The SEC continues to make updates to alleviate the regulatory burdens facing the investment fund industry and asset managers. This article includes several important SEC regulatory changes since our 1Q 2025 update to keep you in the know.
Delayed Compliance Dates
On April 16, 2025, the SEC extended the compliance dates by two years for changes to Forms N-PORT and N-CEN for certain registered investment companies. This follows earlier deadline extensions for the Form PF changes and Fund Name rules.
State Climate Change Rules
On April 8, 2025, President Donald Trump signed an executive order, “Protecting American Energy From State Overreach,” authorizing the attorney general to identify and stop enforcement of any state and local regulations that “address ‘climate change’ or involving ‘environmental, social, and governance’ initiatives, ‘environmental justice,’ carbon or ‘greenhouse gas’ emissions, and funds to collect carbon penalties or carbon taxes.” California, New York, and Vermont were cited as examples.
Exemptive Relief
Multiple Share Classes
Multiple applications for multishare exemptive relief for private business development companies (BDCs) and certain registered closed-end funds have received SEC approval. This relief permits, for the first time, BDCs that are continuously privately offered in reliance on a registration exemption under the Securities Act of 1933, such as Rules 506(b) or 506(c) of Regulation D, to have multiple share classes with varying sales loads, asset-based service fees, and/or distribution fees. In general, the 1940 Act does not permit a fund to offer multiple share classes without exemptive relief. Until now, only non-listed publicly offered BDCs had been allowed by the SEC to gain this type of exemptive relief.
Co-Investments
Co-investment is when a BDC invests in a company alongside other funds or accounts managed by the same investment advisor. A notice of intent to grant more flexible co-investment exemptive relief for BDCs and closed-end funds was recently published by the SEC. If no hearing is requested, the exemptive order will be approved in early May and will include streamlined terms and conditions.
Rulemaking Process
On April 9, 2025, the White House issued a memo permitting federal agencies to deviate from the standard rulemaking process to rescind “unlawful” regulations. Federal agencies, including the SEC, can use the “good cause” exception in the Administrative Procedure Act to expeditiously rescind certain rules without notice and comment period requirements. The memo prioritized 10 recent U.S. Supreme Court decisions for these review and repeal efforts. In the past, courts have narrowly allowed the “good cause” exception.
“Furthermore, notice-and-comment proceedings are ‘unnecessary’ where repeal is required as a matter of law to ensure consistency with a ruling of the United States Supreme Court.”
In a recent speech, acting Chair Mark Uyeda has highlighted a new blueprint for SEC rulemaking:
- Restore historical comment periods to at least 60 days or even 90 days for complex rule changes.
- Where appropriate, consider re-proposing rule changes when significant changes to a proposal are contemplated or re-opening the comment period for changes in market conditions or where significant time has passed since the original proposal.
- Develop a more robust feedback process, including roundtables, requests for information, concept releases, and advice notices of proposed rulemaking.
- Improve the assessment of a rule’s economic impacts, especially for small entities.
- Update the small entity definition.
SEC Staffing
In response to Trump’s executive order, “Return to In-Person Work,” the SEC has notified union staffers to return to the office beginning April 1, 2025.1 The union representing SEC employees will challenge the mandate as it violates a 2023 collective bargaining agreement that allows for remote work but has advised its members to plan to comply with the order while litigation is underway. Bloomberg reported that 10% of the SEC’s 5,000 employees have taken a $50,000 offer to resign or retire in 30 days.2 The SEC also plans to terminate regional office leases in Los Angeles and Philadelphia.
Conclusion
Forvis Mazars provides tailored accounting and consulting services from experienced asset management advisors. Our team provides accounting, tax, and consulting services designed to help meet the needs of diverse investment holdings. Our knowledge spans across conventional debt and equity investments, loans, businesses, alternative investments, and other unique assets. We support a variety of clients, including emerging managers, large multifund groups, investment advisers, wealth managers, family offices, and general partners.
Having a resource in this rapidly changing environment is vital and assisting funds of various sizes is our passion and privilege.