Sept. 15, 2016
Today, the Commission published its annual list of rules scheduled for review in the next twelve months (the "Rule List").[1] The Rule List is responsive to the Regulatory Flexibility Act requirement that the Commission perform a periodic review of rules that have or will have a significant economic impact upon a substantial number of small entities within ten years of the publication of such rules as final rules "to determine whether such rules should be continued without change, or should be amended or rescinded."[2] But, notably, the Rule List is not limited to rules that affect small entities. As in prior years, the Commission has determined to review a broader set of rules;[3] this year's analysis focuses on rules adopted in 2005,[4] including Regulation NMS.[5]
I am pleased that the Commission has this annual occasion to conduct retrospective reviews of our rules.[6] Indeed, I have repeatedly emphasized the need to measure whether the rules and policies the agency implements are actually achieving their intended objectives.[7] Public comment is a key component of such retrospective reviews.
I write to highlight publication of the annual Regulatory Flexibility Act Rule List because historically the lists have generated little or no public comment. In fact, in recent years the annual Rule List has prompted, on average, only one comment. I encourage commenters to engage with the Commission and provide insights that will inform our retrospective reviews. As a guide for the type of comments that may be useful, the Regulatory Flexibility Act identifies the following factors for the Commission's analysis: (1) the continued need for the rule; (2) the nature of complaints or comments received concerning the rule from the public; (3) the complexity of the rule; (4) the extent to which the rule overlaps, duplicates, or conflicts with other Federal rules, and, to the extent feasible, with State and local governmental rules; and (5) the length of time since the rule has been evaluated or the degree to which technology, economic conditions, or other factors have changed in the area affected by the rule.[8]
In particular, I want to focus the public's attention on the fact that this year's Rule List includes Regulation NMS. When Regulation NMS was adopted, there was uniform support for enhancing the efficiency of our markets, but how the Commission sought to achieve that goal was quite complex and controversial.[9] And, there have been substantial changes in technology, economic conditions, and other factors in the last decade. For these reasons, I have been urging the Commission to conduct a comprehensive equity market structure review program.[10] This year's Regulatory Flexibility Act reviews provide an opportunity for the public to spur the Commission to conduct a Regulation NMS "lookback," and specifically consider whether the rules should be modified, streamlined, or rescinded.
[1] List of Rules to be Reviewed Pursuant to the Regulatory Flexibility Act, Securities Act Release No. 10209 (Sept. 15, 2016), available at https://www.sec.gov/rules/other/2016/33-10209.pdf.
[2] 5 U.S.C. 610.
[3] In connection with this and prior publications of Rule Lists, the Commission has cited Securities Act Release No. 6302, 46 F.R. 19251 (Mar. 30, 1981) as the statement of Commission policy that it will review all final rules to assess their continued utility. See, e.g., List of Rules to be Reviewed Pursuant to the Regulatory Flexibility Act, Securities Act Release No. 9965, 80 F.R. 65973 (Oct. 28, 2015), available at https://www.sec.gov/rules/other/2015/33-9965.pdf. That citation is, in fact, incorrect. The Commission's statement that it "intend[ed] to conduct a broader review [than that required by the RFA], with a view to identifying those rules in need of modification or even rescission" is actually contained in Securities Act Release No. 6323, 46 F.R. 33287 (June 29, 1981), available at http://heinonline.org/HOL/Page?public=false&handle=hein.fedreg/046124&page=33287&collection=fedreg.
[4] The Commission has excluded from the Rule List minor amendments to previously adopted rules and rules that are ministerial, procedural, or technical in nature. Likewise, the Commission has excluded rules that were withdrawn or overturned by court order.
[5] Regulation NMS, Securities Exchange Act Release No. 51808, 70 F.R. 37496 (June 29, 2005), available at https://www.sec.gov/rules/final/34-51808.pdf.
[6] An Executive Order of the President of the United States requires independent agencies, such as the SEC, to "promote retrospective analysis of rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned." Regulation and Independent Regulatory Agencies, Executive Order No. 13579, 76 F.R. 41587 (July 11, 2011), available at https://www.gpo.gov/fdsys/pkg/FR-2011-07-14/pdf/2011-17953.pdf. That order, however, does not specify the frequency of reviews or require agencies to seek public comment.
[7] See, e.g., Remarks to the Securities Enforcement Forum 2014, Speech by Commissioner Michael S. Piwowar (Oct. 14, 2014), available at https://www.sec.gov/News/Speech/Detail/Speech/1370543156675.
[8] 5 U.S.C. 610(b).
[9] Commissioners Cynthia A. Glassman and Paul S. Atkins took the unusual step of having their joint dissent from the adoption of Regulation NMS published in the Federal Register. See Statement of Dissent to the Adoption of Regulation NMS, 70 F.R. 37496 (June 29, 2005) at 37632 et seq., available at https://www.sec.gov/rules/final/34-51808-dissent.pdf.
[10] See, e.g., The Benefit of Hindsight and the Promise of Foresight: A Proposal for A Comprehensive Review of Equity Market Structure, Speech by Commissioner Michael S. Piwowar (Dec. 9, 2013), available at http://www.sec.gov/News/Speech/Detail/Speech/1370540470552.