Registered Investment Companies

On November 2, 2022, the SEC proposed wide-ranging changes to how open-end investment companies (other than exchange traded funds and money market funds, “Funds”) process and price shareholder transactions and manage their corresponding liquidity risks (the “Proposal”). This post attempts to summarize key elements of the Proposal as a precursor to our analysis of its merits. “Attempts” is the apt term, as the Proposal would involve substantial revisions to multiple rules and disclosure forms, which makes organizing our summary a challenge.

While working out the possible impact of the SEC’s proposal to require central clearing of triparty repurchase agreements, we realized that we short-changed the analysis of multilateral netting in our last post. Our explanation of the SEC’s example focused on just the cash side of the trades, which is to say the amounts to be paid. To appreciate multilateral netting fully, we need to consider the security side of the trades, what is to be delivered, as well. This post seeks to rectify our oversight.

Our previous post explained the SEC’s proposal (the Proposal) to require central clearing of all “eligible secondary market transactions” with a participant in the Fixed Income Clearing Corporation (FICC). In this post we review the benefits of central clearing cited by the SEC to justify its Proposal. We also discuss “hybrid clearing” and “multilateral netting.”

On October 7, 2022, the SEC reopened the comment period for a dozen proposed rules “[d]ue to a technological error.” As a result of this error, “a number of public comments submitted through the Commission’s internet form for the submission of comment letters were not received by the Commission and therefore were not posted in the relevant comment file.” Comments can be filed from October 7 until two weeks after the SEC’s order is published in the Federal Register—a date that has yet to be established.

On September 14, 2022, the SEC proposed amendments (the Proposal) to regulations for clearing agencies under the Securities Exchange Act of 1934 (the Exchange Act). The Proposal would increase the central clearing of U.S. Treasury securities, to be defined as “any security issued by the U.S. Department of the Treasury.” According to the SEC’s press release, “the proposal would require that clearing agencies in the U.S. Treasury market adopt policies and procedures designed to require their members to submit for clearing certain specified secondary market transactions.”

In part one of our four-part series, we discussed the U.S. Securities and Exchange Commission (SEC) ESG-related initiatives from 2019 to 2022 that preceded the burst of ESG-related enforcement and rulemaking activity in the first half of 2022. In this second part of the series, we explore this recent enforcement activity.

In the first half of 2022, we saw significant U.S. Securities and Exchange Commission (SEC) enforcement and rulemaking activity around ESG investing, and the SEC’s intense focus in this area shows no signs of abating as we move through the third quarter. In this four-post series we:

  • Summarize the 2019-2021 ESG-related initiatives at the SEC;
  • Review the SEC’s ESG-related enforcement activity in the asset management industry;
  • Outline the SEC’s May 2022 ESG-related rule proposals for funds and advisers; and
  • Suggest factors that mutual fund boards should consider in their oversight of ESG funds and adviser ESG initiatives.