SEC Formally Withdraws Fourteen Rule Proposals

The Securities and Exchange Commission (“SEC”) withdrew 14 proposed rules introduced between October 2020 and November 2023. Only one was not proposed by the former Chair Gensler. The notice of withdrawal was published on the SEC’s website on June 12, 2025, and will become effective once it is published in the Federal Register.

Of the 14 rules withdrawn, thirteen relate to the Division of Investment Management and the Division of Trading and Markets and one relates to a Corp Fin shareholder proposal rule.

The withdrawal was made official via a new final rule posted by the SEC, stating that the SEC “no longer intends to issue final rules with respect to these proposals.” Any future regulatory action in these areas will require restarting the regulatory process under the Administrative Procedure Act with a new round of notice-and-comment process.

Some of these proposed rules had extensive comments from the industry and registered investment advisers and funds would have faced substantial new burdens. The withdrawal affords advisers and funds and other market participants a degree of short-term reprieve under the current SEC regulatory agenda, but it may not be permanent as the SEC noted the issues being addressed by the proposed rules could re-emerge as new rule proposals if the SEC decides to pursue further regulatory action.

Please note that the Anti-Money Laundering Rules and Amendments to Regulation S-P, which have respective compliance dates of January 1, 2026, and December 3, 2025 (Larger Entities) / June 3, 2026 (Smaller Entities) remains in effect.... at least for now!

Several of the proposed rules (rules 1 -5 below) had direct or indirect impact on advisers and funds. A summary of the fourteen proposed rules withdrawn is below:

1. Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers -- the rule would have placed limits and disclosure obligations on advisers (and broker-dealers) using AI or data modeling with investors.

2. Safeguarding Advisory Client Assets -- the rule would have significantly revised the custody rule, including new definitions of “custody,” enhanced protections for non-traditional assets, and mandatory surprise exams.

3. Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices – the rule would have required detailed environmental, social and governance reporting by certain advisers and investment companies.

4. Outsourcing by Investment Advisers – the rule would have prohibited outsourcing services to third parties unless the adviser conducted extensive due diligence, monitoring and maintained recordkeeping related to third-party service providers.

5. Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies – the rule would have mandated advisers adopt written cyber policies, incident response programs, make public disclosures of material breaches and maintain related records.

6. Cybersecurity Risk Management Rule for Broker-Dealers, Transfer Agent and Other Securities Market Entities – A similar rule as proposed for advisers and funds above.

7. Regulation Best Execution – the rule would have rule codifying best execution obligations across broker-dealers and advisers.

8. Prohibition Against Fraud, Manipulation, and Deception in Connection With Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers – the rule would have tightened swap fraud rules, curb manipulation and undue influence over chief compliance officers.

9. Volume-Based Exchange Transaction Pricing for NMS Stocks – the rule was designed to restrict exchange pricing tiers based on trading volume, impacting execution quality incentives.

10. Order Competition Rule – rule sought boosting price competition in retail order flow

11. Regulation Systems Compliance and Integrity – the rule would have broadened applicability of systems compliance and integrity requirements to more market entities.

12. Supplemental Information and Reopening of Comment Period for Amendments to Exchange Act Rule 3b-16 Regarding the Definition of Exchange – the rule would have clarified what constitutes an “exchange” under Rule 3b-16, with implications for DeFi platforms and trading venues.

13. Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail To Enhance Data Security – the rule proposed tighter security protocols and access limitations for the CAT.

14. Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals Under Exchange Act Rule 14a-8 – the rule would have liberalized resubmission of certain proposals and changed thresholds for inclusion.

Compliance4 welcomes the rule withdrawals in the short term but cautions that such rules may be re-proposed.

We recommend that firms review their cybersecurity, third party oversight and custody policies and procedures as these and other matters do have a direct effect on clients. Finally, the adviser AML rule remains and firms should begin working on developing new procedures and adopt such them in advance of the compliance date of January 1, 2026.