New U.S. Chamber, Industry Whitepaper Shows Flawed, Unlawful Rulemaking Agenda Harms Capital Markets, Consumer Protection

WASHINGTON, D.C. — Today, the U.S. Chamber of Commerce and a coalition of business groups are calling on the Securities and Exchange Commission (SEC) and Congress to put in place reforms that will improve the agency’s rulemaking process and restore public faith in the regulator. The whitepaper, Investors and the Markets First: Reforms to Restore Confidence in the SEC, documents our concerns with the SEC’s agenda, explains the significance of how federal courts view lawsuits challenging certain regulations, and recommends reforms to improve how the agency approaches rulemaking. 

The whitepaper also analyzes how the SEC is failing to undertake the necessary work to understand how markets and participants will be impacted by proposed changes, leading to unnecessary and flawed rules that will, in some cases, disrupt the orderly functioning of the markets. The whitepaper focuses on how the SEC’s interconnected rules put U.S. capital markets at risk. It also addresses how final rules that differ substantially from proposed rules violate the Administrative Procedure Act and heighten the risk of unintended consequences for markets, giving the public inadequate opportunity to provide input.  

The whitepaper outlines a series of reforms that the SEC should enact to improve its rulemaking process and to restore market confidence in the agency’s role as an impartial regulator: 

• Conduct an analysis of all interrelated and interconnected rules (existing and contemporaneously proposed) for each proposed rule and amend or repeal rules as necessary to account for such interconnections. 
• Provide a minimum of 60-day comment periods for proposals calculated from the date published in the Federal Register (unless there is an emergency). 
• Have a third party perform and publish for public comment no later than 90 days from the date of enactment a post-adoption cost impact assessment for each major rule the SEC has adopted in the past three years. 
• Integrate and expand on the mission of several offices at the SEC to appropriately resource mandates that focus on market innovation and capital formation.  
• Publish an annual report on the exemptions granted from rules and adjudicate exemptive applications within 180 days. 

“America’s capital markets fuel the growth engine that creates jobs and prosperity for Main Street investors,” said U.S. Chamber of Commerce Center for Capital Markets Competitiveness Executive Vice President Tom Quaadman. “The SEC has taken its eye off the ball with a rushed and interconnected agenda that often fails to account for the real-life costs and benefits of its rules, including how they might limit capital formation. Our common-sense reforms would promote a rulemaking process that renews the SEC’s focus on its tripartite mission of investor protection, capital formation, and competition.” 

“The current SEC has faced a record number of lawsuits because it continues to push an unlawful, aggressive, and anti-business regulatory agenda,” said American Investment Council President and CEO Drew Maloney. “Our paper outlines how to reform the SEC so that it facilitates capital formation – an important part of its mission.”   

“The SEC has a vital mandate of protecting investors, promoting efficient capital markets, and fostering capital formation,” said Business Roundtable Vice President of Corporate Governance Will Anderson. “When the agency departs from its mandate or circumvents its procedures, it weakens U.S. capital markets, undermining prosperity, and economic security. Business Roundtable urges Congress to advance reforms to support strong and resilient capital markets.”   

“ICI has serious concerns with the pace and scale of the SEC’s rulemaking. Over the past three years, the Commission has approached regulation in a manner that can potentially harm our capital markets and the financial well-being of American investors,” said Investment Company Institute President and CEO Eric Pan. “One result of the pace and scale is that the SEC has issued several rules that will interact with each other in myriad ways. We are concerned that the SEC has not attempted to understand these interactions fully and, accordingly, has adjusted its approach to the regulatory actions, including the proposed compliance deadlines. As we wait for many of these proposals to be finalized, we further note that the agency has already produced some final rules that have differed substantially from their proposals. In such cases, the SEC should have re-proposed the rules. For the sake of American investors and the markets, the SEC needs to be more careful and deliberative in its rulemaking,” noted Pan. 

"The SEC fails to acknowledge the interconnectedness of its rulemaking. This failure produces sloppy proposals and rules that conflict with each other and are inconsistent,” said Managed Funds Association President and CEO Bryan Corbett. “One of the most glaring examples of this arbitrary rulemaking are the Securities Lending and Short Sale Disclosure rules. These incongruous rules were finalized in violation of the Administrative Procedure Act and will harm markets, investors, and the economy.” 

“As opposed to focusing on capital formation for venture capital, which would lead to more entrepreneurs and greater economic growth, the SEC’s regulatory overreach and piecemeal approach feels like death by a thousand cuts,” said National Venture Capital Association President and CEO Bobby Franklin. “I’m glad this paper lays out the issues and makes sound recommendations.” 

Along with the U.S. Chamber, the coalition includes the American Investment Council, Business Roundtable, Investment Company Institute, Managed Funds Association, and National Venture Capital Association.

The whitepaper can be viewed here.

---

About the U.S. Chamber of Commerce: The U.S. Chamber of Commerce is the world’s largest business organization, representing companies of all sizes across every sector of the economy. Our members range from the small businesses and local chambers of commerce that line the Main Streets of America to leading industry associations and large corporations. They all share one thing: They count on the U.S. Chamber to be their voice in Washington, across the country, and around the world. For more than 100 years, we have advocated for pro-business policies that help businesses create jobs and grow our economy. 

The American Investment Council (AIC) is an advocacy and resource organization established to develop and provide information about the private investment industry and its contributions to the long-term growth of the U.S. economy and retirement security of American workers. Member firms of the AIC consist of the country’s leading private equity and growth capital firms united by their successful partnerships with limited partners and American businesses. 

Business Roundtable is an association of more than 200 chief executive officers (CEOs) of America’s leading companies, representing every sector of the U.S. economy. Business Roundtable CEOs lead U.S.-based companies that support one in four American jobs and almost a quarter of U.S. GDP. Through CEO-led policy committees, Business Roundtable members develop and advocate directly for policies to promote a thriving U.S. economy and expanded opportunity for all Americans.  

The Investment Company Institute (ICI) is the leading association representing regulated investment funds. ICI’s mission is to strengthen the foundation of the asset management industry for the ultimate benefit of the long-term individual investor. ICI’s members include mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and UCITS and similar funds offered to investors in other jurisdictions. Its members manage $34.1 trillion invested in funds registered under the US Investment Company Act of 1940, serving more than 100 million investors. Members manage an additional $9.4 trillion in regulated fund assets managed outside the United States. ICI also represents its members in their capacity as investment advisers to certain collective investment trusts (CITs) and retail separately managed accounts (SMAs). ICI has offices in Washington DC, Brussels, and London and carries out its international work through ICI Global. 

The Managed Funds Association, based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180-member fund managers, including traditional hedge funds, credit funds, and crossover funds, that collectively manage over $3.2 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time. 

The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit www.nvca.org.