SEC Reopening Comment Period on Several Key Proposed Rules After Technical Error
The SEC on Oct. 7, 2022, reopened the comment period for 11 rule making proposals, one request for comment and eight Self-Regulatory Organization (SRO) matters – all due to a technical error. This glitch likely throws a wrench in the SEC's push to speed up the rulemaking process.
In August 2022, commenters noticed their submissions – made through the SEC's website – were not posted on the proposed rule's page. After market participants informed SEC staff of the issue, the SEC discovered the problem: When comment letters were submitted on the website as an attachment, the letter attachment was not sent to the Office of the Secretary, where the comment letters are processed. Although the SEC insists the glitch mainly impacted comments submitted in August 2022, the error was found to have occurred as early as June 2021. The SEC estimates almost 200 comment letters were lost due to the technical error, a small fraction of the more than 25,000 unique comment letters and more than 45,000 form comment letters the agency received during the relevant time period.
The 12 affected releases are listed below, along with helpful insights from Holland & Knight's Securities Enforcement Defense Team on key proposals:
- Release No. 34-93613, Reporting of Securities Loans, Dec. 8, 2021
- Release No. 34-93784, Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions, Feb. 4, 2022
- Release No. IC-34441, Money Market Fund Reforms, Feb. 8, 2022
- Release Nos. 34-93783, Share Repurchase Disclosure Modernization, Feb. 15, 2022
- Release No. 34-94313, Short Position and Short Activity Reporting by Institutional Investment Managers, March 16, 2022; see also Release No. 34-94314, Notice of the Text of the Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data Collection, March 16, 2022
- SECond Opinions: "Something We Can All Agree On? SEC Unanimously Approves Proposed Short-Seller Disclosure Rules"
- Release No. 33-11038, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, March 23, 2022
- SECond Opinions: "SEC Proposes Cybersecurity Incident and Governance Disclosure Obligations for Public Companies"
- Release No. IA-5955, Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews, March 24, 2022
- Release No. 33-11042, The Enhancement and Standardization of Climate-Related Disclosures for Investors, April 11, 2022
- SECond Opinions: "SEC's Proposed Rule for Climate-Related Disclosures Would Flood Public Companies with New Disclosure Obligations"
- Release No. 33-11048, Special Purpose Acquisition Companies, Shell Companies, and Projections, May 13, 2022
- SECond Opinions: "Writing on the Wall for SPAC Underwriters? New SEC Rule Increases Exposure and Risks"
- Release No. 33-11067, Investment Company Names, June 17, 2022
- Release No. 33-11068, Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices, June 17, 2022
- SECond Opinions: "SEC ESG-Rulemaking Wave Continues with Proposed Rule for Advisers and Funds"
- Release Nos. IA-6050, Request for Comment on Certain Information Providers Acting as Investment Advisers, June 22, 2022
Although the SEC has recovered almost 90 percent of the affected comments, the agency is reopening the comment period to ensure interested persons have an opportunity to participate in the rulemaking process. The comment period will be open for 14 days following publication of the reopening release in the Federal Register.
Additionally, the SEC reports that the glitch may have affected the following self-regulatory organization matters:
- File No. SR-BOX-2022-08, BOX Exchange LLC; Proposed Rule Change, as Modified by Amendment No. 1, to Amend Rule 12140 (Imposition of Fines for Minor Rule Violations), to Expand the List of Violations Eligible for Disposition Under the Exchange's Minor Rule Violation Plan and to Update the Fine Schedule Applicable to Minor Violations of Certain Rules, July 7, 2022
- File No. SR-CboeBZX-2021-083, Cboe BZX Exchange Inc.; Proposed Rule Change to Amend Rule 25.3, Which Governs the Exchange's Minor Rule Violation Plan, in Connection with Certain Minor Rule Violations and Applicable Fines, Dec. 20, 2021
- File No. SR-FINRA-2022-017, Financial Industry Regulatory Authority Inc.; Proposed Rule Change to Amend FINRA Rule 6750 Regarding the Publication of Aggregated Transaction Information on U.S. Treasury Securities, Aug. 5, 2022
- File No. SR-FINRA-2022-024, Financial Industry Regulatory Authority Inc.; Proposed Rule Change to Amend the Codes of Arbitration Procedure to Modify the Current Process Relating to the Expungement of Customer Dispute Information, Aug. 9, 2022
- File No. SR-MEMX-2021-10, MEMX LLC; Proposed Rule Change, as Modified by Amendment No. 1, to Establish a Retail Midpoint Liquidity Program, May 6, 2022
- File No. SR-NYSEARCA-2022-52, NYSE Arca Inc.; Proposed Rule Change to Amend Rule 6.64P-O, August 15, 2022
- File No. SR-NYSENAT-2021-19, NYSE National Inc.; Proposed Rule Change to Extend the Pilot Related to the Market-Wide Circuit Breaker in Rule 7.12, Oct. 1, 2021
- File No. SR-OCC-2022-802, The Options Clearing Corporation; Advance Notice Related to a Master Repurchase Agreement as Part of The Options Clearing Corporation's Overall Liquidity Plan, July 20, 2022
Accordingly, the SEC will also evaluate resubmitted comments for these SROs.
The SECond Opinions Blog will continue to monitor the agency's activity in this space and provide further updates. If you need any additional information on this topic – or anything related to SEC enforcement – please contact the authors or another member of Holland & Knight's Securities Enforcement Defense Team.