SIFMA Calls on SEC to Reform Waiver Process for Disqualifications

SIFMA urged the SEC to adopt proposed "Regulation CC" as part of a broader effort to modernize and streamline the "Collateral Consequences" disqualification waiver process under the federal securities laws. 

In a letter to SEC Chair Paul Atkins, SIFMA said the current waiver process is inefficient, opaque, resource-intensive, and unpredictable. The association argued that the existing framework burdens both firms and the SEC with unnecessary procedural hurdles, often in cases that do not merit disqualification. SIFMA emphasized that its proposed reforms would enhance efficiency, transparency, and predictability, allowing both firms and SEC staff to focus on cases that truly warrant disqualification. The association said the new approach would tailor disqualifications to conduct directly relevant to investor protection and promote "clear rules of the road" that support responsible market participation.

SIFMA recommended that the SEC:

1. Adopt Proposed Regulation CC. SIFMA proposed a new rule, "Regulation CC," to establish a formal two-track waiver process. SIFMA explained that under this framework, a Presumptive Waiver would apply to routine cases not involving scienter-based fraud, certain industry bars, or U.S. felony convictions. The association stated that these waivers would be granted automatically unless the SEC objects within 10 business days. SIFMA further noted that for all other cases, a Standard Waiver process would provide a structured review using clear, enumerated factors to guide the Commission’s decision-making.
2. Amend Rule 405 of the Securities Act. SIFMA urged the SEC to narrow the "ineligible issuer" definition found in Securities Act Rule 405 ("Definitions of terms") so that the Well-Known Seasoned Issuer disqualification applies only to the named party in a disqualifying action—not to subsidiaries. The association also recommended limiting disqualifying criminal events to those occurring in the United States, citing significant variations in foreign legal systems.
3. Amend Rule 206(4)-1 of the Advisers Act. SIFMA urged the SEC to amend Advisers Act Rule 206(4)-1 ("Investment Adviser Marketing") to remove final orders issued by state regulators, the CFTC, and self-regulatory organizations from the definition of a "disqualifying event." The association said this change would prevent routine or unrelated regulatory actions from triggering unnecessary disqualifications and improve consistency in enforcement outcomes.
4. Clarify the Broker-Dealer Exception in Rule 206(4)-1. SIFMA recommended clarifying when broker-dealers can rely on the exemption from disqualification provisions in Advisers Act Rule 206(4)-1. The association proposed specifying that the exemption applies if a broker-dealer is not subject to a suspension or bar arising from a statutory disqualification.

SIFMA included with its letter draft text for proposed Regulation CC, including a new "Form CC" application and redlined amendments to Securities Act Rule 405 and Advisers Act Rule 206(4)-1 to implement the suggested reforms.