Dive Brief:
- The Securities and Exchange Commission said Friday that it will give investment companies an extra six months to comply with the agency’s updated “Names Rule.”
- The compliance dates for the rule, which requires companies to align their funds’ investment strategies with any characteristics in the fund name, will now be June 11, 2026 for companies with more than $1 billion in net assets and Dec. 11, 2026 for fund groups with less than $1 billion in assets, according to the SEC’s March 14 release.
- The SEC modified the Names Rule in a September 2023 update to the agency’s Investment Company Act. The update would require funds with named objectives, like “growth” or “ESG,” to invest 80% of the funds’ assets under management in alignment with that objective.
Dive Insight:
When the SEC initially adopted the updated Names Rule in 2023, the largest funds previously had until Dec. 11, 2025 to comply, with smaller funds due to comply six months after. Former SEC Chair Gary Gensler said the amended rule “will help ensure that a fund’s portfolio aligns with a fund’s name,” when the updates were first announced.
The new compliance dates were chosen to help the funds “avoid additional costs when coming into operational compliance” and align with annual reporting and disclosure requirements for funds, according to the SEC’s announcement last week.
“The extension is designed to balance the investor benefit of the amended Names Rule framework with funds’ needs for additional time to implement the amendments properly, develop and finalize their compliance systems, and test their compliance plans,” the SEC said.
In addition to requiring funds with an objective like “ESG,” “sustainability” or other thematic focuses to invest 80% of their AUM in such objectives, the rule will also require enhanced disclosures as part of the funds prospectuses. The update broadens the scope of funds to include those with thematic or environmental, social or governance focuses, as such funds have proliferated since the Names Rules first adopted in 2021, according to an agency fact sheet.
Acting SEC Chair Mark Uyeda said at a conference Monday that the agency would consider extending compliance dates, as in the case of the Names Rule, for other recently-adopted rules. Such extensions would give firms more time “to implement new rules in an orderly manner, when we become aware of challenges associated with the timing of the initial compliance dates,” Uyeda said at the Investment Company Institute’s 2025 Investment Management Conference in San Diego.
Uyeda — who has asked for arguments to be delayed for lawsuits against the SEC’s climate-risk disclosure rule — also told the crowd that the agency should consider whether “changed circumstances weigh in favor” of pausing implementation of certain rules.
“The Commission’s blueprint needs to prioritize effective and cost-efficient regulations that respect the limits of our statutory authority,” Uyeda said. “We must be clear-eyed about how existing proposals fare under this rubric.”
Analogous rules exist in both the European Union and the United Kingdom. The European Securities and Market Authority similarly has an 80% investment rule for funds with objectives in the name, and the Financial Conduct Authority has a 70% investment rule for funds with a sustainability objective in the U.K.
