SEC Commissioner Peirce Criticizes SEC for "Dwindling" Engagement with the Public
Commentary by Steven Lofchie
SEC Commissioner Hester M. Peirce criticized the SEC for failing to "genuine[ly]" engage with the public in its rulemaking process.
In remarks at an "SEC Speaks" forum, Ms. Peirce said the SEC has been proposing broad rules, giving unreasonably short comment periods and often replacing substantial elements from proposed regulations without providing a proper public comment period. Ms. Peirce said representatives from small and midsize companies reported spending most of their time implementing standing and new rules, leaving little time to read or comment on proposed regulations. According to Ms. Peirce, these companies believe the SEC does not listen to them. She said, "when individuals and entities come to the SEC with their novel ideas, their feedback, their concerns, their objections, their questions about implementation of a new rule or application of an old one to new circumstances, too often now they are met with... well, crickets." She explained that "[the] root of the problem, though is that the Commission discourages the staff from offering much more than silence, shrugs, sighs and slow walking," and argued that "the culture at the top of the SEC has changed, which in turn has changed the way the agency interacts with the public."
Ms. Peirce urged the SEC to (i) pare back rulemakings and focus on essential rules, (ii) use concept releases, public roundtables and consensus workshops to identify problems and solutions, (iii) form an advisory committee with chief compliance officers, (iv) provide greater insight regarding where a registration statement is in the SEC process, (v) direct staff to clearly articulate and address specific issues that are delaying commission action and (vi) encourage staff to use its expertise to work through difficult regulatory issues, including ways to apply existing rules to new technologies.
Commentary
Defenders of recent SEC actions argue that their rulemaking efforts are just "simple, common sense." When an agency is making rules that impact a major part of the economy, that provides services directly or indirectly to everyone, and that sells numerous different products of all types, there is actually not very much that is simple common sense. It's actually quite complicated, and the details matter. The SEC is not capable of giving birth to rules as if it were Zeus giving birth to Athena.
Commissioner Peirce's concerns go to the heart of how the rulemaking process is supposed to work. (See also, Memo explaining why comment periods matter.)
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