Investment Industry Wire | November 2021– November 17, 2021 by Lori Novak

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 & Company’s quarterly recap of the latest developments at a variety of regulatory agencies likely to impact our clients.

Securities & Exchange Commission (SEC)

Proposal Enhances Reporting of Proxy Votes by Registered Management Investment Companies
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:

  • Require funds and managers to tie the description of each voting matter to the issuer’s form of proxy and to categorize each matter by type to help investors identify votes of interest and compare voting records;
  • Prescribe how funds and managers organize their reports and require them to use a structured data language to make the filings easier to analyze; and
  • Require funds and managers to disclose how their securities lending activity impacted their voting.

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.

SEC Approves New Nasdaq Listing Rules Related to Board Diversity
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:

  • One self-identified female director; and
  • One director who self-identifies as an “underrepresented minority” or as LGBTQ+. Underrepresented minorities are defined as individuals who self-identify as one or more of the following groups: Black or African American, Hispanic or Latino, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or two or more races or ethnicities.

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:

  • SPACs (prior to a business combination);
  • Asset-backed issuers and other passive issuers;
  • Cooperatives;
  • Limited partnerships;
  • Management investment companies; and
  • Other securities listed under Nasdaq's Rule 5700 Series, which includes ETF shares and equity and commodity index-linked securities.

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.


Guidance Issued on Evaluating Relevance and Reliability of Audit Evidence Obtained From External Sources
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, Julie Lowry at or a member of your service team to discuss these topics further.

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Cohen & Company 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.