Information and Regulatory Affairs released its Fall Unified Agenda of Regulatory and Deregulatory Actions in 2022, including the Securities and Exchange Commission (“SEC”) rule agenda for 2023. From the 2023 rulemaking agenda, the SEC released 7 final rules in the first 2 quarters of the year, and 10 final rules from June to October 2023, with more released in recent months. Companies should follow up on the new rules and update their board calendars to start implementing all required changes before each rule’s compliance date. Below is a list of updated rules for the 2023 fall and the 2024 spring agenda. We highlighted the items affecting funds and advisers.

2023 Fall Agenda + Final Rules

1. Removal of References to Credit Ratings from Regulation M | Final Rule | Effective August 21, 2023
2. Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers | Final Rule | Effective August 29, 2023
3. Cybersecurity Risk Management, Strategy, Governance, and Inci- dent Disclosure | Final Rule | Effective September 5, 2023 - Initial Compliance Date: June 15, 2024
4. Adoption of Updated EDGAR Filer Manual | Final Rule | Released on September 18, 2023. Effective on the publication date in the Federal Register.
5. Privacy Act Amendments | Final Rule | Effective October 26, 2023
6. Private Fund Advisers; Documentation of Registered Investment Adviser Compliance | Final Rule | Effective November 13, 2023.
   Compliance Date:
   1. March 2025 for the audit rule and the quarterly statement rule (for all private fund advisers).
   2. For the adviser-led secondaries rule, the preferential treatment rule, and the restricted activities rule:
      1. September 2024 for advisers with 1.5 billion in AUM
      2. March 2025 for advisers with less than 1.5 billion in AUM
7. Exemption for Certain Exchange Members | Final Rule | Effective November 6, 2023 - Compliance Date: September 6, 2024.
8. Investment Company Names | Final Rule | Released September 20, 2023. Rule effective on the publication date in the Federal Register.
   Compliance date:
   1. 24-month compliance period for entities $1 billion or more net assets.
   2. 30-months compliance period for entities with less than $1 billion net assets.
9. Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers and Private Equity Fund Advisers; Requirements for Large Private Equity Fund Adviser Reporting | Final Rule | Effective June 11, 2024.
   Compliance Date:
   1. Amendments to Form PF sections 5 and 6 (referenced in 17 CFR 279.9) effective December 11, 2023
   2. For the amended, existing Form PF sections and amendments to 17 CFR 275.204(b)- 1, effective date June 11, 2024.
10. Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and Form N-1A | Final Rule | Effective June 11, 2024
    Compliance Date:
    1. 6 months after the effective date for Forms N-MFP and N-CR amendments, except for the existing fee and gate reporting requirements in Form N-CR.
    2. 12 months after the effective date for the Mandatory and Discretionary Liquidity Fee Frameworks.
    3. 6 months for non-government money market funds to comply with the amended discretionary liquidity fee framework.
11. Clearing Agency Governance and Conflicts of Interest | Final Rule
    Compliance Date:
    1. May 12, 2024 for Rule 17Ad- 25; and
    2. May 12, 2025 for for pro- posed Rules 17Ad-25(b)(1), (c) (2), and (e).
12. Rules Relating to Security-Based Swap Execution and Registration and Regulation of Security-Based Swap Execution Facilities | Final Rule | Compliance Date: July 13, 2024 to submit Form SBSEF.
13. Short Position and Short Activity Reporting by Institutional Investment Managers | Final Rule | Compliance Date: August 2025 for CAT amendments
14. Reporting of Securities Loans | Final Rule | Compliance Date: 90 calendar days after the reporting date for covered persons reporting according to Rule 10c-1a (information to an RNSA)
15. Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule with Respect to U.S. Treasury Securities | Final Rule
    Compliance Date:
    1. 60 days after publication in the Federal Register for amendments required under Section 19(b) and/or advance notices required under Title VIII of the Dodd-Frank Act.
    2. 150 days after publication in the Federal Register for after requirements to clear eligible secondary market transactions and monitoring of the submission of such transactions
    3. the proposed rule changes must be effective by December 31, 2025, for cash market transactions encompassed by 205 section (ii) of the definition of an eligible secondary market transaction, and by June 30, 2026, for repo transactions encompassed by section (i) of the definition of an eligible secondary market transactions.
16. Prohibition Against Conflicts of Interest in Certain Securitizations | Final Rule | Compliance Date: Any securitization participant must comply with the prohibition and the requirements of the exceptions to the final rule, as applicable, with respect to any ABS the first closing of the sale of which occurs on or after Mon., June 9, 2025.
17. The Enhancement and Standardization of Climate- Related Disclosures for Investors | Proposal
18. Special Purpose Acquisition Companies, Shell Companies, and Projections | Proposal
19. Rule 14a-8 Amendments | Proposal
20. Modernization of Beneficial Ownership Reporting | Proposal
21. Safeguarding Advisory Client Assets | Proposal
22. Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices | Proposal
23. Open-End Fund Liquidity Risk Management Programs and Swing Pricing; Form N–PORT Reporting | Proposal
24. Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies | Proposal
25. Amendments to Exchange Act Rule 3b-16 re Definition of “Exchange”; Regulation ATS and Regulation SCI for ATSs That Trade U.S. Government Securities, NMS Stocks and Other Securities | Proposal
26. Amendments to NMS Plan for the Consolidated Audit Trail-Data Security | Joint Industry Plan; Order Approving an Amendment to the National Market System Plan Governing the Consolidated Audit Trail
27. Further Definition of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer | Proposal
28. Outsourcing by Investment Advisers | Proposal
29. Regulation SP: Privacy of Consumer Financial Information and Safeguarding Customer Information | Proposal
30. Regulation Systems Compliance and Integrity | Proposal
31. Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments Regarding FOCUS Report | Proposal
32. Order Competition Rule | Proposal
33. Disclosure of Order Execution Information | Proposal
34. Regulation NMS: Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Orders | Proposal
35. Regulation Best Execution | Proposal
36. Exemption for Certain Investment Advisers Operating Through the Internet | Proposal
37. Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker Dealers and Investment Advisers | Proposal
38. Daily Computation of Customer and Broker-Dealer Reserve Requirements under the Broker-Dealer Customer Protection Rule | Proposal
    

SEC Regulatory Activity & Risk Alerts

SEC AdoptsAmendments to Rules Governing Beneficial Ownership Reporting

The SEC recently adopted amendments to rules governing beneficial ownership reporting. Here we break down these amendments and what they mean for your firm. (11/3/23)

SEC Adopts Rule to Increase Transparency into Short Selling and Amendment to CAT NMS Plan for Purposes of Short Sale Data Collection

The SEC recently adopted Rule 13f-2 to increase transparency in short selling as well as an amendment to the CAT NMS Plan for short sale data collection. We break down these changes and what they mean to you. (11/17/23)

SEC Announces Enforcement Results for Fiscal Year 2023

At the end of November 2023, the SEC released its enforcement results for fiscal year 2023. We review this recent release and how these results compare to 2022. (12/1/23)

SEC Release New and UpdatedForm ADV FAQs

The SEC recently released over 30 new and updated Form ADV and IARD frequently asked questions. We highlight some key answers and guidelines and where you should look for new information. (12/8/23)

Joot/FinTech Law Blog Updates

Fair Value Pitfalls: How to Avoid an SEC Deficiency Letter Under Rule 2a-5

Rule 2a-5 under the Investment Company Act took effect in September 2023. Joot Managing Director and Head of Compliance, Charles Black, reviews some key findings from Rule 2a-5 related examinations that should be implemented into every fair value process under Rule 2a-5.. (11/10/23)

The Marketing Rule: Key Takeaways from SEC Enforcement Actions

The Marketing Rule continues to be a hot topic among the finance and compliance community. FinTech Law Law Clerk, Irina Garcia Iglesias, discusses the Marketing Rule in our current industry landscape and what can be learned from recent SEC enforcement actions surrounding the Marketing Rule. (12/14/23)

How to Comply with the Corporate Transparency Act

Earlier in 2023, FinTech Law posted a blog piece regarding the Corporate Transparency Act. As a follow-up as the compliance date approaches, FinTech Law Paralegal, Christy Groves, highlights important aspects of the Corporate Transparency Act, what you need to know when filing beneficial ownership information, and how compliance with the act will affect your firm. (12/21/23)

Industry News & Commentary

Introduction to Private Fund Service Providers: Legal Advisors

As part of FinTech Law’s commentary series on private fund space and the first part in the “Service Providers” series, the FinTech Law team gathered information on legal advisors and law firms, similar to FinTech Law, that they would recommend to prospective and emerging managers of private funds, as well as veterans in the space. (11/8/23)

Introduction to Private Fund Service Providers: Administrators

In part two of FinTech Law’s “Services Providers” series and commentary on the private fund space, the FinTech Law team focus on reputable and recommended fund administrators. (11/9/23)

Introduction to Private Fund Service Providers: Auditors

In the third and final part of FinTech Law’s “Service Providers” series and commentary on the private fund space, the FinTech Law team covers reputable and recommended fund auditors. (11/10/23)