The Trump Administration’s attack on regulations just made a sweep through the financial industry. The Securities and Exchange Commission, The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency all clarified that staff guidance is not a regulation.
SEC Chairman Clayton made it clear that the SEC’s “longstanding position is that all staff statements are nonbinding and create no enforceable legal rights or obligations of the Commission or other parties.” He makes it clear that to have the power of law, there needs to be a published rulemaking in the Federal Register, and adoption of a final rule which considers public comments on the proposal to be in accordance with the Administrative Procedure Act.
I think this cuts both ways. Some guidance creates an additional regulatory burden. But sometimes it clarifies the application of a rule to lessen the regulatory burden.
The banking regulators will focus on making sure that bank examiners will not criticize a supervised financial institution for a “violation” of supervisory guidance. That is clearly falling on the case of regulation by guidance. It does not address the opposite position where a party is complying with the guidance, but the regulators still bring an action.
The SEC enforcement tends to throw everything they don’t like under the vagaries of Section 206 as a fraudulent, deceptive or manipulative act. Take a look at tomorrow’s story for one of those.
I generally think of SEC guidance for investment advisers as a mixed bag. For me, it mostly helps reduce the regulatory burden. It certainly helps craft my thoughts about how to comply with the formal regulations, particularly where the regulation is unclear on a the particular application.
Certainly, there is grumbling about regulation by examination. I’m not sure if this statement from he Chairman will reach to that.
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