Even the SEC’s new Reg Flex Agenda (which reflect the priorities of the SEC Chair) has now elicited a “dissent” from the two SEC Commissioners on the other side of the political aisle. In this statement, posted yesterday, Commissioners Hester Peirce and Elad Roisman lambast the new Spring 2021 Agenda for “the regrettable decision to spend our scarce resources to undo a number of rules the Commission just adopted.” While the Agenda contains several “important and timely items”—which they identify as rules related to transfer agents and government securities alternative trading systems—the absence of other items was notable, including important rulemakings that would “provide clarity for digital assets, allow companies to compensate gig workers with equity, and revisit proxy plumbing.” (Of course, two of those rulemakings were not entirely absent, but have instead been moved to the long-term agenda. See this PubCo post.) Perhaps, they suggest, too much attention to undoing existing rules rather than creating new ones?

The two Commissioners charge that SEC Chair Gary Gensler’s recent directive to revisit recent rulemakings regarding proxy voting advice was “just the opening salvo in an effort to reverse course on a series of recently completed rulemakings” (see this PubCo post), identifying as problematic proposed items on the agenda relating to proxy advice and shareholder proposals under Rule 14a-8 (see this PubCo post), the resource extraction payment disclosure rules (see this PubCo post), the accredited investor definition and integration framework (see this PubCo post), and the whistleblower rules (see this PubCo post). These rules, they argue, have only recently been adopted and, to the Commissioners’ knowledge, the SEC has received no new information that “would warrant opening up any of these rules for further changes at this time. We are disappointed that the Commission would dedicate our scarce resources to rehashing newly completed rules.”

The SEC doesn’t exactly give short shrift to the rulemaking process, they contend. Under the Administrative Procedure Act, the SEC employs a rigorous lengthy rulemaking process, and, for most of the rulemakings that are apparently now going to be reopened, there was an even more elaborate process to obtain public input, including roundtables and concept releases. According to Peirce and Roisman, a

“change in administration naturally brings changes in policy, and the Agenda reflects that shift in the form of new rulemakings, but reopening large swathes of work that was just completed without new evidence to warrant reopening is not normal practice. Past Commissions have generally refrained from engaging in a game of seesaw with our rulebook. The inclusion of these rules in the Agenda undermines the Commission’s reputation as a steady regulatory hand. While we will keep an open mind on each proposal, it is hard to see how the Commission could change course on such complex matters before the Commission’s latest actions have fully taken effect.”

SideBar

Of course, on the last change of administration, the first piece of legislation signed into law by the then-new administration in 2017 was, according to the Washington Post, a bill that relied on the Congressional Review Act to dispense with the resource extraction payment disclosure rules, which had just been adopted by a Democratic majority on the SEC. (See this PubCo post.) Under the CRA, any rules recently finalized by the executive branch and sent to Congress can be jettisoned by a simple majority vote in Congress and a Presidential signature. According to the Congressional Research Service, before the last administration took up the cudgel in 2017, “[o]f the approximately 72,000 final rules that [had] been submitted to Congress since the [CRA] was enacted in 1996, the CRA [had] been used to disapprove one rule: the Occupational Safety and Health Administration’s November 2000 final rule on ergonomics, which was overturned using the CRA in March 2001.” But that changed in 2017, and, as of January 9, 2020, the CRA had been used to overturn a total of 17 rules, according to the CRS. In 2017, very few SEC rulemakings were eligible for elimination under the CRA; however, a significant number were eligible in 2021. Nevertheless, the CRA was not applied to eliminate any SEC rules in 2021.

And, in 2017, Acting Chair of the SEC Michael Piwowar asked the staff to revisit the Dodd-Frank pay ratio disclosure rules (see this PubCo post), and the conflict minerals rules (see this PubCo post), both of which were adopted by Democratic majorities at the SEC after very lengthy processes. Both rules ultimately remained in effect, although, following a court decision, Corp Fin issued an Updated Statement in 2017 advising that it would not recommend enforcement if companies filed only specified limited disclosure regarding conflict minerals—even if they would otherwise be required to disclose more under the rule (see this PubCo post). (See also this PubCo post regarding a 2017 executive order.