Lawmakers, trade groups seek more time to comment on SEC proposals

Public comment about Securities and Exchange Commission rule proposals is being rushed, Republican lawmakers and a major financial services industry trade group asserted this week.

In a letter Monday to SEC Chairman Gary Gensler, Rep. Patrick McHenry, R-N.C., ranking member of the House Financial Services Committee, and Sen. Patrick Toomey, R-Pa., ranking member of the Senate Banking Committee, said the agency has “consistently provided unreasonably short comment periods” since Gensler began his term last April.

The lawmakers said most comment periods should last for 60 days and the deadline for complex rules should be 90 or 120 days. Most comment periods under Gensler, however, have been for 45 or 30 days, they said.

“We urge you to immediately extend all comment periods for the SEC’s proposed rules of significance to at least 60 days, including reopening the comment filing for those rulemakings with shorter comment periods that have closed prematurely,” McHenry and Toomey wrote.

A wider window is required to ensure substantive public input, the lawmakers said.

“This commentary helps refine and improve adopted rulemakings — and in some cases provides a basis for the SEC to rethink or scrap imprudent rulemakings entirely,” McHenry and Toomey wrote.

The Securities Industry and Financial Markets Association also complained about a tight comment deadline in a letter this week raising concerns about the SEC’s proposal on securities lending reporting.

“The proposed rule would impose significant costs on SIFMA member firms which are not commensurate with the benefits sought to be achieved,” SIFMA wrote in its letter. “However, given the very short comment period, SIFMA and its members do not have sufficient time to fully analyze and calculate the true anticipated cost of implementing the proposed reporting regime.”

The securities lending proposal was released Nov. 18. and comments were due last Friday. But the comment period occurred over the Thanksgiving and Christmas holidays.

When the SEC released a request for comment on the digital engagement practices of investment advisers and brokers — one of the biggest issues it is tackling — the comment period was a little over one month.

An SEC spokesperson did not respond to a request for comment.

The pushback over the short deadlines is another example of the tension between Gensler — and the Democratic SEC majority — and Republicans.

“There seems to be alignment, particularly on the right, on the need for longer comment periods,” said Kurt Wolfe, counsel at Quinn Emanuel Urqurhart & Sullivan.

One of the risks for the SEC is that grumbling over comment deadlines could transform into litigation charging that the agency violated the Administrative Procedure Act.

A potential reason for the tight public comment periods could be that Gensler is pursuing an expansive agenda. At a recent open meeting, the commission advanced five rule proposals.

Digesting proposals that are often more than 100 pages, especially if several are put out at once, can pose a big challenge to financial firms that are responding.

“It makes it difficult, if not impossible, to give robust feedback on each of those proposals in their own right,” said Nick Losurdo, a partner at Goodwin Procter and a former counsel for SEC Commissioner Elad Roisman. “Oftentimes, it’s the smaller firm and the softer voice that is not heard.”

One of the big challenges that firms face is deciding which part of the proposal has the biggest impact on their business and addressing the sometimes dozens of embedded questions. The goal is to write a comment that will influence the agency and perhaps be quoted in the final rule.

“That can take a lot of research, a lot of phone calls and some soul-searching,” Wolfe said. “It can take some time to prepare the comment letters and get them in shape to submit to the SEC.”