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IPA Forming Working Groups on SEC Climate Disclosure Proposal and FINRA Complex Products Notice


With Congress looking toward election season, its continued to be a busy month on the regulatory front. The IPA is already engaged in reviewing and soliciting feedback on a number of recent regulatory proposals, including the new share repurchase disclosure rules and the private fund adviser amendments.

This week the Securities and Exchange Commission (SEC) released a landmark 500 page climate change disclosure that requires all SEC registrants – including non-traded REITs and BDCs – to provide more information on how their operations affect the climate and carbon emissions. The proposed rule reflects the Biden administration’s broader push to confront the dangers that climate change poses to our financial system and economic stability.

Additionally, on March 8, the Financial Industry Regulatory Authority (FINRA) issued . The Notice is FINRA’s most significant statement on sales of complex products since .

In the coming weeks, the IPA will be assembling working groups to evaluate and respond to both the SEC and FINRA proposals.

SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosure for Investors

Under the proposed rule, which sets forth amendments to Regulations S-K and S-X, all SEC registrants would have to disclose their climate-related risks in their financial reports to the SEC, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements. The required information about climate-related risks also would include disclosure of a company’s greenhouse gas emissions.

In a media briefing with reporters following the announcement, Chairman Gary Gensler the proposed rules would not only help to protect investors but also respond to a barrage of requests for greater clarity about carbon emissions. He added, “I really do think that the SEC has a role to play here when this amount of investor demand and need is there.” All three Democratic Commissioners supported the proposal, while Commissioner Hester Peirce, who will give a keynote address at , opposed.

The proposed rules now enter a public comment period, which will remain open for 30 days after publication in the Federal Register or 60 days after the date of issuance and publication (March 21), whichever period is longer. An IPA working group will be seeking feedback from members in preparing a comment letter ahead of the anticipated May deadline.

FINRA Issues Notice on Complex Products

FINRA’s Regulatory Notice 22-08 on complex products and options puts a spotlight on the regulatory concerns that arise when investors trade such products without understanding their unique characteristics and risks. While largely focused on options and exchange-traded products, and particularly those accessible to self-directed retail investors, the notice specifically references recently emerging products that may be considered complex, including “interval funds, or tender-offer funds that provide limited liquidity to investors.” Further, the notice makes reference to non-traded REITs and other products such as direct participation programs.

The notice comes now, more than a decade after Regulatory Notice 12-03, as an acknowledgement of the notable increase in the number of accounts trading these investments in recent years. To that end, FINRA is soliciting comment on effective practices that members have developed for complex products and options, particularly when retail investors are involved, and whether the current regulatory framework is appropriately tailored to address current concerns raised by complex products and options, or whether new or different requirement should apply.

An IPA working group will similarly be seeking feedback from members ahead of the May 9 comment deadline.

As always, we will share additional updates on both efforts as they advance. To stay up-to-date on our advocacy efforts, please plan to join us for our annual IPA Summit event in Washington, D.C. on May 4-6 – the is open now. If you have any questions, please don’t hesitate to reach out to Tony or me.


Anya Coverman
SVP, Government Affairs and General Counsel
Institute for Portfolio Alternatives