In 2024, the SEC plans to finalize as many as 21 new regulations with fresh industry requirements, an increase from 16 in 2023.10 For a more detailed review of these rules, refer to the 2024 Investment Management Regulatory Outlook. This flurry of activity has led some industry participants to believe that the number of new rules has been too much too fast for the industry.11 However, this pace is not likely to ebb. The SEC is planning to continue its record rule-setting pace in 2024. If the SEC finalizes just 75% of its proposed agenda for 2024, it will surpass the previous highwater mark set in 2023.12
Moreover, regulators have returned to using fines and penalties as a method to encourage compliance.13 The SEC issued a record dollar amount of enforcement penalties in 2022, followed by the second-highest dollar amount ever in 2023.14 Client communications continues to be an active area for SEC investigations. In February 2024, the SEC announced penalties totaling over US$81 million against 16 investment management firms for failures to properly preserve electronic communications.15 Regulators in the United States may continue using penalties as a tool to correct behavior, rather than encouraging compliance through other means. This means that noncompliance could become costlier than ever before, and this trend may continue for the foreseeable future.
The heightened focus on new rules marks a shift for the agency after several years in which it was more likely to reexamine the utility, and in some cases redundancy, of existing rules. For example, in 2018 and 2019, several final rules from the SEC were aimed at streamlining the overlaps between US generally accepted accounting principles and required disclosures by certain issuers, expanding the exemptions available under Regulation A to more issuers, and easing some restrictions on proprietary trading that had been in place under the Volcker Rule.16 This focus on existing rules was the main driver of the relatively lower intensity index values seen from 2017 to 2020. Two additional elements that contributed to the lower intensity values were the relatively less frequent use of enforcement actions, and lower fines and penalties. During this period, regulators seemed to mainly turn their attention toward rules and regulations already on the books to deliver on their mission to help facilitate financial markets stability.17