On February 5, 2025, Robert Cook, President and Chief Executive Officer of the Financial Industry Regulatory Industry, Inc. (“FINRA”), announced that FINRA will not set an effective date for its recent amendments (the “Amendments”) to Trade Reporting and Compliance Engine (“TRACE”) reporting rules to reduce the current 15-minute timeframe to one minute for reporting transactions in relevant fixed income securities.  The U.S. Securities and Exchange Commission (“SEC”) approved the Amendments in September 2024.

Following the SEC’s approval of the Amendments, FINRA continued to receive questions and concerns about implementing the shorter reporting requirements and the potential for unintended consequences for the markets.  FINRA believes it is important to take more time to consider these questions and concerns and develop appropriate responses.  As such, FINRA plans to prepare a new filing with the SEC to make substantive changes to the Amendments.  The new filing is expected to (i) propose less significant reductions to current reporting timeframes for manual trades and (ii) address other TRACE requirements that may unnecessarily delay reporting, such as current requirements for reporting trade allocations.  The new filing will be published for public comment and will require SEC approval before becoming effective.

On January 27, 2025, US Securities and Exchange Commission Commissioner Hester Peirce gave the keynote address at the Northwestern Securities Regulation Institute in which she offered her personal views on how public companies and, to some extent, the SEC in working with public companies might move away from “importing politics and contentious social issues” into corporate and disclosure matters and how we might return to materiality as the cornerstone of disclosure.  To that end, in her remarks, she offered a few suggestions:

Refocus on the limited mission of public companies and of the SEC.  Commissioner Peirce takes the view that public companies have a singular focus–building corporate value for shareholders, precluding companies from diverting time and resources to matters that do not contribute to the company’s long-term value—such as the “ever-growing, never-satisfied set of stakeholders that brazenly grasp at company resources to do something other than maximize the value of the company.”  She describes the SEC’s mission as focused on investor protection by ensuring investors have the disclosures they need in order to make their decisions.

Return to materiality as the guidepost for disclosure requirements.  Commissioner Peirce points to a number of examples of disclosure requirements that have been prompted by the interests of particular constituencies but may not have met a materiality standard. For example, in her remarks, she cites conflict minerals disclosure, pay ratios, the now-stayed climate disclosure rules, and expanded human capital disclosure.  She advocates that: “The best course is for all of us to retreat to a place where materiality from the perspective of the reasonable investor is the sine qua non for disclosures.  In this retreat, there is no shame.  Materiality-based disclosure is one of the foundational strengths of the American securities regulatory regime.”

Asset managers should focus on the exercise of their fiduciary duty.  The Commissioner noted that fiduciary duty to the fund should be an asset manager’s guiding principle when deciding how or whether to exercise a vote.  In this regard, Commissioner Peirce objected to the requirement that investment companies make public how they vote on proxies relating to portfolio securities like “environment or climate” or “human rights or human capital/workforce.”  She notes that this exposes voting to scrutiny by third parties in ways that may interfere with the exercise of the manager’s fiduciary duty.

Addressing the shareholder proposal process.  Commissioner Peirce notes that the rise in environmental and social proposals imposes significant monetary and opportunity costs on companies, diverting management and board attention away from their primary goal of maximizing corporate value.  As a potential solution, she suggests reexamining Rule 14a-8 to ensure that a proponent has some meaningful economic stake or investment interest in a company.

Refrain from using enforcement actions to override managerial decision-making.  Commissioner Peirce expressed concerns regarding a trend toward enforcement actions in which the Commission has taken an aggressively broad interpretation of Exchange Act Section 13(b)(2)(B)’s internal accounting controls provision and other instances in which the Commission has used Rule 13a-15(a), which requires companies to have “disclosure controls and procedures” in enforcement actions.  In these cases, the Commission has, in effect, used internal control and disclosure controls requirements to extend its authority and to address the internal corporate policies of the subject companies in ways that may be inconsistent with the largely disclosure-based mandates of the Commission.

Provide guidance to companies.  Commissioner Peirce emphasized the importance of early and frequent communication during the registration statement review process and encourages more and renewed dynamic, interactive engagement by the staff with public companies, their lawyers, and accountants to address complex questions about new and existing rules.

Read Commissioner Peirce’s full remarks.

On February 7, 2025, the US Securities and Exchange Commission (SEC) provided a temporary exemption from compliance with Rule 13f-2 under the Securities Exchange Act and the associated Form SHO reporting.  Originally, the first Form SHO disclosures were due by February 14, 2025, but the exemption now pushes out the deadline to February 17, 2026 for the January 2026 reporting period.

This extension provides institutional investment managers additional time to adapt to reporting requirements introduced under the SEC’s Short Sale Final Rules, which were finalized in October 2023.  The Short Sale Final Rules require certain institutional managers to report short sale-related data within 14 days following month-end, with the SEC subsequently publishing aggregated data in order to promote transparency.

Despite the extension, Acting Chair Mark Uyeda emphasized that while the exemption allows for a smoother compliance transition, the SEC will continue to use its regulatory tools to combat manipulative short selling practices.  The delay is intended to ensure that the data collected is accurate and useful to market participants, not to weaken enforcement. 

The Investment Company Institute (ICI) had urged the SEC to delay enforcement of the Short Sale Final Rules, citing concerns over the lack of compliance guidance and challenges associated with meeting the fast-approaching deadline.  The SEC’s decision effectively grants the relief sought by the ICI.  The Short Sale Final Rules remain subject to a litigation challenge.

Read the SEC’s exemptive order and press release.

The Securities and Exchange Commission (SEC) staff issued updated FAQs regarding Rule 35d-1 under the Investment Company Act of 1940 (the “Names Rule”) on January 8, 2025.  These updates reflect amendments that were adopted in 2023 and replace certain earlier guidance from 2001. The Names Rule requires investment funds to ensure their fund names accurately reflect the investment focus, mandating that at least 80% of the fund assets align with the terminology used in the fund names. 

Larger funds must comply with this new rule by December 10, 2025, while smaller funds have until June 10, 2026 to comply.

Under the amended Names Rule, funds cannot use terminology that suggests a specific investment focus unless they adopt an 80% Investment Policy, which is a fundamental or nonfundamental policy committing to invest at least 80% of fund assets in line with the fund name. This applies to names implying investment in a particular asset class, industry, geographic region, or group of investments with certain characteristics.  The rule establishes a framework for determining when a fund’s name must be supported by a corresponding investment policy.

Clarifications on the 80% Investment Policy.  The SEC staff clarified that shareholder approval is not required when a fund adopts or modifies a fundamental policy solely to comply with the Names Rule unless the change represents a significant deviation from an existing fundamental policy.

Guidance for Tax-Exempt and Municipal Funds.  Funds that suggest tax-exempt status in their names, such as Maryland Tax-Exempt Fund, must adopt an 80% Investment Policy and can use either an asset-based or income-based test in order to comply.  Single-state tax-exempt funds may include securities from issuers outside the named state if the securities meet federal and state tax exemption requirements.  The staff guidance also provided distinctions regarding terminology:  funds with “municipal” or “municipal bond” in their names must adopt an 80% policy. However, funds using municipal rather than tax-exempt can include securities subject to the Alternative Minimum Tax in their 80% basket, while tax-exempt funds cannot.

Specific Terms in Fund Names and Their Implications.  The updates expand the scope of the 80% Investment Policy requirement to include names suggesting investments with “particular characteristics.”  The SEC staff addressed the application of the rule to commonly used terms:

  • High-yield funds generally must invest 80% of their assets in below-investment-grade corporate bonds.  However, municipal or tax-exempt high-yield funds may invest less than 80% in such bonds, though they must still comply with the 80% requirement for “municipal” or “tax-exempt” securities.
  • Income funds are not required to adopt an 80% policy unless the name suggests an emphasis on specific income-generating securities rather than current income as a general investment objective.
  • Money market funds with generic names that imply investment in money market instruments do not need an 80% policy, as they are governed by Rule 2a-7.  However, funds specifying a particular type of money market instrument, such as US Treasury Money Market Fund, must meet the 80% investment requirement for that asset type.

The SEC staff’s updated FAQs provide additional guidance on compliance with the Names Rule, including a list of withdrawn 2001 Names Rule FAQs.  Read the 2025 Names Rule FAQs.

In a statement entitled “The Journey Begins,” on February 4, 2025, US Securities and Exchange Commission (“SEC” or the “Commission”) Commissioner Hester Peirce provided new details regarding her thoughts on the agency’s evolving position on crypto. Commissioner Peirce is leading the SEC’s new Crypto Task Force (the “Task Force”), which she described as “want[ing] to travel to a destination where people have great freedom to experiment and build interesting things, and which will not be a haven for fraudsters,” while “working to help create a regulatory framework that both achieves the Commission’s important regulatory objectives—including protecting investors—and preserves industry’s ability to offer products and services.” 

Commissioner Peirce’s statement outlined at least some of the Task Force’s goals; including, firstly, resolving “the status of crypto assets under the securities laws.”

Other Task Force goals Commissioner Peirce highlighted include:

  • Identifying areas outside the Commission’s jurisdiction, including by utilizing the SEC staff’s no action letter process to seek staff views on specific situations;
  • Possibly providing temporary prospective and retroactive Commission relief for certain token offerings, under which the tokens are deemed not to be securities, subject to issuers’ compliance with certain information and other requirements;
  • Working to change the path to registered token or coin offerings, such as through the use of Regulation A and crowdfunding;
  • Considering expanding the special-purpose broker dealer no action statement to cover broker-dealers that custody both crypto asset securities and crypto assets that are not securities;
  • Working with investment advisers to provide a practical regulatory framework within which advisers can safely custody client assets;
  • Clarifying whether and how crypto-lending and staking programs are covered by the federal securities laws;
  • Working with the SEC staff to provide clear statements about the approach used when considering SRO applications to list new types of crypto exchange-traded products;
  • Working on the intersection of crypto and clearing agency and transfer agent rules; and
  • Considering the facilitation of cross-border crypto projects on a limited and temporary scale, with the chance of expansion to a long-term, permanent solution.

Importantly, Commissioner Peirce provided several avenues for the public to engage with the Task Force, including by email to crypto@sec.gov (noting that submissions will be posted publicly on sec.gov) and through in-person or virtual meetings, which can be requested at Request Form for Meetings with the Crypto Task Force (noting that those requesting a meeting are asked to provide a summary of the issues planned to be discussed, which will be posted publicly on sec.gov).

Read the speech here.

The Investment Company Institute (ICI) has asked the Securities and Exchange Commission (SEC) in a comment letter to delay enforcement of its new short sale disclosure rules (the “Short Sale Final Rules”) until additional compliance guidance is provided. The Short Sale Final Rules, finalized in October 2023, require certain institutional investment managers to report short sale-related data within 14 days following month-end. The SEC will then publish aggregated data by security while keeping individual trade details confidential. Additionally, a separate rule mandates that securities lending transactions be reported to the Financial Industry Regulatory Authority (FINRA) by the end of the day on which a securities lending transaction is effected or modified, with certain details made public by the following business morning.

In its comment letter, the ICI emphasized the urgency of enforcement relief, citing the fast-approaching February 14, 2025, deadline for the first disclosures. The ICI expressed concern that institutional investment managers lack necessary reporting and interpretive guidance, leaving them to determine their own compliance methods and system designs for Rule 13f-2 and Form SHO.

The Short Sale Final Rules (and related securities lending rule) have also faced legal challenges. In December 2023, The National Association of Private Fund Managers (NAPFM), Alternative Investment Management Association (AIMA), and Managed Funds Association (MFA) filed a lawsuit asking the U.S. Court of Appeals for the Fifth Circuit to invalidate the Short Sale Final Rules. A decision has not been made on this case.

In October 2023, then Commissioner Uyeda, now Acting Chair, said that “[given] the unfortunate, but likely, consequence of discouraging publicly beneficial short selling activity” he was “unable to support” the Short Sale Final Rules.

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have extended the compliance deadline for the amendments to Form PF, moving it from March 12, 2025 to June 12, 2025.

The SEC adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, including those that also are registered with the CFTC as commodity pool operators (CPOs) or commodity trading advisers (CTAs), on February 8, 2024.  The amendments aim to enhance the Financial Stability Oversight Council’s (FSOC) risk assessment capabilities and strengthen regulatory oversight of private fund advisers.

By extending the compliance date, the SEC and CFTC are allowing affected firms additional time to update reporting systems, address technical challenges, and manage associated costs.  The extension also provides firms with a longer adjustment period to ensure compliance with the revised reporting requirements.

Read the final rule extending the deadline and the final amendments to Form PF.

The Securities and Exchange Commission’s (SEC) Small Business Capital Formation Advisory Committee will meet on February 25, 2025 to discuss capital-raising challenges for emerging fund managers and smaller public companies the securities of which are not listed on a national securities exchange.  The meeting, available via webcast on SEC.gov, will begin with an overview of the SEC Office of the Advocate for Small Business Capital Formation’s 2024 Annual Report, which provides data on capital formation trends and includes policy recommendations.  See our two blog posts relating to the 2024 Annual Report summarizing Crowdfunding, Reg A & Private Companies trends and Exempt Offerings & Smaller Public Companies trends.

The morning session will focus on supporting emerging fund managers, with insights from industry participants.  In the afternoon, the committee will discuss challenges faced by smaller public companies the securities of which are not listed on a national securities exchange.  The meeting notice indicates that small public companies, which for these purposes are considered to be those companies with a market capitalization of $250 million or less, represent almost half of all public companies.  However, many small public companies do not have a class of equity securities listed on a national securities exchange.  As a result, these companies face particular challenges in raising capital. The group will hear from the OTC Markets Group.  The committee will explore ways to address some of the challenges facing smaller public companies.

Read the agenda and press release.

According to CB Insights’ State of Fintech 2024 Report (the “Report”), global fintech companies raised $33.7 billion in private placements in 2024, marking a 20% drop year-over-year.  Deal volume also declined, with 3,580 offerings completed—a 17% decline from the prior year.  However, this annual funding decline was the smallest in three years, signaling potential stabilization in the fintech sector. 

Interestingly, despite the overall funding decline, the median deal size for fintech companies rose by 33% to $4 million.  Investors concentrated their capital on fewer, higher-value opportunities. Mega-rounds—funding rounds exceeding $100 million—remained a significant driver of capital, with 73 such rounds raising a total of $12 billion.  Additionally, 14 new fintech unicorns emerged globally in 2024, bringing the total number of companies valued at over $1 billion to 326.  The Report also highlighted an active year for M&A. A total of 664 M&A exits were completed in 2024, a 6% year-over-year increase.  In contrast, IPO activity remained subdued, with only 28 IPOs completed and three fintech companies executing de-SPAC transactions.

Despite this decline in funding levels, median deal size for fintech companies increased by 33% to $4 million.  Fintech companies completed 73 mega-rounds, raising $12 billion through rounds that raised over $100 million.  Globally, there were 14 fintech unicorn “births”, bringing the total number of fintech companies valued at over $1 billion to 326.  The Report notes that there were a total of 664 M&A exits in 2024, a 6% jump year-over-year.  IPO activity remained relatively tame, with 28 IPOs completed, while only three fintech companies completed a de-SPAC transaction.

Spotlight on Fintech Subsectors

Within the fintech sector, payment solutions dominated in late 2024.  Half of the top 10 equity deals in 2024Q4 were undertaken by companies innovating in mobile payment apps, cross-border payment tools, and platforms digitizing B2B payments.  Banking tech gained increased investor attention as a stable subsector amidst regulatory uncertainty. In 2024, 38% of all banking tech deals were mid- or late-stage. While mid- and late-stage deals rose by 4 percent year-over-year across the broader fintech sector, banking tech saw a larger increase of 17 percent. Investors appeared to favor established solutions in a time of market volatility and evolving regulation.  As fintech adapts to shifting investor priorities and regulatory landscapes, the sector’s focus on scalable, proven solutions suggests continued evolution and resilience in 2025.