The Securities and Exchange Commission (SEC) recently announced the withdrawal of several Biden-era regulations, including a proposed rule that would have required a broad range of platforms and financial intermediaries (such as broker-dealers, clearing agencies, national securities exchanges, and transfer agents) to adopt policies and procedures that address cybersecurity risks. The proposed rule also would have mandated immediate notification to the SEC of significant cybersecurity events along with detailed reporting and public disclosures.
Originally proposed in March 2022, the withdrawn rule generated significant industry controversy and thousands of public comments across two comment periods. If implemented, it would have significantly expanded the cybersecurity compliance obligations for registered investment advisers.
The withdrawal, while notable, is not entirely unexpected. Though the SEC did not cite a specific rationale, the move aligns with a broader shift under Commissioner Paul Atkins toward easing compliance burdens for market participants. Recent amendments to Regulation S-P, which require broker-dealers, registered funds, and registered investment advisers to adopt written policies and procedures that address cybersecurity risks, may have already addressed some of the concerns the withdrawn rule sought to tackle.
Shortly thereafter, the parties to the SEC’s closely-watched enforcement action against SolarWinds and its CISO announced a pending settlement of the case. While the terms of the settlement are not yet public, the move indicates a significant shift in the litigation on the heels of the SEC’s opposition to SolarWinds’ motion for summary judgment, which had urged the court to proceed to trial.
While no new cyber-related enforcement actions have been filed under Chair Atkins, the Trump Administration’s creation of a Cyber and Emerging Technologies Unit earlier this year potentially signals continued focus on cyber-related misconduct, particularly in protecting retail investors in the emerging technologies space.
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