Dive Brief:
- The Securities and Exchange Commission announced Wednesday that it is extending the timeline for investment companies to comply with amendments to the agency’s “Names Rule” until 2027 and 2028, depending on the size of the fund group.
- Investment fund groups with over $10 billion in assets will now have until November 2027 to comply with the rule, which requires funds with named objectives like “growth” or “ESG” to invest 80% of the fund’s assets towards that goal. Funds with under $10 billion in assets will have until May 2028 to comply, according to a Feb. 18 press release.
- SEC Chair Paul Atkins announced that the rule was being reviewed, along with others promulgated under the prior administration, at an SEC oversight hearing hosted by the House Financial Services Committee last week.
Dive Insight:
The SEC passed amendments to the Names Rule in 2023, under then-chair Gary Gensler, who said at the time that the updates would “help ensure that a fund’s portfolio aligns with a fund’s name.” This is the second time compliance deadlines for the rule have been extended under the Trump administration, and the most recent changes also alter the asset thresholds for compliance.
As part of the changes announced this week, registered investment companies will not have to submit Names Rule reporting as part of their N-PORT disclosures. N-PORT is the form used by registered investment companies to report portfolio-related information and risk metrics to the agency on a monthly basis. The SEC said the changes are “designed to reduce reporting burdens without significantly affecting the use of the data or the public’s ability to assess relevant information about a fund.”
The SEC said the extended compliance timeline for the Names Rule “will provide additional time for funds and the Commission to consider the proposed amendments to Form N-PORT and avoid certain costs associated with regulatory requirements that the Commission is proposing to eliminate.”
Atkins told the House Financial Services Committee Feb. 11 that the Names Rule was just one of the rules affecting registered funds and investment advisers that he directed the Commission’s division directors and staff to review. The SEC chair said regulations like the Names Rule “add costs for investors,” which is why the agency is taking a retroactive approach to determine whether such rules are “fit for purpose.”
“I think it's good to have a retrospective review to see exactly how things are working,” Atkins said. “We also get lots of suggestions and comments from the industry and from investors. So the Names Rule is just one example.”
Under the original 2023 update, funds with over $1 billion in assets under management had until December 2025 to comply, with smaller funds having an additional six months. Last March, then-acting SEC Chair Mark Uyeda announced that the agency planned to give companies an extra six months to comply, but retained the $1 billion-threshold.
The SEC also released a FAQ page on complying with the amended Name Rules on Wednesday, which explains the staff’s thoughts on whether funds with terms like “money market,” “growth” or “high-yield” in their names are subject to the 80% investment threshold. The page does not explain the Commission’s thoughts on funds with terms like “ESG” or “sustainability” in the title.
