About 80 percent of my clients are regulated by the United States Securities and Exchange Commission (“SEC”). My clients rely upon me to give them advice on how to navigate the waters of regulation. The advice that I give is based upon guidance, opinions and daily interaction with the SEC. It is also based on the advice of colleagues who also have interactions with the SEC. While I don’t always agree with the interpretation of rules and regulations that I receive from the SEC or with new rules and regulations that they issue, I have never said that the SEC should be stripped of its authority.

The Supreme Court decision this week will result in chaos in the world in which I labor. If every time I received an interpretation I did not “like” I ran to court for a ruling, several things would happen. First, I will undoubtedly not be the only person running to court. Thus, raising the possibility that the same rule or regulation will have multiple interpretations from various district courts. Second, this will increase the cost of doing business for my clients. Finally, there will be various interpretations of the same rules and regulations which will create chaos.

How will broker-dealers (my main client base) interact with each other if they are working from a different interpretation of the same regulation? If one of the goals of the SEC is to protect investors, how will investors know what their rights are?

Broker-dealers are also regulated by FINRA, a self-regulatory organization, but FINRA is also regulated by the SEC. Will regulated entities be able to question the approval of new FINRA interpretations, and rules, which are approved by the SEC? Will FINRA rules be subject to the same approval of US District Courts?

For those who think that the securities industry is over regulated, I ask that you think about the chaos that will result in regulation by a variety of US District Courts.

We must also keep in mind that in this session the Supreme Court also ruled that SEC Administrative Courts do not have the authority to issues decisions that find defendants guilty and to provide for the payment of civil penalties. The combination of these two decisions virtually put the SEC on ice.

We will follow as these two decisions are tested.

© June 29, 2024 Sharon M.  Davison. Use with attribution is allowed.