Commissioner Peirce Reacts to SEC Spring Rule List

Steven Lofchie Commentary by Steven Lofchie

SEC Commissioner Hester M. Peirce criticized Chair Gary Gensler's spring 2022 Agency Rule List, asserting that both the goals and the method for achieving them are flawed. She described the pace and character of the SEC rulemakings as creating "dangerous conditions in our capital markets."

Commissioner Peirce argued that the SEC is proposing rules that are outside of the SEC's historical focus (e.g., disclosures as to the diversity of board members and as to climate-related risks and opportunities). She asserted that while the SEC once tried to induce issuers to go public, it now simultaneously attempts to force them to go public while making it much more expensive for them to do so. Ms. Peirce charged that the agency was ignoring rule updates that were far along procedurally, such as the electronic record keeping rules for broker-dealers. She also said that the SEC failed to give attention to other rules that should be examined (such as those governing transfer agents) while reopening debate on rules that were just adopted.

Procedurally, Ms. Peirce argued that the agenda deviated from the SEC's ordinary "careful and considered approach" to regulation in favor of effecting "hasty and sweeping" change. She expressed concern that there seems to be no sign of the SEC slowing down. She reported that the agenda reveals many new rules that will be proposed within the next five months. Those rules, she warned, would not allow for comprehensive public feedback due to time constraints and a lack of necessary resources to give the proposals proper attention.

Ms. Peirce urged the SEC to focus on issues core to the agenda of protecting investors and the operation of the markets. She encouraged a slower pace and advocated for sufficient comment periods on all proposed rules to allow commenters the proper time to respond to lengthy releases.

Commentary

Commissioner Peirce is saying what many of us are thinking. 

There is simply no way that the onslaught of new rules being proposed by the SEC can be reasonably vetted by market participants, that a serious cost-benefit analysis can be conducted or that reasonable consideration can be given as to whether the rules are within the SEC's statutory authority. Any SEC Chair under the next administration will have to give consideration as to whether it makes sense to simply rewind the videotape - under the precedent that Chair Gensler established last year when he effectively nullified previously adopted rules governing proxy advisors - and start up the rule process all over again. (See Trade Associations Comment on Proposal to Mandate Climate Disclosures.)

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