Senators urge SEC to institute moratorium on non-COVID-19-related rulemaking

The SEC has announced that, in light of the challenges associated with COVID-19 and particularly the difficulty associated with submission of comment letters, it will not take formal action before April 24 on a number of different proposed rulemakings with comment periods otherwise set to expire in March. Of course, the SEC has historically been open to consider comments submitted after the deadline but before adoption. The purpose of this extension was to expressly allow commenters additional time to comment if needed. Apparently, however, the SEC’s action was not enough for two Senators on the Senate Banking Committee, ranking member Sherrod Brown and Chris Van Hollen.

Below are the specific actions that will remain open for comment:

  • “Amendments to Rule 2-01, Qualifications of Accountants, File No: S7-26-19, Release Nos.: 33-10738, 34-87864, FR-86, IA-5422, IC-33737;
  • Amending the ‘Accredited Investor’ Definition, File No: S7-25-19, Release Nos.: 33-10734, 34-87784;
  • Disclosure of Payments by Resource Extraction Issuers, File No: S7-24-19, Release No. 34-87783;
  • Use of Derivatives by Registered Investment Companies and Business Development Companies;
  • Required Due Diligence by Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles, File No. File No: S7-24-15, Release Nos.: 34-87607, IA-5413, IC-33704; and
  • Notice of Proposed Order Directing the Exchanges and the Financial Industry Regulatory Authority to Submit a New National Market System Plan Regarding Consolidated Equity Market Data, File No. 4-757, Release No. 34-88340.”

Yesterday, the two Senators sent a letter to the SEC— with similar letters going to the heads of other federal financial agencies—urging that it discontinue all pending rulemaking that is not directly related to COVID-19 and its related impact, instead “prioritiz[ing] actions on activities related to the economic risks posed to markets and capital formation.” Specifically, the Senators advocated that the SEC suspend or extend for at least 45 days all rulemakings unrelated to the “virus response or other imminent health, safety, or national security threats” and instead “focus its resources on providing reliable guidance and responding to the evolving health and economic effects of this crisis….In light of this crisis, we urge you to place an immediate moratorium on rulemakings not related to the crisis at hand until the COVID-19 virus has been fully addressed by our financial and public health agencies.” In addition, they asked the SEC to “formally extend” the comment period for these actions, characterizing the SEC’s action as “an unsatisfactory solution” that does not adequately assure stakeholders that their comments will be fully considered.

Of course, the SEC has consistently emphasized that it remains open for business—all business: “While the agency is engaging on numerous COVID-19 initiatives…, we also continue our regular agency operations. For example, we have continued to advance rulemaking initiatives, conduct inspections, bring enforcement actions, and review and comment on issuer and fund filings.” It remains to be seen what impact, if any, the Senators’ advocacy has on future SEC activity.

For guidance on the legal, regulatory and commercial implications of the COVID-19 pandemic, see our Cooley coronavirus resource hub.