SEC Chair Gary Gensler has certainly heard from Republicans with some frequency about proposal comment periods that they consider too abbreviated. The charge is that, under Gensler’s tenure, the time periods allowed for public responses to voluminous and complex proposals—which were initially set at 30 days, and then, in response to complaints, extended for a longer period under a slightly more complex formulation—just don’t leave enough time for public review and comment. (Of course, the not-very-secret secret is that the SEC typically accepts comments submitted well after the deadlines.) SEC Commissioners Hester Peirce and Mark Uyeda, as well as former Commissioner Elad Roisman, have all taken on the issue (see the SideBar below). And it’s not just commissioners that have tackled the comment period issue— Republicans in Congress have also voiced disapproval. Now, as reported by Politico, in a September 13 letter that has recently surfaced, a group of 12 Senate Democrats have joined the chorus. Although the letter is focused on the duration of comment periods, according to Politico, “Senate Democrats are privately urging SEC Chair Gary Gensler to slow work and take more time for feedback on a slew of regulations rattling Wall Street, as tensions surrounding the agency’s Biden-era agenda reach a boiling point.” Are problems with the comment period signaling a larger issue?
Several Republicans in Congress have made arguments similar to those expressed by Republican SEC commissioners. For example, in this letter to Gensler, Senator Pat Toomey and Representative Patrick McHenry complained that proposals under Gensler’s tenure have “consistently provided unreasonably short comment periods, which will harm the quality of public comment and may run afoul of the Administrative Procedure Act.” Further, they contended that the
“notice-and-comment process is critical to effective SEC rulemaking. The opportunity to comment on proposed rulemakings ensures the public can provide substantive analysis, warn of unintended negative consequences, and suggest alternative approaches with rationale for the SEC to consider. This commentary helps refine and improve adopted rulemakings—and in some cases provides a basis for the SEC to rethink or scrap imprudent rulemakings entirely. Moreover, properly scrutinizing a proposed rulemaking often requires a significant investment of time and resources. This is especially true when a proposal consists of several hundred pages and is intended to interact with complicated financial markets and existing securities laws. Truncated comment periods pose particular difficulties—and are of particular concern—when overlapping with holidays, year-end operational or regulatory obligations, or other times when commenters’ staff are expected to manage other deadlines.”
While this criticism from the Republican camp is nothing new, what is new and somewhat surprising is the pushback from the dozen Democratic Senators. In this letter, albeit a mild one, the 12 Senators, led by Senator Jon Tester, encourage Gensler to “provide a sufficient period for notice and comment as you consider rules that will impact our constituents. Adequate input and public comment is central to ensuring that the SEC’s rules and regulations reflect the perspectives and needs of all stakeholders.” (See this PubCo post, describing Tester’s colloquy with Gensler regarding the SEC’s climate proposal.) There were a number of important proposed rulemakings on the agenda, they wrote, and it “is critical that, as the SEC moves through the rulemaking processes, there is adequate time to evaluate each individual rule as well as how those rules interact with existing and other proposed rules….As the Commission continues work on this ambitious rulemaking agenda, assessing the collective impact of these proposed rulemakings will be particularly important to achieving your goals and ensuring our markets remain the world’s best. It is our belief that a thorough and thoughtful comment process will only yield better results for investors and our economy.”
According to Politico’s analysis, the letter from the Dems “underscores the growing tensions between Gensler and moderate Democrats on Capitol Hill at an especially contentious time for the regulator, as the agency’s upcoming rules face a growing risk of litigation from industry as well as potential investigations from Republican lawmakers. The letter hits on what has become a growing sore point for business groups: the length of comment periods in which the agency lets the public send feedback on proposed regulations.”
In addition, if the SEC did provide for longer comment periods, “it would ultimately result in the proposed market safeguards taking longer to go into effect,” Politico speculated, “possibly spelling good news for corporate executives hoping to wait out Gensler for a change in administration.”
Gensler has rebuffed these arguments, Politico reports, contending “that the law only requires the SEC to provide 30 days for comment. Even then, comment periods typically start when the proposal is published on the Federal Register, which is running on a lag of several weeks. In the meantime, comments can still be submitted to the SEC.” (The article notes that, during his tenure, former SEC Chair Jay Clayton faced, to a limited extent, some of the same criticisms.) Politico reports that “Gensler has come under fire for the pace of rulemaking coming out of the agency, with critics claiming that dissecting the flood of new proposals in such short periods of time is impractical. Gensler has pointed out that the number of proposals [is] largely on par with what former SEC chairs like Clayton have done. The latest proposals have just been more clustered than in the past, Gensler said.”
Poor Chair Gensler, no one is ever happy! The Republicans complain about his “ambitious agenda” (see this PubCo post), and critics like Jon Stewart express their frustration with what the SEC is not doing and ask why the SEC isn’t doing more to fix inequities. (See this PubCo post.)