Clifford Chance

SEC Proposes ESG Disclosure Rules, And Updates To The Names Rule

June 7, 2022

On May 25, 2022, the US Securities and Exchange Commission (the “SEC” or the “Commission”) proposed to amend rules and forms under both the Investment Advisers Act of 1940 (the “Advisers Act”) and the Investment Company Act of 1940 (the “Investment Company Act”) to require registered investment advisers, certain advisers that are exempt from registration, registered investment companies, and business development companies (“BDCs”), to provide additional information regarding their environmental, social, and governance (“ESG”) investment practices (“ESG Proposal”).

On the same day, the Commission proposed to amend Rule 35d-1 under the Investment Company Act (the “Rule 35d-1 Proposal” together with the ESG Proposal, the “Proposals”) which according to the SEC is designed to increase investor protection by improving and clarifying the requirement for certain funds to adopt a policy to invest at least 80% of their assets in accordance with the investment focus that the fund’s name suggests. The Rule 35d-1 Proposal is also proposing enhanced prospectus disclosure requirements for terminology used in fund names, and additional requirements for funds to report information on Form N-PORT regarding compliance with the proposed names-related regulatory requirements.

This Client Alert provides details regarding each Proposal, which we believe, if adopted in the proposed forms, would have far reaching implications for the asset management industry, including with respect to current and future product offerings, compliance oversight of investment programs both in the United States and globally and, disclosure obligations.

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