SEC Rulemaking Agenda

In one of the most ambitious agendas in its history, the U.S. Securities Exchange Commission has simultaneously undertaken multiple rulemakings that would affect nearly every investor and public company in America. Meaningful public input into the rulemaking process, a pivotal element of ensuring that the Commission’s rules are appropriately tailored and that the Commission is meeting its statutory obligations and tripartite mission, is at risk of being lost in the current rulemaking agenda. 

In the fall of 2021, the SEC released its list of upcoming new rules with 54 separate items. Since December, the SEC issued 24 proposals making an array of changes to complicated securities laws and complex financial markets. Just 12 such proposals total roughly 3,500 pages of text and ask 2,200 separate questions.

Aside from the sheer volume of rulemaking items, the Commission simultaneously is tackling issues that could result in significant shifts in industry operations and practices. A truncated list of these proposals and requests for information includes:

  • Shortening the settlement cycle;
  • Climate-related disclosures;
  • Special Purpose Acquisition Companies (SPACS);
  • Money market fund reforms;
  • Short sale reporting proposal;
  • Securities lending proposal;
  • Applying new rules to digital engagement practices (request for information);
  • Broad new disclosure obligations for private funds and requirements for fund advisers;
  • Amendments to Commission Rule 3b-16 (the definition of “Exchange”) and Regulation ATS for ATSs that trade U.S. government securities, NMS stocks, and other securities;
  • New cybersecurity risk management rules;
  • First time reporting obligations for security-based swaps (SBS);
  • New anti-fraud/anti-manipulation requirements for SBS;
  • First time reporting obligations for large SBS positions;
  • Further defining the terms dealer and government securities dealer along with related registration requirements; and
  • Significant amendments to beneficial ownership reporting rules.

Sufficient time for meaningful public input into individual proposals and more holistically on the Commission’s rulemaking agenda and the possible interconnectedness of these proposals is vitally important and ultimately could have a significant impact on savers, investors, capital formation, and economic growth and job creation. Together with 24 other trade associations, we note:

  • The Administrative Procedure Act requires appropriate comment periods that provide meaningful opportunity to comment;
  • The current approach to comment period length diverges from recent Commission practice under other Commission Chairs;
  • The Commission should consider complexity and the overall rulemaking agenda when setting the length of comment periods;
  • Statutorily required economic analysis mandates meaningful opportunity to comment; and
  • Needlessly short comment periods harm investors and markets and negatively impact the Commission’s tripartite mission.

Unnecessarily short comment periods run the risk of giving the impression that the Commission has already made up its mind on a particular issue. This is a risk easily mitigated by the Commission by providing commenters with ample opportunity to review, analyze, and comment on proposed rules.

Importantly, changing the “rules of the road” across an array of connected markets represents an unwelcome source of uncertainty – regulatory uncertainty – that is likely to negatively impact markets and the economy. Recent research on the impact of uncertainty on the economy and extend previous research to directly incorporate the impact of regulatory uncertainty. Consistent with previous findings, U.S. data indicate that increasing economic policy and regulatory uncertainty have important, negative consequences for the broad economy that can persist for an extended period of time. While added uncertainty should not be used as a blanket objection to all regulation, the negative impacts of heightened uncertainty should be directly considered by regulators as increasing regulatory uncertainty may compound other significant uncertainties and impede the ability of capital markets to continue to support the economy as they have over the past few years.

On behalf of our members, SIFMA stands ready to work with the Commission to provide investors with a thoughtful and well-tailored regulatory regime.

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