SEC's technical glitch won’t slow rulemaking, experts say

A technical glitch that prevented the Securities and Exchange Commission from receiving some comment letters on several proposals is not expected to slow the pace of rulemaking.

The SEC announced Friday it is extending the comment periods on 11 rulemaking proposals and one request for comment due to problems with the electronic comment form on the agency’s website. Several of the proposals affect financial advisers, including those on environmental, social and governance investing, investment fund names, cybersecurity and private funds.

The majority of blocked comments were submitted in August, the SEC said, but the problem started as early as June 2021. The agency advised anyone who submitted a comment using the online form to check the comment file for the proposals to see whether their letter was filed and posted. If it’s not there, it should be resubmitted.

The SEC reopened the comment periods for the affected proposals for 14 days beginning on the date that the order was published in the Federal Register.

The SEC has been moving at a breakneck pace in releasing rule proposals and gathering comments under Chairman Gary Gensler. The regulator reopened comment periods for several rules earlier this year under pressure from the industry to slow down.

The latest stumble was based on a technological breakdown and isn’t expected to significantly delay any of the affected proposals.

“I don’t view this as a substantive reopening and certainly not as a signal that the Commission recognizes that the comment periods are unreasonably short,” Investment Adviser Association general counsel Gail Bernstein said in a statement. “I also don’t believe it will materially slow down the rulemaking proposal. Most commenters that submitted substantive comments likely will have checked to make sure their comments made it into the record, so I’d expect that the bulk of these missing comments may be form letters.”

A former SEC counsel also anticipates the problem with the comment letters will be just a speed bump rather than a roadblock.

“It’s really more of an embarrassing admission than it is anything that would change outcome or timing,” Nicholas Losurdo, a partner at Goodwin Procter, wrote in an email.

One of the affected rulemakings was likely about to be brought up in an SEC open meeting when the comment glitch was caught, Losurdo said. That one might be pushed back a couple weeks, but it’s otherwise all systems go.

“Chairman Gensler will likely have open meetings for these rulemakings teed up on the calendar as soon as is feasibly possible once the comment period extension expires,” said Losurdo, who served as counsel for former SEC Commissioner Elad Roisman.