(Corrected) Today, the SEC announced that President Biden —Happy Inauguration Day +1—has appointed Democratic SEC Commissioner Allison Lee as the new Acting SEC Chair to replace the Republican appointee, Elad Roisman. (Former CFTC Chair Gary Gensler is expected to serve as the permanent SEC Chair, but will first need to go through the confirmation process. See this PubCo post.) Lee has focused much of her attention at the SEC on ESG issues, such as climate and diversity, and, in the press release, she indicated that climate and sustainability would “continue to be a priority” for her. (See, e.g., this PubCo post and this PubCo post.) In addition, yesterday, the new administration imposed, at least informally, a regulatory freeze. The memorandum from the President’s Chief of Staff asks the agency heads not to propose or issue any rules or publish any rules in the Federal Register until a new department or agency head appointed or designated by the new President approves the rule. While Congress can use the Congressional Review Act to scrap agencies’ “midnight regulations” (see this PubCo post), this action represents a speedy approach to the same end available to the Executive branch for some recent rulemakings, many of which were adopted in the surge at the end of the last term.
Once a rule is considered final, agencies must comply with the Administrative Procedure Act to change the rule, including publishing a new proposal, providing a public notice-and-comment period and performing the same type of analysis that was performed for the original rulemaking. However, rules are not really considered final until they are published in the Federal Register. Accordingly, in the memo, the new administration asks that any rules sent for publication in the Federal Register but not yet published be withdrawn from publication.
The memo also requests that rules published but not yet effective be considered for postponement for 60 days to allow a legal and policy review. In addition, the memo suggests that agencies consider opening a 30-day comment period to allow further comment by interested parties, and consider pending petitions for reconsideration of those rules. Where substantial questions are raised, the memo suggests consideration of an additional delay, as appropriate and necessary, as well as consultation with the OMB director.
Although the freeze may not directly apply to independent agencies like the SEC, it is possible that new Acting Chair Lee might want to comply voluntarily. In that case, what could potentially fall into the category of possible delay or other action? While there are certainly other possibilities, some of the candidates might include the MD&A rule changes (see this PubCo post), which go effective on February 10, 2021, the rules regarding harmonization of private offering exemptions (see this PubCo post), which are scheduled to go effective March 15, 2021, rule changes regarding independence of accountants (see this PubCo post), which are set to go effective on June 9, 2021, and the resource extraction disclosure rules (see this PubCo post), which are scheduled to become effective on March 16, 2021. Lee dissented in the votes on each of these rulemakings. Keep in mind, however, that delay of an effective date would likely require an SEC vote, and the SEC is currently evenly split.
