The SEC’s spring 2024 agenda was released last week, and it offers clues about the timing of long-awaited final rulemaking by the securities regulator.

The Office of Information and Regulatory Affairs’ Spring Unified Agenda of Regulatory and Deregulatory Actions includes the short- and long-term regulatory actions various administrative agencies plan to take, particularly the SEC.

Here are a few highlights:

• The SEC plans to propose rules on human capital management disclosure and corporate board diversity;
• It plans to finalize rules on topics including climate change disclosure, shareholder proposals and cybersecurity risk management;
• And, interestingly, it is planning to reissue proposed rules on swing pricing and conflicts of interest associated with predictive data analytics (or “PDA,” which includes artificial intelligence).

ESG requirements

As noted in the agenda, the SEC’s Division of Corporation Finance recommends that the Commission adopt requirements for investment companies and investment advisers related to environmental, social and governance (ESG) factors, including ESG claims and related disclosures to clients and shareholders. The agenda lists October as the final rule issue date.

The controversial rule seemed to make few groups happy when the SEC voted on it in March. It requires some public companies in the US to report their greenhouse gas emissions and climate risks.

The rule adopted in early March was watered down from what the nation’s securities regulator had proposed two years ago, after it faced lobbying and criticism from business and trade groups and Republican-led states that argued the SEC had overstepped its mandate. But the new version’s softened disclosure mandates didn’t stave off lawsuits; after the final rule was approved, some of the critics sued – and environmental groups such as the Sierra Club also sued, saying the SEC’s weakened rule did not go far enough.

“In every generation since the SEC’s founding 90 years ago, our Commission has updated rules to meet the markets and technologies of the times.”

SEC Chair Gary Gensler

The SEC paused the implementation of its new climate disclosure rule while it defends the regulation in court, so the October date is either aspirational or made with an expectation those court actions will be finished.

Predictive data analytics

On the agenda, the division lists October as the month the SEC plans to release a totally new Notice of Proposed Rulemaking for its PDA rule . This targets conflicts of interest associated with the use of such data analytics, artificial intelligence, machine learning, and similar technologies in connection with certain investor interactions.

The SEC in July 2023 had issued its PDA proposal, and it would require investment advisers and broker dealers to “eliminate or neutralize” conflicts of interest in all types of investor interactions and uses of technology.

The proposal has faced stiff pushback from financial industry trade groups, industry firms, lawmakers and the two Republican SEC Commissioners who said it was way too broadly written and would raise costs for advisers and investors.

In May, SEC Chair Gary Gensler has noted that his agency is taking those comments seriously.

Swing pricing

Finally, the SEC plans to reissue its swing pricing proposal, which was unveiled in November 2022. Under its original writing, the rule would require any open-end fund – other than a money market fund or exchange-traded fund – to use swing pricing, which adjusts a fund’s value based on trading activity, so redeeming shareholders bear transaction costs rather than diluting other shareholders.

The proposal would also implement a “hard close,” requiring that funds receive trades by a certain time, typically around 4pm ET, to execute them at that day’s price.

Lawmakers and industry groups have urged the SEC to withdraw the proposal over concerns it could increase costs, reduce returns and limit choice for millions of investors. Looking at the agenda, the SEC plans to reissue the proposal by April 2025.

DEI and human capital disclosures

The agenda merely notes the Division is considering recommending that the SEC propose rule amendments to enhance registrant disclosures about the diversity of board members and nominees. And this is considering recommending that the agency propose rule amendments to enhance registrant disclosures regarding human capital management. No timeframes were listed.

Referring to the regulatory agenda issues last week, SEC Chair Gary Gensler issued this statement (in part): “In every generation since the SEC’s founding 90 years ago, our Commission has updated rules to meet the markets and technologies of the times. We work to promote the efficiency, integrity, and resiliency of the markets. We do so to ensure the markets work for investors and issuers alike, not the other way around.”