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Business Crimes BulletinFeaturesRegulationWhite Collar Crime

Examining the SEC's Rulemaking Process

By Jonathan S. Sack and Penina Moisa
March 01, 2022

SEC Chair Gary Gensler has set out an ambitious regulatory agenda. In testimony, speeches, and interviews, he has put forward a substantial set of rulemaking priorities for the staff and Commission to consider. Among these priorities are: 1) disclosure regarding environmental, social, and governance (ESG) policies, including the impact of business on climate change; 2) disclosure and liability obligations for special purpose acquisition companies (SPACs); 3) regulatory oversight of crypto currency; and 4) equities trading and market structure, including payment for order flow (PFOF).

This agenda raises important questions of both substance and process, including the technical, but very important, matter of SEC rulemaking: What is required for the Commission to create new rules, or change well-established rules? The answers to these questions, in turn, may determine what can realistically be accomplished given timing and political constraints.

A recent essay by law school professor J. W. Verret puts forward a provocative argument that the rulemaking process may not be as time-consuming, and may not require as much detailed study, as past experience and case law suggest, at least in one area of concern to Chair Gensler: market structure and PFOF. J.W. Verret, "Robinhood's Threat To Sue the SEC Over Broker-Inducement Regulation Unlikely To Succeed," George Mason Law & Economics Research Paper Series 21-38 (Nov. 30, 2021).

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