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Key Takeaways
- Last week, the SEC withdrew 14 proposed regulatory actions that had been pending for several years, including a number of proposed rules that would have had a major impact on investment advisers and funds.
- The proposed rules that were withdrawn include those commonly referred to as the Investment Adviser Outsourcing Rule, the ESG Rule, the Cybersecurity Rule, the Safeguarding Rule, and the Artificial Intelligence Rule.
- Although widely anticipated, the withdrawals are welcome news for the industry, as certain of the proposed rules would have introduced considerable implementation challenges.
On Thursday, June 12, 2025, the SEC formally withdrew 14 notices of proposed rulemaking, including several significant proposals relating to investment advisers that had been issued between March 2022 and November 2023 under Chair Gensler's leadership.1 The SEC indicated that it does not intend to issue final rules with respect to these proposals. If the SEC decides to pursue future regulatory action in any of these areas, it will issue a new proposed rule.
The withdrawals had been widely anticipated. Following the Fifth Circuit's decision in June 2024 vacating the SEC's so-called Private Fund Adviser Rule, the statutory authority underlying many of these proposed regulatory actions had been in question.2 In its decision last June, the Fifth Circuit held that the SEC exceeded its statutory authority in relying on Sections 211(h) and 206(4) of the Investment Advisers Act of 1940 to adopt the rules and rule amendments that constituted the Private Fund Adviser Rule. Section 206(4), in particular, was the basis for several of the proposed rules withdrawn by the SEC.
The withdrawn rule proposals include the following:
- Outsourcing by Investment Advisers
- Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices
- Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies
- Safeguarding Advisory Client Assets
- Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers
Investment advisers should note that the Financial Crimes Enforcement Network's ("FinCEN") rule3 extending the anti-money laundering ("AML") and countering the financing of terrorism ("CFT") requirements to certain investment advisers (the "AML/CFT Program Rule") is still scheduled to come into effect on January 1, 2026, and the related joint SEC/FinCEN proposal4 to extend the customer identification program requirements to investment advisers is still pending. Several industry groups have requested an extension to the compliance date for the AML/CFT Program Rule, but for now the compliance date remains January 1, 2026.
Footnotes
1. See the Index of the SEC's Rulemaking Activity.
2. For additional background, see SEC's Private Fund Adviser Rule Vacated by the Fifth Circuit, Dechert OnPoint (June 2024).
3. FinCEN: Anti-Money Laundering/Countering the Financing of Terrorism Program, 89 Fed. Reg. 72156 (Sept. 4, 2024).
4. SEC and FinCEN: Notice of Proposed Rulemaking, Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers, 89 Fed. Reg. 44571 (May 21, 2024).
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