SEC Chair, John Clayton, issued a statement on September 14, 2018, that on its face should not have caused any concern. We have always known that the Commission oversees the work of the staff and that an individual staff member cannot bind the Commission. We know that No-Action letters are not binding although we read them to detect trends based upon very specific facts. FAQs issued by the staff are relied upon for directions on how to comply with regulations.
So why did the Chair’s statement seem to indicate that too much reliance has been given to the staff’s work?
I think it was this portion of the statement dealing with the non-binding impact of staff statements:
“Several weeks ago, I instructed the directors of the Division of Enforcement and the Office of Compliance Inspections and Examinations to further emphasize this distinction to their staff.
More generally, our divisions and offices, including but not limited to the Division of Corporation Finance, the Division of Investment Management and the Division of Trading and Markets, have been and will continue to review whether prior staff statements and staff documents should be modified, rescinded or supplemented in light of market or other developments.”
Why was OCIE particularly cited as having received instruction about staff statements being non-binding?
Which documents might be rescinded and what impact will that have on prior reliance upon those documents?
Does the Commission actually have the time and resources to deal with every interpretation of regulations (particularly in examinations), determine what enforcement actions should be pursued and draft FAQs? Isn’t that precisely what staff is for?
Or was this announcement just an effort to appease the administration and life will continue as usual?
We will have to watch what comes out of the SEC over the next few months.
© Sharon M. Davison October 2018