To address recent comments regarding the concept that the Securities and Exchange Commission (“SEC”) is de facto rulemaking based on the views of staff, SEC Chairman Jay Clayton issued a public statement regarding SEC staff views. It was noted that the staff of the SEC frequently makes their views known through a variety of communications, including written statements, compliance guides, letters, speeches, responses to frequently asked questions and responses to specific requests for assistance. The staff often addresses specific questions from particular SEC-regulated institutions or other stakeholders about SEC rules or regulations and how those rules or regulations may apply to a particular entity’s specific facts and circumstances.
However, when the SEC promulgates and enforces its rules and regulations which have the force and effect of law in furtherance of its mission, such rules and regulations generally take effect only after the SEC publishes a notice of proposed rulemaking in the Federal Register, and adopts a final rule which considers public comments on the proposal in accordance with the Administrative Procedure Act.
Ultimately, the SEC’s position is that all staff statements are nonbinding and create no enforceable legal rights or obligations. Statements issued by SEC staff frequently include a disclaimer underscoring the important distinction between the SEC’s rules and regulations, on the one hand, and staff views on the other. Chairman Clayton noted that “as we carry out our market oversight functions, I believe we at the Commission should keep this important distinction in mind.”
Finally, Chairman Clayton clarified the SEC’s view when he stated “I believe that public engagement on staff statements and staff documents is important and will assist the Commission in developing rules and regulations that most effectively achieve the SEC’s mission. I encourage such engagement, with the recognition that it is the Commission and only the Commission that adopts rules and regulations that have the force and effect of law.”