The pace and intricacies of regulatory change in the investment industry are, at times, nothing short of overwhelming. Yet, organizations in this space need to have a clear understanding of evolving regulations, their timing and overall impact.
To help you stay up to date, below is Cohen & Co’s quarterly recap of the latest developments at a variety of regulatory agencies likely to impact our clients.
In an effort to enhance transparency around proxy voting and make voting records more comparable, the SEC has proposed to expand the information that mutual funds, closed-end funds, exchange-traded funds (ETFs) and other registered investment companies must disclose about their proxy votes.
Public companies, institutional shareholders, funds and investment managers all would be affected, and will have potentially different views and interests as the rulemaking proceeds.
Among other things, the amendments would:
Impact: Published in the Federal Registrar on October 15, 2021, the comment period ends on December 14, 2021. Keep an eye out for changes to come based on the comments received.
On August 6, 2021, the SEC approved rules originally proposed by Nasdaq Stock Market LLC requiring all listed companies to meet certain minimum diversity targets or disclose why they aren’t doing so.
Rule 5605(f) requires Nasdaq-listed companies to have at least two diverse directors (companies with five or fewer board members need to have one diverse board member), including at least:
The board-level diversity data required must be disclosed by the later of August 8, 2022, or the date the company files its proxy statement for its 2022 annual meeting of shareholders. Failure to comply could result in delisting if not remedied within specified grace periods.
A number of entities are exempt from these requirements, including:
Impact: Even though these prescribed criteria do not currently affect the investment industry due to exemptions provided, many boards continue to seek opportunities to add diversity. Those boards that have not done so to date should be considering diversity initiatives as part of their overall operating strategy.
In early October 2021, the PCAOB staff issued guidance around the considerations auditors should apply when it comes to the relevance and reliability of information obtained from external sources and used as audit evidence.
The guidance serves as a reminder about the standards for evaluating evidence provided by others rather than obtained by the audit firm directly, which is becoming increasingly important to audits, particularly in supporting fair value measurements.
Impact: For valuations provided by management that are dependent on third party external data, these reminders are key in understanding what your auditors may be expecting you to provide regarding support for fair valued investments.
Contact Lori Novak at lnovak@cohenco.com, Julie Lowry at jlowry@cohenco.com or a member of your service team to discuss these topics further.
Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.