Should the SEC adopt this proposal, it will be challenged in court. Arguments would likely focus on (i) the SEC's authority to adopt disclosure requirements that may not be material as a matter of the economics of the investment and (ii) the quality of the SEC's cost-benefit analysis. (See ).

Even assuming that the SEC should win (and it is not obvious that the SEC would win on either of these issues), the implementation of the rule would be left to the next…

Chairman Gensler is correct that investment assets that are sold to the retail public should be subject to some form of regulation and that, in the absence of such regulation, there will be fraud. He concludes, however, with the aphorism that "like must be treated as like." While it may be correct to conclude that identical financial products must be regulated identically, it is not at all clear that similar financial products must be regulated identically. (Shouldn't one be asking…

Historically, this enforcement action would have been brought by FINRA as a "suitability" violation of FINRA Rules. Now it is brought by the SEC as a violation of the Exchange Act. Potentially, charges under the Exchange Act are more serious; e.g., they are violations of law.

Even if the SEC declines to respond to the Republican Senators in this request for information, the letter should be viewed only as a first step. If Republicans gain control of the House or Senate in the next election, they will make enforceable demands for information. Separately, should the SEC go forward, it is likely that litigation will follow.

Either way, the process may reveal how the SEC performs its cost-benefit analyses. That would be good. Various commenters suggest…