During this time of unprecedented uncertainty, the need for our government to set forth consistent, predictable rules has never been greater, and the Securities and Exchange Commission (SEC) is no exception.
It’s time for the SEC to return to required rulemaking to impose new regulations, rather than regulating without rules. This is why we, along with the American Securities Association, the Competitive Enterprise Institute and the New Civil Liberties Alliance, have filed a petition for rulemaking, demanding the SEC to discontinue the troubling practice of rulemaking by enforcement.
The SEC’s Share Class Selection Disclosure Initiative has taken over $125 million from investment advisers over the past two years. However, the enforcement staff could not cite a clear rule or regulation that had been violated. Instead, the SEC relied on previous settlements and past published guidance (which are statements of the staff’s view on a topic at a given time) to squeeze settlements from businesses today.
This drive-by regulating without rules harms independent financial services firms and American investors. Independent financial firms and advisors have a reasonable expectation that the SEC will establish clear rules of the road before engaging in enforcement. Regulating without rules creates uncertainty for firms by not providing proper guidelines as to how they should operate their business, leads to inconsistencies in interpretation and enforcement, and increases costs for investors.
It’s time for the SEC to return to required rulemaking to impose clear regulations, rather than regulation established through enforcement action. Any rulemaking should be transparent, allow interested members of the public to provide comments and include an appropriate phase-in period to allow firms to develop and implement plans to comply with the new rules, with consideration given to grandfathering established practices.
In the News
- Clayton Defends Share Class Initiative in Senate Hearing, WealthManagement.com, 11/17/2020
- SEC Commissioner Balks at Regulation by Enforcement, Financial Advisor, 10/2/2020
- FSI fights SEC ‘rulemaking by enforcement’, InvestmentNews, 6/3/2020
- Broad Alliance of Financial Services and Public Interest Groups File Petition for Rulemaking Challenging SEC’s Unlawful Regulation by Enforcement, Advisor Magazine, 4/30/2020
- FSI Hits SEC for ‘Regulation by Enforcement’, WealthManagement.com, 4/29/2020
- Groups File Petition to End SEC Crackdown on 12b-1 Fees, ThinkAdvisor, 4/29/2020
- Financial industry groups seek SEC rule on 12b-1 fee disclosure, InvestmentNews, 4/29/2020
- Critics Attack SEC For ‘Guerrilla Governance’ Of Fund Fees, Law360, 4/29/2020
- Lobbyists Petitioning SEC to End ‘Backdoor Regulation of 12b-1 Fees’, Financial Advisor IQ, 4/29/2020
- Groups Petition SEC for Rule on Mutual Fund Fees, Politico Pro, 4/29/2020
- Financial industry opponents remain wary of SEC’s crackdown on share-class disclosure, InvestmentNews, 4/20/2020
- 3 Ways to Protect Investors’ Access to Financial Advice, ThinkAdvisor, 4/3/2020
- With more SEC disclosure cases on the horizon, FSI is ready to fight, Financial Planning, 1/28/2020
- FSI denounces ‘regulation by enforcement’ despite strong rebuke from SEC’s Jackson, InvestmentNews, 1/28/2020
- SEC’s Avakian Details Next 12b-1 Fee Crackdown, ThinkAdvisor, 11/26/2019
- SEC Presses Ahead in 12b-1 Fee Crackdown, ThinkAdvisor, 10/29/2019
- Agency Staff Regulatory Guidance & the SEC’s Share Class Select Disclosure Initiative, The Federalist Society, 9/13/2019
- ‘Regulation by Enforcement’ Battle Reaches Full Tilt, ThinkAdvisor, 9/6/2019
- FSI blasts SEC disclosure cases as ‘regulating without rules’, Financial Planning, 9/5/2019
- FSI: SEC Should Stop ‘Regulating Without Rules’, Financial Advisor, 9/4/2019
- Former SEC Commissioner Slams Regulator’s Enforcement of 12b-1 Violation, Financial Advisor IQ, 8/21/2019
- Ex-Commissioner Attacks SEC’s Share-Class Sales Crackdown, Ignites, 8/20/2019
- Yet another festering regulatory problem growing in Washington, The Hill, 8/16/2019
- The SEC Should Follow Its Own Rules for Guidance, The Wall Street Journal, 8/6/2019
- It’s time to end ‘rulemaking by enforcement’, InvestmentNews, 7/29/2019
- Reg BI Footnote Justifies Pausing SEC Share Class Disclosure Initiative, ThinkAdvisor, 7/19/2019
- Critics concerned with pending second wave of SEC share-class crackdown, InvestmentNews, 7/16/2019