Investment advisers and market participants are freed from proposed cybersecurity regulations by the Securities and Exchange Commission (SEC).

The Securities and Exchange Commission (SEC) has announced the withdrawal of proposed cybersecurity regulations for investment advisers and companies participating in securities markets. This decision, made under a now Republican-led SEC, marks a potential significant reversal of the commission's plans to subject major financial entities to cybersecurity requirements for the first time.

The SEC's new leadership, appointed during President Trump's administration, has taken aim at several regulations proposed and adopted during the Biden administration, including a landmark climate disclosure rule. The SEC's decision to withdraw the proposed rules was announced on Thursday with no explanation.

The SEC's withdrawal of these regulations raises questions about the commission's commitment to a cyber incident disclosure rule for public companies, a rule that was adopted in 2023 under Democratic leadership. The SEC had proposed the rules due to concerns that financial advisers and securities-market participants were not taking cybersecurity seriously enough, leaving their computer systems vulnerable.

The SEC's new stance on cybersecurity regulations could be part of a broader trend of rolling back regulations adopted during the Biden administration. The financial services industry could be emboldened to press for the rescission of the cyber incident disclosure rule, which they have identified as a major priority.

The SEC's decision to withdraw these regulations could potentially undermine confidence in the U.S. financial system. The SEC noted that the financial-services sector faced digital threats from hackers who use sophisticated tactics, techniques, and procedures. The SEC warned that current practices, including incident disclosure, may not adequately address investor protection concerns.

The SEC's comment on their focus on promoting innovation suggests a possible shift towards deregulation under the current leadership. This could be a departure from the Biden administration's approach, which aimed to address cybersecurity through regulation. However, the SEC declined to address the decision, stating they are focusing on promoting, rather than stifling, innovation.

The head of the SEC appointed by President Donald Trump was Gary Gensler. The Trump administration opposes Biden-era efforts to address cybersecurity through regulation, similar to its stance on climate change. The SEC's actions could potentially undermine the previously adopted cyber incident disclosure rule for public companies, a rule that was designed to enhance transparency and investor protection in the face of growing cyber threats.

Investment advisers and market participants are freed from proposed cybersecurity regulations by the Securities and Exchange Commission (SEC).