ICI Calls On SEC to Reassess Regulatory Agenda Amid Presidential Transition

The Investment Company Institute urged the Securities and Exchange Commission to pause compliance deadlines for recent rules, suspend work on pending proposals and extend expiring relief for market participants, citing concerns about burdensome costs and implementation challenges.

In a letter to SEC Chair Gary Gensler, the ICI highlighted key issues impacting funds, investment advisers and investors, calling for regulatory prudence ahead of the leadership transition in Washington.

“We have different clients than the ICI,” an SEC spokesperson stated in an emailed response. “The SEC has no intention of suspending its work on behalf of American investors and issuers.”

The ICI emphasized that a new SEC chair, expected under the incoming administration, should reassess the current regulatory framework and determine appropriate next steps. The ICI’s appeal reflects growing tension between regulators and the asset management industry over the pace and scope of rulemaking under Gensler’s tenure.

Marketing Rule and Off-Channel Communications

The ICI flagged compliance challenges with the SEC’s marketing rule, which governs investment advisers’ advertising practices. The rule’s requirements, including new disclosures and recordkeeping obligations, have been costly and complex for advisers to implement, according to the letter. The ICI noted that off-channel communications, such as text messages and encrypted messaging apps, pose additional compliance risks, as advisers are tasked with monitoring and archiving these communications to avoid regulatory penalties.

“The asset management industry dedicated, and is continuing to dedicate, substantial time, money and resources to implement these new requirements, in some cases at considerable cost to investors,” the ICI stated, emphasizing that upcoming compliance deadlines should be delayed to allow further industry adjustments.

Fiduciary Duty and Rule Proposals

The letter also raised questions about the fiduciary status of advisers under proposed rules, including those intended to safeguard advisory client assets and address conflicts tied to predictive data analytics. These proposals, the ICI states, could reshape how advisers manage client relationships and impose additional costs on firms. The ICI argued that such sweeping changes should be reassessed by the next SEC chair to ensure they align with the agency’s investor protection mandate without stifling market innovation.

The ICI pointed out that several recently adopted rules—such as amendments to Form N-PORT and regulations on short position reporting—are currently in courts facing legal challenges. Recent court decisions invalidating certain SEC rulemaking further underscore the need for caution in trying to move forward with them, the ICI said. It recommended staying the effectiveness of rules under litigation until final judicial outcomes are determined.

“This backdrop further increases uncertainty—and quite possibly adds needless expense—for market participants,” the ICI wrote.

The letter also urged the SEC to extend relief related to Rule 15c2-11, which requires market makers to review issuer information before publishing quotes for that issuer’s securities; that rule is set to expire in January 2025. The ICI cautioned that applying this rule to fixed-income securities, historically exempt, could disrupt the market and harm retail investors. It called for indefinite relief until the SEC conducts a dedicated rulemaking process for fixed-income securities.