Trade Associations Seek More Time for Comment on SEC Rule Proposals
Commentary by Steven Lofchie
In a letter to SEC Chair Gary Gensler, 25 trade associations (the "Associations") asserted that the "unnecessarily short" time that the SEC is allowing for comments on rule proposals makes it difficult to provide meaningful input.
The Associations argued that providing sufficient time is necessary for the public to "fully analyze, consider, and comment on [the] rule proposals" and that sufficient time is "vital" for specific rulemaking and to better consider "the possible interconnectedness of these proposals." They stated that these considerations "could have a significant impact on savers, investors, capital formation, and economic growth and job creation."
The Associations reported that the use of a short 30-day comment period by the SEC has increased in the past seven years and requested that the SEC:
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Consider Comment Periods on a Case-by-Case Basis: The Associations recommended that the SEC consider what the appropriate comment period length should be for a new proposal based on (i) the complexity of the SEC's overall rulemaking agenda and (ii) each new rule proposal one by one. The Associations emphasized that a "reflexive assign[ing] [of] a 30-day or 60-day comment period" is not prudent.
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Incorporate Economic Analysis: The Associations highlighted that a "thoughtful economic analysis" of the proposed rule is a "pivotal element" to the rulemaking process, and that the failure to provide a proper opportunity to comment on the economic impact of a proposed rule will have negative outcomes.
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Consider the Commission's Current Agenda: The Associations recommended that the Commission consider its current regulatory agenda and the various complex issues presented, and how, practically speaking, a short comment period would hinder an "appropriately tailored, well crafted, and fully thought-out" comment period.
The Associations emphasized that they are prepared to work with the SEC "to provide investors with a thoughtful and well-tailored regulatory regime."
Commentary
Both the number (25) and breadth (sell-side, buy-side, issuers and proprietary traders) of the associations participating in the letter to the Chair reflect very broad dissatisfaction with the SEC rulemaking process. The short time period to comment is really just one of multiple issues, and arguably not the most serious. The most problematic is the uncertainty around how the numerous different rule proposals might interact with each other. Anticipating the effect of a single major rule change on a complicated social system (the market) is hard enough. Anticipating the effects of a dozen major rule changes and how they might interact with each other may be impossible. Nobody is that smart.