SEC hits pause on proposed investment fund and adviser rules

Acting US Securities and Exchange Commission (SEC) chairman Mark Uyeda has hit pause on proposed rules covering safeguarding of advisory client assets and outsourcing by investment advisers. The SEC may re-propose aspects of the recently adopted Form N-PORT, he said in a speech at the 2025 Investment Management Conference on March 17.

Uyeda called for a back-to-basics approach to SEC rulemaking which would give ample time to solicit industry feedback and weigh the cost of any new rule.

“The commission’s blueprint needs to prioritise effective and cost-efficient regulations that respect the limits of our statutory authority. We must be clear-eyed about how existing proposals fare under this rubric. Using this framework for analysis, the commission could consider options that include withdrawing or re-proposing existing rule proposals,” he said.

Uyedaʼs concerns with some existing rule proposals, “including those addressing the safeguarding of advisory client assets, outsourcing by investment advisers, [environmental, social and governance] disclosures for funds and advisers, and digital engagement practices, are a matter of public record”, he added.

The SEC is assessing the proposed safeguarding rules on advisory client assets. Since their review in August 2023, commenters have raised concerns over the “broad scope” of the proposal that extends custodial requirements to digital assets. In particular, the Blockchain Association wrote to the SEC in May addressing “significant costs on a far broader swath of the digital asset industry”.

The regulator is also working closely with its newly formed crypto task force to consider alternative actions or even withdrawal of the proposals.

The outsourcing investment adviser rule is another proposal on the SECʼs agenda. This would prohibit advisers from outsourcing services unless they met minimum requirements, as well as requiring them to conduct due diligence prior to engaging in services; periodically monitor the performance of service providers and reassess their retention.

Re-proposing adopted rules

Meanwhile, the SEC is also looking at adopted rules that have not been effective but were challenged in court. This includes re-proposing Form N-PORT adopted in August, requiring investment funds and trusts to file monthly reports on portfolio holdings and risk assessments.

Uyeda cited comments on more frequent public disclosure of funds’ portfolio holdings, as well as developments of artificial intelligence (AI).

He explained: “Re-proposing rules has the benefit of taking into account issues that commenters have raised in iterating on the prior rule proposal. It also can respond to changed conditions in the markets. Re-proposal is also appropriate when significant time has passed since the original proposal.”

For adopted rules, the SEC could extend or delay the compliance dates, which is the same approach used for the Form PF amendments on February 5 and the extension of investment company name rule on March 14.

Enforcement director’s delegated authority revoked

Separately, the SEC has amended its rulebook with respect to eliminate the director of the division of enforcement’s delegated authority to issue formal orders of investigation, according to the US Federal Register.

The SEC eliminated the head of enforcement’s delegation of authority, to align investigative resources “more closely” with its current priorities. The elimination was also announced on March 14.