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Regulatory & Compliance Updates
The Regulatory Forum is a virtual meeting place for the exchange of timely information on a variety of compliance and industry topics. SEC actions, compliance industry best practices, and Institutional LP concerns and interests are a few of the topics addressed. This Forum includes webinars, podcasts, electronic print material, and other resources to allow compliance professionals and other interested parties to stay current on a variety of private fund topics.
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Regulatory Forum – Q1 2025 Updates
The first quarter of 2025 reflected a number of meaningful changes at the Securities and Exchange Commission (SEC or Commission) with more to come. Former Chairman Gensler departed the agency on January 20 upon President Trump’s inauguration. Trump has nominated Paul Atkins to serve as the next SEC Chairman. Atkins is a former SEC Commissioner who knows the agency well and is expected to be an effective leader. However, his Senate Banking Committee confirmation hearing did not come until very late in the quarter, as it was finally scheduled on March 27. During his hearing, Atkins shared his views on the current regulatory landscape. He noted that the recent regulatory environment stifles capital formation and indicated his desire to pivot from the SEC’s recent emphasis on aggressive enforcement. On April 3rd, the Committee approved his nomination along party lines which will move to the full Senate to vote.
January marked the transition between the priorities of the former Commission to the new Commission, with a few noteworthy enforcement cases pushed through before Chairman Gensler departed. For most of the quarter, the SEC was led by Republic Commissioner, Mark Uyeda, serving as Acting Chairman, Republican Commissioner, Hester Peirce, and a sole Democratic Commissioner, Caroline Crenshaw. In theory, the three-person composition could effectively have veto power over actions requiring a vote of the SEC because Commissioner Crenshaw can deny a quorum for any action she strongly opposes. However, if Atkins is confirmed, the Republican majority would no longer need the Democratic Commissioner, so it will be able to begin with formal rulemaking steps.
No significant rules were proposed or moved forward in the first quarter. Certain compliance dates that were scheduled for key regulatory filings in early 2025 were extended during the quarter. As is typical upon a change in administration, multiple senior staff left the agency in January coinciding with Gensler's departure. President Trump and the Department of Government Efficiency took aim at the SEC, among other federal agencies, resulting in hundreds of other SEC staff departures.
Q1 Insider Trading Case Summary (03/31/25)
The SEC regularly brings insider trading cases under Section 10(b) of the Securities Exchange Act of 1934 against company officers, directors, employees, or other insiders, as well as gatekeepers, such as investment bankers or lawyers involved in merger and acquisition activities, who have access to and misuse material non-public information (MNPI) received in such capacity, in breach of a duty of confidence. The SEC also regularly charges friends, family members, and individual or professional traders who receive tips from such insiders regarding MNPI and use such MNPI to trade on their own behalf or in funds or accounts that they manage. While SEC enforcement priorities appeared to have shifted significantly during Q1 2025, the SEC nevertheless brought a number of insider trading cases during the quarter as usual. We have summarized some of the perpetrators and facts presented by such cases and reminders for clients.
SEC Hosts AI Roundtable (03/27/25)
On March 27, 2025, the SEC hosted an all-day roundtable discussion on artificial intelligence (AI) in the financial industry. The event was hosted in person at the SEC headquarters in D.C. as well as simultaneously virtually, accessible on the SEC’s website’s main page. The roundtable focused on the risks, benefits, and governance of AI in the financial industry. The three Commissioners delivered remarks. The panelists included experts from a wide variety of stakeholders who provided education on developments in AI, possible use cases and AI’s potential benefits and risks. An archive of the AI roundtable webcast can be found at: https://www.sec.gov/newsroom/meetings-events/sec-roundtable-artificial-intelligence-financial-industry
The following is a list of the panels that were presented:
SEC Votes to End Defense of Climate Disclosure Rules (03/27/25)
On March 27, 2025, the SEC voted 2-1 to end its defense of rules that were adopted in March 2024 requiring enhancement and standardization of climate-related disclosures. The prior rulemaking was championed by former Chairman Gary Gensler and Democratic Commissioners, who argued it was necessary to provide investors with the information they need to make informed decisions, while Republican Commissioners dissented, arguing the rule was likely to overwhelm investors. While the decision does not directly relate to the pending rules for investment advisers and investment companies that would require enhanced disclosures about ESG investment practices, it does suggest that these are unlikely to move forward under the current Commission.
SEC Crypto Task Force to Host Multiple Roundtables (03/25/25)
Launched on January 21 by Acting SEC Chairman Mark T. Uyeda and led by Commissioner Hester Peirce, the Crypto Task Force was established to help the SEC draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously. The task force subsequently announced that it would hold a series of roundtable events to discuss key areas of interest in the regulation of crypto assets. The “Spring Sprint Toward Crypto Clarity” series, as it was dubbed, began on March 21 with its inaugural roundtable, “How We Got Here and How We Get Out – Defining Security Status.” The roundtables are open to the public and available live on the SEC's website. Upcoming roundtables will be held as follows:
CTA: FinCEN Removes Beneficial Ownership Reporting Requirements for US Companies and US Persons, Sets New Deadlines for Foreign Companies (03/21/25)
FinCEN has issued an interim final rule that removes the requirement for U.S. companies and U.S. persons to report BOI to FinCEN under the CTA. There may be limited scenarios in which a foreign-domiciled fund portfolio company or entity within a foreign fund structure meets the definition of a reporting company and requires reporting of its non-U.S. beneficial owners. The firm should consult with counsel if there are any questions as to whether or not an exemption applies to a given entity.
