June 4, 2024
What Happened?
On June 3rd, 2024, the SEC’s amendments to Regulation S-P were published to the Federal Register.
The amendments will become effective 60 days after publication in the Federal Register. Larger entities will have 18 months after the date of publication in the Federal Register to comply with the amendments, and smaller entities will have 24 months after the date of publication in the Federal Register to comply.
The finalized amendments (Amended Regulation S-P) outline which entities will be considered “larger entities”, included in the table below. Smaller entities will be the covered institutions that do not meet these standards.
| Entity | Qualification to be Considered a “Large Entity” |
|---|---|
| Investment companies together with other investment companies in the same group of related investment companies1 | Net assets of $1 billion or more as of the end of the most recent fiscal year |
| Registered investment advisers² | $1.5 billion or more in assets under management |
| Broker-dealers³ | All broker-dealers that are not small entities under the Securities Exchange Act for purposes of the Regulatory Flexibility Act |
| Transfer agents⁴ | All transfer agents that are not small entities under the Securities Exchange Act for purposes of the Regulatory Flexibility Act |
Next Steps:
Although both large and small entities have some time to comply with these amendments (18 months and 24 months, respectively), firms should start preparing for compliance now. If you do not already have a vendor management program in place, consider starting there. Building these programs takes time, and we are already seeing requests for vendor due diligence in cyber-related exam requests.
If you have not done so already, you may also want to review Fairview’s initial flash report on this topic, SEC Adopts Rule Amendments to Regulation S-P, which includes an overview of the amendments.
If you have questions or could use assistance preparing for compliance with Amended Regulation S-P, let us know. Our team of regulatory experts is available to walk you through these changes and to answer any questions you may have.
| Notes from adopting release: |
|---|
| 1. “Group of related investment companies” is as defined in 17 CFR 270.0-10. We estimate that, as of September 2023, 77% of registered investment companies would be considered to be larger entities. This estimate is based on data reported in response to Items B.5, C.19, and F.11 on Form N-CEN. 2. We estimate that, as of September 2023, 23% of registered investment advisers would be considered to be larger registered investment advisers. This estimate is based on data reported in response to Items 2.A and 5.F.2.(c) on Form ADV. 3. A broker or dealer is a small entity if it: (i) had total capital of less than $500,000 on the date in its prior fiscal year as of which its audited financial statements were prepared or, if not required to file audited financial statements, on the last business day of its prior fiscal year; and (ii) is not affiliated with any person that is not a small entity. This threshold was chosen to include all broker-dealers who do not fall within the definition of a small entity under the Regulatory Flexibility Act (5 U.S.C. 553). Based upon FOCUS filings for the third quarter of 2023, we estimate approximately 77% of broker-dealers, not including funding portals, would be considered larger entities. Based upon staff analysis and review of public filings, we estimate approximately 3% of funding portals would be considered larger entities. 4. A transfer agent is a small entity if it: (i) received less than 500 items for transfer and less than 500 items for processing during the preceding six months; (ii) transferred items only of issuers that are small entities; (iii) maintained master shareholder files that in the aggregate contained less than 1,000 shareholder accounts or was the named transfer agent for less than 1,000 shareholder accounts at all times during the preceding fiscal year; and (iv) is not affiliated with any person that is not a small entity. 17 CFR 240.0-10. This threshold was chosen to include all transfer agents who do not fall within the definition of a small entity under the Regulatory Flexibility Act. Based on the number of transfer agents that reported a value of fewer than 1,000 for items 4(a) and 5(a) on Form TA-2 filed with the Commission as of September 30, 2023, we estimate approximately 132 transfer agents may be considered small entities, of 315 total registered transfer agents. See infra section VI. |
