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(Article from Registered Funds Regulatory Update, July 2025)

For more information, please visit the Registered Funds Resource Center.

On June 12, 2025, the SEC formally withdrew fourteen proposed rules issued between March 2022 and November 2025 by former SEC Chair Gary Gensler under the Biden administration. The rescinded rule proposals span multiple areas of securities regulation.

Among the most significant of the withdrawals are the AI and ESG rule proposals that had been under development for several years. The AI rule proposal, which was proposed two years ago, would have created new rules requiring broker-dealers and investment advisers to eliminate or neutralize conflicts-of-interest related to predictive data analytics and similar technologies used to interact with investors. The ESG rule proposal, which was first proposed three years ago, would have imposed enhanced ESG disclosure requirements for funds, BDCs and investment advisers. Other proposed rules withdrawn include (i) cybersecurity guidelines for investment advisers and funds requiring the adoption and implementation of cybersecurity policies and procedures and mandatory reporting of significant cybersecurity incidents; (ii) mandated due diligence requirements for advisers outsourcing fund services to third-party service providers; and (iii) proposed updates to the Advisers Act custody rule. Additional rescinded rule proposals include (i) requiring broker-dealers to establish written policies and procedures designed to comply with best-execution standards; (ii) a new auction system for retail trade orders; (iii) narrowing standards for excluding shareholder proposals on proxy statements; (iv) data security amendments related to the National Market System Plan Governing the Consolidated Audit Trail; (v) new swap trade protections; (vi) protections against undue influence over chief compliance officers; (vii) volume-based exchange transaction pricing for National Market System stocks; (viii) an expansion of firms subject to Regulation Systems Compliance and Integrity; and (ix) updating the statutory definition of “exchange” to accommodate trading systems that trade crypto assets.

The SEC notice stated that if it determines to pursue future regulatory action in any of these areas, it will issue new proposed rules. The SEC did not elaborate on the reasons for the withdrawals, and it did not issue any statements in connection with the withdrawal of the proposed rules. The withdrawals follow an executive order issued by President Trump in January that paused all federal regulations not yet effective for the purpose of reviewing any questions of fact, law, and policy that the rules may raise. Industry groups had lobbied the SEC to revoke or rework many of these rules, seizing on the freeze on the pending rules ordered by the White House following Trump’s inauguration.

SEC Rulemaking Activity (June 12, 2025), available at:
https://www.sec.gov/rules-regulations/rulemaking-activity.