GAO Reviews Newly Adopted Investment Company Names Rule for Compliance with APA Requirements
Commentary by Steven Lofchie
The Government Accountability Office ("GAO") reviewed SEC compliance with the requirements of various statutory requirements, to the extent applicable, in connection with the SEC adoption of a rule on investment company names. The SEC rule is intended to increase investor protection by improving and broadening the scope of the requirement for certain funds to invest at least 80 percent of the value of their assets in accordance with the investment focus suggested by the fund's name (see previous coverage).
In a Report provided to the Senate Banking Committee and House Financial Services Committee, GAO described the actions the SEC undertook to comply with the requirements of the Administrative Procedure Act, the Paperwork Reduction Act and the Regulatory Flexibility Act. The report stated that the requirements of the Unfunded Mandates Reform Act and the Administrative Pay-As-You-Go Act do not apply to independent regulatory agencies such as the SEC.
Commentary
This is an odd response to the legislators' questions. GAO does not seem to have performed any independent investigation as to whether the SEC procedures were sufficient to meet the relevant legal obligations in practice. GAO found that a number of certain administrative law requirements do not apply to the SEC as an independent agency, not really a question in doubt. Beyond that, GAO merely concludes that the SEC's adopting release recites that the SEC complied with the administrative law requirements applicable to it. As a result, the report seems to serve no purpose.