October 24, 2023
The Honorable Sherrod Brown
The Honorable Tim Scott
Committee on Banking, Housing, and City Affairs
United States Senate
The Honorable Patrick McHenry
The Honorable Maxine Waters
Committee on Monetary Providers
Home of Representatives
Topic: Securities and Alternate Fee: Funding Firm Names
Pursuant to part 801(a)(2)(A) of title 5, United States Code, that is our report on a serious rule promulgated by the Securities and Alternate Fee (SEC) titled “Funding Firm Names” (RIN: 3235-AM72). We acquired the rule on September 21, 2023. It was printed within the Federal Register as a ultimate rule on October 11, 2023. 88 Fed. Reg. 70436. The efficient date is December 11, 2023.
In keeping with SEC, it’s amending a rule beneath the Funding Firm Act of 1940 that addresses sure broad classes of funding firm names which are prone to mislead buyers about an funding firm’s investments and dangers. See Funding Firm Act, ch. 686, title I, 54 Stat. 789 (1940). SEC said that the amendments to this rule are designed to extend investor safety by enhancing, and broadening the scope of, the requirement for sure funds to undertake a coverage to take a position no less than 80 p.c of the worth of their belongings in accordance with the funding focus that the fund’s identify suggests, updating the rule’s discover necessities, and establishing recordkeeping necessities. SEC additionally said that it is usually adopting enhanced prospectus disclosure necessities for terminology utilized in fund names, and extra necessities for funds to report info on Kind N-PORT concerning compliance with the names-related regulatory necessities.
Enclosed is our evaluation of SEC’s compliance with the procedural steps required by part 801(a)(1)(B)(i) by means of (iv) of title 5 with respect to the rule. If in case you have any questions on this report or want to contact GAO officers accountable for the analysis work regarding the subject material of the rule, please contact Shari Brewster, Assistant Basic Counsel, at (202) 512-6398.
Shirley A. Jones
Managing Affiliate Basic Counsel
cc: Vanessa A. Countryman
Securities and Alternate Fee
REPORT UNDER 5 U.S.C. § 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
SECURITIES AND EXCHANGE COMMISSION
“INVESTMENT COMPANY NAMES”
(i) Price-benefit evaluation
The Securities and Alternate Fee (SEC) ready an financial evaluation for this ultimate rule. The evaluation consists of: an introduction and evaluation of broad financial concerns; the institution of a baseline to check prices, advantages, and different financial impacts; and alternate options SEC thought-about.
(ii) Company actions related to the Regulatory Flexibility Act (RFA), 5 U.S.C. §§ 603–605, 607, and 609
SEC ready a Last Regulatory Flexibility Evaluation. The evaluation included a press release of the necessity for and goals of the ultimate rule; an outline of serious points raised by public feedback; an outline of the small entities topic to the ultimate rule; projected reporting, recordkeeping, and different compliance necessities; and an outline of company actions to reduce results on small entities.
(iii) Company actions related to sections 202–205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532–1535
As an impartial regulatory company, SEC will not be topic to the Act. See 2 U.S.C. §§ 658(1), 1502(1).
(iv) Company actions related to the Administrative Pay-As-You-Go-Act of 2023, Pub. L.
No. 118-5, div. B, title III, 137 Stat 31 (June 3, 2023)
Part 270 of the Administrative Pay-As-You-Go-Act of 2023 amended 5 U.S.C. § 801(a)(2)(A) to require GAO to evaluate company compliance with the Act, which establishes necessities for administrative actions that have an effect on direct spending, in GAO’s main rule stories. In steering to Government Department businesses, issued on September 1, 2023, the Workplace of Administration and Finances (OMB) instructed that businesses ought to embrace a press release explaining that both: “the Act doesn’t apply to this rule as a result of it doesn’t improve direct spending; the Act doesn’t apply to this rule as a result of it meets one of many Act’s exemptions (and specifying the related exemption); the OMB Director granted a waiver of the Act’s necessities pursuant to part 265(a)(1) or (2) of the Act; or the company has submitted a discover or written opinion to the OMB Director as required by part 263(a) or (b) of the Act” of their submissions of guidelines to GAO beneath the Congressional Evaluation Act. OMB, Memorandum for the Heads of Government Departments and Companies, Topic: Steerage for Implementation of the Administrative Pay-As-You-Go Act of 2023, M-23-21 (Sept. 1, 2023), at 11–12. OMB additionally states that directives within the memorandum that complement the necessities within the Act don’t apply to proposed guidelines which have already been submitted to the Workplace of Data and Regulatory Affairs, nonetheless businesses should adjust to any relevant necessities of the Act earlier than finalizing such guidelines.
SEC doesn’t focus on the Administrative Pay-As-You-Go Act of 2023 on this ultimate rule.
(v) Different related info or necessities beneath acts and government orders
Administrative Process Act, 5 U.S.C. §§ 551 et seq.
On June 17, 2022, SEC printed a proposed rule. 87 Fed. Reg. 36594 (Proposal). SEC said that it acquired remark letters on the Proposal from a wide range of commenters, together with funds, legislation companies, investor advocacy teams, environmental advocacy teams, skilled and commerce associations, public coverage analysis institutes, lecturers, and people. SEC additionally said that it thought-about and mentioned feedback within the preamble of the ultimate rule.
Paperwork Discount Act (PRA), 44 U.S.C. §§ 3501–3520
SEC decided that this ultimate rule incorporates info assortment necessities (ICRs) and submitted them for evaluation by OMB. SEC estimated the burden of every ICR. SEC lists the ICRs as follows: (1) “Rule 35d-1 Beneath the Funding Firm Act of 1940, Funding Firm Names” (OMB Management Quantity 3235-0548); (2) “Kind N-1A Beneath the Funding Firm Act of 1940 and Securities Act of 1933, Registration Assertion of Open-Finish Administration Funding Firms” (OMB Management Quantity 3235-0307); (3) “Kind N-2 Beneath the Funding Firm Act of 1940 and Securities Act of 1933, Registration Assertion of Closed‑Finish Administration Firms” (OMB Management Quantity 3235-0026); (4) “Kind N-8B-2, Registration Assertion of Unit Funding Trusts Which Are At the moment Issuing Securities” (OMB Management Quantity 3235-0186); (5) “Kind S-6, Registration Beneath the Securities Act of 1933 of Unit Funding Trusts Registered on Kind N-8B-2” (OMB Management Quantity 3235-0184); (6) “Kind N-PORT beneath the Funding Firm Act of 1940” (OMB Management Quantity 3235‑730); and (7) “Funding Firm Interactive Information” (OMB Management Quantity 3235-0642).
Statutory authorization for the rule
SEC promulgated this ultimate rule pursuant to sections 77e, 77f, 77g, 77h, 77j, 77s, 78j, 78m, 78o, 78w, and 78ll, 80a-8, 80a-18, 80a-29, 80a-30, 80a-33, 80a-34, 80a-37, 80a-58, and 80a-63 of title 15, United States Code.
Government Order Quantity 12866 (Regulatory Planning and Evaluation)
As an impartial regulatory company, SEC will not be topic to the Order.
Government Order Quantity 13132 (Federalism)
As an impartial regulatory company, SEC will not be topic to the Order.