Welcome to the June 23, 2025 edition of On The Docket, which includes the following content:
- Is the SEC Raising the AUM Threshold?
- Impressive Content v. Disclosure Ratio
- Reporting of “Access Persons” Beneficially-Owned Securities Accounts – Who, What, and When
- The SEC’s Investor Advisory Committee Recommends Harmonization with FINRA Rules re: Arbitration Clauses
- SEC Withdraws 14 “Proposed Regulatory Actions”
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– Chris
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Is the SEC Raising the AUM Threshold?
SEC staff have been directed to evaluate whether the $100 million AUM threshold for SEC registration as an investment adviser should be “adjusted” (i.e., raised).
The last time the SEC raised the AUM threshold from $25 million to $100 million in 2010 as a result of Dodd-Frank, about 3,200 advisers had to switch from SEC registration to state registration by June 2012 (about a 1.5 year transition period). There was no ‘grandfathering’ provision for advisers that were between $25 million and $100 million.
Dodd-Frank also bestowed the SEC with rulemaking authority to raise the $100 million AUM threshold in the future (which it now appears to be taking the first steps to do).
It’s way too early to tell whether, when, and by how much the $100 million AUM threshold will be raised.
However, SEC-registered advisers with ~$500 million or less in AUM should keep a watchful eye on the results of the SEC staff’s evaluation. Transitioning back to registration with the states is a terrible outcome for a lot of reasons (some of which I’ve identified here: https://lnkd.in/g3JyDwmP), and I suspect many advisers would go to the ends of the earth to remain SEC registered… especially those that would be required to be registered in multiple states or certain states with more draconian rules.
I’m assuming such potential SEC rulemaking would be subject to a public comment period. If and when the time comes, I know I and others will be at the ready to chime in with our two cents.
Impressive Content v. Disclosure Ratio
This might be a new record in content v. disclosure ratio: 24% content and 76% disclosure.
Congratulations to Goldman Sachs Asset Management and its compliance department; I tip my cap.
Is this what the SEC thinks consumers actually want or need?
Reporting of “Access Persons” Beneficially-Owned Securities Accounts – Who, What, and When
The SEC’s code of ethics rule is fairly prescriptive—particularly with respect to the reporting of “access persons” beneficially-owned securities accounts.
The 3 most important questions to answer when designing and implementing a compliant code of ethics w/r/t reporting of personal securities accounts are:
1️⃣ Who within the advisory firm is subject to reporting of their personal securities transactions and holdings?
2️⃣ What information do such individuals need to report with respect to their personal securities and holdings?
3️⃣ When must they report such information?
In brief, the answers are:
1️⃣ Access persons
2️⃣ Holdings reports and transaction reports
3️⃣ Initially, quarterly, and then annually
An “access person” (i.e., someone that must report beneficially-owned securities holdings and transactions) is a supervised person that has access to nonpublic info re: client securities holdings, transactions, or recommendations.
Remember that exceptions apply to non-reportable securities (including mutual funds), automatic investment plans, and accounts over which the access person has no direct/indirect influence or control.
For more detail, read this past article I wrote → “RIA Code Of Ethics: Important Nuances To Note In Relatively Straightforward Requirements”
The SEC’s Investor Advisory Committee Recommends Harmonization with FINRA Rules re: Arbitration Clauses
The SEC’s Investor Advisory Committee wants to 86 most arbitration clauses from RIA client agreements.
On June 5th, the Committee recommended that the SEC:
➡️ Create arbitration rules that harmonize with FINRA’s prohibitions against certain types of predispute arbitration clauses (i.e., “adopt rules similar to FINRA Rules 2268, 12213, and 12800”)
➡️ Gather/assess further data re: predispute arbitration clauses by RIAs and the outcomes for clients
➡️ Develop investor education materials to explain arbitration and provide investors with questions to ask RIAs about arbitration
🤨 IMO, the recommended harmonization with FINRA rules is a bit of an eyebrow-raiser. The prescriptive rules-based FINRA regulatory regime is fundamentally different than the principles-based SEC regulatory regime, and the SEC should not catalyze the erosion of such principles or the freedom of contract in favor of FINRA-style regulation.
The Committee’s full recommendations can be found here.
I’m skeptical that the current SEC Commissioners will jump at the opportunity to engage in additional rulemaking given the still-lingering hangover from the Gensler-era rulemaking deluge, but time will tell if the SEC takes any action on arbitration clauses (whether directly through rulemaking or indirectly through a Risk Alert, guidance, or as filtered through Exam Staff).
SEC Withdraws 14 “Proposed Regulatory Actions”
In-line with the new SEC leadership’s “more is not better” approach to regulation, yesterday the SEC officially withdrew 14 “Proposed Regulatory Actions” (i.e., pending new rules or rule amendments that had been proposed but not adopted).
Of primary interest to RIAs are the elimination of proposed rules/amendments related to:
– Conflicts of Interest Associated with the Use of Predictive Data Analytics
– Safeguarding Advisory Client Assets (i.e., custody)
– Cybersecurity Risk Management
– Enhanced Disclosures About Environmental, Social, and Governance Investment Practices
– Outsourcing by Investment Advisers
– Cybersecurity Risk Management Rule
As the public release plainly states, “The Commission does not intend to issue final rules with respect to these proposals. If the Commission decides to pursue future regulatory action in any of these areas, it will issue a new proposed rule.”
While it’s certainly possible that new proposed rules will be issued at some point down the line, I wouldn’t hold my breath.
Read the full list of withdrawn rules/rule amendments—and all SEC rulemaking activity in general—here.
