(Article from Registered Funds Regulatory Update, April 2022)
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In a letter to SEC Chair Gary Gensler, Rep. Patrick McHenry (R-N.C.), ranking member of the House Financial Services Committee, and Sen. Patrick Toomey (R-Pa), ranking member of the Senate Banking Committee, criticized the SEC for “consistently provid[ing] unreasonably short comment periods” since Chair Gensler began his term in April 2021. While comment periods generally last for 60 days, with extended comment periods of 90 or 120 days provided for more complex rules, the Gensler administration has only provided comment periods of 30 or 45 days for rule proposals, with several of those brief timelines coinciding over holiday periods. In their letter, McHenry and Toomey noted that a wider window is necessary to ensure that there is substantive public input in the rulemaking process and is particularly necessary given the Gensler administration’s expansive rulemaking mandate. The lawmakers also underscored the critical impact that public comment has on refining and improving adopted rulemakings, in some cases even providing the SEC with grounds to rethink or scrap imprudent rulemakings entirely.
The Securities Industry and Financial Markets Association (“SIFMA”) also complained about the tight comment deadline in a January comment letter that raised concerns about the SEC’s proposal on securities lending reporting. SIFMA asserted that “the proposed rule would impose significant costs on SIFMA member firms which are not commensurate with the benefits sought to be achieved . . . [h]owever, given the very short comment period, SIFMA and its members [did] not have sufficient time to fully analyze and calculate the true anticipated cost of implementing the proposed reporting regime.” More recently, SIFMA submitted a comment letter to the SEC this March challenging the SEC’s provision of only 30 days to comment on its notice of proposed rulemaking on procedures governing the filing and processing of prohibited transaction exemptive applications. SIFMA requested an extension of time from 30 days to “at least 60 days” given the “myriad [of] substantive changes . . . and the novel legal and policy theories also involved.”
The pushback over the short comment deadlines is just one example of the simmering tensions between Gensler—and his Democratic SEC majority—and Republicans. A potential reason for the tight public comment periods may be due to Gensler’s pursuit of an expansive agenda; at just one recent open meeting alone the SEC advanced five rule proposals. But the tight comment timelines greatly exacerbate the strain already placed on an industry that must triage its limited available resources to determine if and when to respond, especially when multiple proposals are put forth at once. According to a former counsel to SEC Commissioner Elad Roisman, the current comment periods make responding to agency proposals “difficult, if not impossible” and often leaves the smaller firms and softer voices unheard.
Letter from Rep. Patrick McHenry, R-N.C., ranking member of the House Financial Services Committee and Sen. Patrick Toomey, R-Pa ranking member of the Senate Banking Committee to Hon. Gary Gensler, Chair, SEC (January 10, 2022), available at: https://republicans-financialservices.house.gov/uploadedfiles/2022-01-10_pmc_toomey_letter-gensler_sec_comment_period.pdf.