April 14, 2015

More on “Should the SEC Shorten Its Adopting Releases By Providing Less Guidance, Etc.?”

Recently, I blogged about SEC Commissioner Piwowar’s speech entitled “A Fair, Orderly, and Efficient SEC” – which included a section calling for shorter adopting releases and perhaps even breaking rulemakings into smaller parts.

I ran two surveys on that blog: one asked about reducing the amount of guidance in releases (34% voted ‘yes’ and 63% voted ‘no’) and one asked about whether the SEC should break up rulemakings into smaller, multiple pieces (53% voted ‘yes’ and 36% voted ‘no’). I’m surprised that even 34% want less guidance because then we wind up with guidance at the Staff level, which some Commissioners ironically have griped about over the years.

Here’s feedback that I received from a member that pretty much sums up my feelings on the subject:

I don’t think breaking rulemakings into smaller parts is realistic. Having done a stint in Corp Fin’s Office of Rulemaking, I know that there is a lot that of administrative stuff that has to go into each separate rulemaking. It just doesn’t seem practical to increase the volume of separate rulemakings given the environment and how that process works these days. Breaking things into smaller parts would just result in less rules getting adopted

As far as length, I agree that they are probably too long – but a lot of that is the back-end, driven by the cost-benefit analysis and what’s going on in the courts. I think they could actually give some more interpretative advice. A lot of times, there is a lot of words and background – but not a whole lot of really useful interpretation. Examples of the application of new rules could be very useful in certain circumstances. Whenever there is something like that in a rulemaking, it is pretty helpful and avoids the need for Staff level interpretations. I was just reading the Regulation M release from the 1990s yesterday for this purpose! In an ideal world, maybe the rules could be so clear that interpretation wouldn’t be needed – but I don’t see us getting there anytime soon. So I would think that a Commissioner might prefer to have Commission-level clarifications out there rather than needing the Staff to do it.

Supreme Court Holds that Agencies Can Amend or Repeal Interpretive Rules Without Notice-and-Comment Procedures

Here’s a summary of this Sullivan & Cromwell memo (also see this Proskauer memo):

The U.S. Supreme Court recently held that agencies are not required to follow notice-and-comment rulemaking procedures when amending or repealing their interpretations of existing regulations. The Court ruled that the D.C. Circuit’s longstanding Paralyzed Veterans doctrine, which required agencies to follow notice-and-comment procedures when changing interpretive rules, was contrary to the text of the Administrative Procedure Act and exceeded the scope of judicial review authorized by Congress. The Court suggested, however, that changed interpretations should be subject to more searching review by courts, especially when regulated entities have extensively relied on the prior interpretation, and may face limitations in retroactive application. Three Justices wrote separately to question the fundamental appropriateness of judicial deference to agencies’ interpretations of their own regulations. Though the Court directed that an agency will need to provide a more substantial justification for its new interpretation if the new interpretation has engendered serious reliance interests or if it is based on factual findings contrary to prior findings, yesterday’s decision may make it easier for an agency to modify or even reverse its interpretation of existing regulations.

By the way, you might want to read Keith Bishop’s blog entitled “Did The SEC Violate The Administrative Procedure Act?”

Should Law Firms Go Public?

This DealBook column raises a topic that I blogged about a while back. The column summarizes the arguments supporting the idea made in this article. Law firm IPOs! I don’t have an opinion one way or another (although the notion of shareholders pressuring law firms – who are supposed to be advocates for their clients – seems like a big hurdle), but I would love to see what type of names would be drummed up by the new law firm corporations! I imagine using nomenclature consisting of last names would go the way of the Dodo…

– Broc Romanek