In related news, a program is being hosted by the Chamber from 10:30am - 12:30 EST today, which is being webcast, to discuss the Chamber's recommendations. The panelists include:
- Paul Atkins, former Commissioner, U.S. Securities and Exchange Commission
- Jack Katz, former Secretary, U.S. Securities and Exchange Commission
- Ed Knight, Executive Vice President and General Counsel, Nasdaq Stock Market, Inc.
- Harvey Pitt, Chief Executive Officer, Kalorama Partners LLC
- Eric Roiter, former General Counsel, Fidelity, and Professor, Boston College Law School
- Kara Scannell, SEC Reporter, The Wall Street Journal (moderator of the panel)
The twenty-three recommendations made by the Chamber fall into the categories listed below.
Strengthening [SEC's] Management, Structure and Oversight
- The Division of Trading and Markets and the Division of Investment Management should be realigned into a Division of Investor Protection and Retail Financial Services Regulation and a Division of Market Oversight and Operations. The Examination Programs of the Office of Compliance, Inspections, and Examinations (OCIE) should be assigned to these new divisions.
- The SEC should create an accelerated conditional approval process for new investment products or services.
- The five-member Commission should play a greater ongoing role in the interpretation and application of regulatory policy. This may require Congressional action to amend the
Government in the Sunshine Act (Sunshine Act) that was passed in 1976 that, among other
requirements, mandates that every portion of every meeting of an agency shall be open to public observation. Although the Act was developed to create greater openness in government, it has had the unintended consequence of restricting valuable communications between Commissioners and SEC Staff.'
- The SEC should create a Chief Operating Officer (COO) position with sufficient authority to oversee daily operations throughout the SEC.
- The SEC should establish a coordinating council, chaired by the COO, to resolve issues or disagreements involving more than one division or office.
- The SEC should expand the breadth of its staff expertise. Legal and accounting expertise should be complemented with staff experts in capital markets operations and the business operations of regulated entities as well as financial economics.
- The SEC should develop a knowledge management program to transfer information and expertise between divisions, preserve the knowledge and experience of departing
staff, and provide future staff with ready access to materials explaining and documenting the analysis and reasons for actions taken or not taken.
Improving the Exemptive Order Process
- An expedited process should be created for routine exemptive applications that mirror prior exemptive orders.
- Incomplete applications should be rejected with standard rejection letters, or “bedbug letters,” consistent with published standards explaining the grounds for rejecting deficient filings.
- Internal compliance deadlines should be adopted for staff review and action, and apply to applicant responses or revisions based upon staff comments.
- Expanding the use of exemptive rules could substantially reduce the number of routine applications. Rule-writing authority for exemptive rules should be reassigned to the same staff that acts on exemptive applications.
- In 2006, 127 filings (12.5%) were rejected, and in 2007, 138 filings (12%) were rejected by the SEC staff as incomplete or incorrectly filed. These high rejection levels demonstrate that an expectation gap between the Commission and SROs exists. The division should formulate a standard that articulates the grounds for rejecting a filing as improperly filed. The division should also require its staff to send a rejection letter to the SRO identifying which items on Form 19b-4 are deficient.
- Waivers of statutory time limits should be the exception, not the norm. All requests for waivers of statutory deadlines should require senior-level approval and should be time limited.
- The five-day pre-filing requirement should be eliminated.
- The Commission should re-delegate to the staff the authority to abrogate SRO filings that are deemed effective upon filing.
- The SEC should order hearings on SRO filings that raise complex issues that cannot be resolved following the notice and comment period. Division staff should have responsibility for reviewing all papers submitted in response to the order for hearing and for submitting a recommendation to the Commission. An administrative law judge should be assigned only for exceptionally complex matters.
- The SEC should create an optional conditional approval process to encourage
Improving the No-Action Letter Process
- The Commission should rationalize the current system of informal guidance by
reducing the number of vehicles it uses to provide guidance. Each operating division should develop a web-based system of Compliance and Disclosure Interpretations (CDI), which should replace Staff Legal Bulletins, FAQs, summaries of staff comment letters, small entity compliance guides, and interpretive letters.
- The Commission should publish guidelines distinguishing the use of no-action letters and exemptive orders.
- The practice of issuing no-action letters of general applicability should be discontinued in favor of exemptive orders or emergency orders, as appropriate.
- Each division should post on the SEC Website a list of the staff members, with e-mail addresses and phone numbers, who are authorized to provide informal assistance on specified topics, with all substantive responses promptly posted on the web-based CDI system, following supervisory review.
- Each division should attempt to provide a final response to a no-action request within 90 days of receipt. To promote compliance, each division should be required to send a quarterly advice memorandum to the Commission identifying all requests pending for 90 days or longer. The memo would identify the issues presented that must be resolved and provide a target date for resolution. The division should also indicate if it is unlikely that a no-action letter will be issued.
- A no-action letter should be viewed as informal guidance rather than a method of setting regulatory policy. Because it is often difficult to distinguish interpretation from policy on a
prospective basis, the Commission should annually issue interpretive statements that review, adopt, and codify significant staff positions contained in no-action letters. These releases could also be used to withdraw or revise a no-action position previously taken, based upon new facts or an analysis of how it has been interpreted. The Commission should issue these interpretive statements following an opportunity for public notice and comment. The original recipient of a no-action letter could continue to rely upon the assurances provided in the letter. Any revisions or changes reflected in the Commission interpretative release would apply prospectively to third parties.
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