February 21, 2020

What to Do About Astroturfing the Comment Letter Process

It’s hard to know for sure whether astroturfing is part of the SEC comment letter process.  Last fall, John blogged about the flurry of comment letters received at the SEC on the S-K Modernization Proposal and the potential that some would assert this resulted from an astroturf campaign.  And Broc blogged last fall about the “fishy” comment letters submitted to the SEC ahead of its proposed rulemaking on proxy advisors.

Congressional leaders are apparently taking the notion of astroturfing seriously and a recent blog from Jim Hamilton summarizes a hearing held by the Subcommittee on Oversight and Investigations of the House Financial Services Committee on alleged astroturfing of the Administrative Procedure Act (APA) process for submitting comment letters on agency rulemaking – and as a reason for the hearing, the subcommittee cited reports of astroturfing relating to proposals by several agencies, one being the SEC.

Jim Hamilton’s blog provides an interesting read of the back and forth testimony about possible solutions to concerns about astroturfing.  Here’s an excerpt:

Beth Simone Noveck, a professor from New York University, testified that the notice and comment period on proposed federal regulations is sometimes referred to as the “notice and spam” period due to the volume of duplicate comment letters agencies receive.  She recommended that the agencies use readily available tools to address voluminous, duplicative, and fake comments. These include machine learning to summarize voluminous comments, “de-duplication” software to remove identical comments, and filtering software to sift out “the real and the relevant.”

Others, including Steven Balla, a professor from George Washington University, and Ranking Member Barr recommended Congress focus its attention on fake comment letters not mass comments.

Ranking Member Barr questioned whether the APA should be amended to standardize the comment letter collection process as it currently allows agencies discretion for determining how they collect and post comment letters.  A GAO representative noted that a 2019 GAO study recommended certain agencies clearly disclose how they post comments and associated identity information, including the SEC, and the SEC has implemented these recommendations.  The SEC issued a memorandum reflecting the SEC’s internal policies for posting duplicate comments and associated identity information and added a disclaimer on the SEC’s main comment posting page.

Possible solutions aside, it doesn’t sound like the Subcommittee settled on any immediate actions and it’s unclear if there are any next steps.

SEC Extends Comment Period for NYSE Direct Listing Proposal

In December, we were tracking the NYSE Direct Listing proposal, which the SEC rejected soon after the exchange submitted it, and then right on the heels of the rejection, the exchange submitted a revised proposal.  Since then, nothing but crickets…until last week, likely because the comment period was set to expire.  Last Thursday, the SEC issued this notice extending the comment period for the revised proposal, which will now close on March 29th.  The notice says the SEC received 8 letters with comments and it needs more time to consider the proposed rule and comments.

Might be early to jump to conclusions but judging solely on the low count of comments so far, it doesn’t sound like astroturfing is going on here.

January-February Issue of “The Corporate Counsel”

We recently mailed the January-February issue of “The Corporate Counsel” print newsletter (try a no-risk trial). The topics include:

1. Annual Season Items

– Time for a Risk Factor Tune-Up?
– Getting Back to Basics
– Rooting Out Hypothetical Risk Factor Disclosure
– Brexit – What’s Next?
– LIBOR Transition
– IP and Technology Risks Associated with International Business Operations
– Tariffs and Trade
– World Health Concerns
– Data Privacy

2. Omitting Third Year Comparisons from MD&A: The Staff Weighs In

3. More on MD&A: The Commission’s Interpretive Release on KPIs and Metrics

4. A Brave New World for Confidential Treatment: Asking for Forgiveness Instead of Permission

– A New Streamlined Confidential Treatment Process Dawns
– Self-Executing Rules
– Staff Review of Exhibits
– New Streamlined Extension Confidential Treatment Request Procedures
– Enter the Supremes: The Impact of Argus Leader
– The SEC’s New Confidential Treatment Request Guidance

– Lynn Jokela