In an address Friday at the 44th annual “SEC Speaks” conference, SEC Commissioner Michael Piwowar suggested that the Securities Exchange Commission might do well to apply its own rules to itself. He suggested the Commission might best build on its 2014 accomplishments by “apply[ing] the same objective that we have for the markets we regulate – that they fair, orderly, and efficient – to ourselves.”

Addressing “fairness,” Piwowar suggested the agency must not engage in rulemaking by
enforcement or exam findings and “must resist the temptation to include undertakings in enforcement settlements or principles in examination reports that serve as de facto rule[s].” He also pointed out the unfairness in burying key regulatory guidance in 500 to 1,000-page adopting releases.

Piwowar said the Staff’s recommendation of greater use of the SEC’s administrative forum “has the appearance of the Commission looking to improve its chances of success by moving cases to its in-house administrative system.” That perception might have been ameliorated somewhat by SEC Administrative Law Judge Patil’s recent indication that he will apply the Second Circuit’s Newman rationale (that tippee’s must know of an objective, consequential and valuable gain to the tipper) to the SEC’s insider-trading action, In the Matter of Gregory T. Bolan, Jr., AP No. 3-16178 – even as prosecutors seek an en banc rehearing in the case. Even so, another putative respondent filed suit the day before Piwowar’s remarks challenging the constitutionality of the Commission’s administrative forum. See Gray Financial Group, Inc. v. SEC, No. 1:15-cv-0492-CAP (USDC NDGA).

Commissioner Piwowar suggested that “To avoid the perception that the Commission is taking its tougher cases to its in-house judges, and the ensure that all are treated fairly and equally, the Commission should set out and implement guidelines for determining which cases are brought in administrative proceedings and which in federal courts.” Though implementing some guidelines might make for a better “appearance” of fairness, it’s difficult to have much faith in their substantive affect, when the Commission just held (and argues Chevron deference to its view) that the Congressionally-imposed 180-day charging deadline doesn’t matter. (more here)

Commissioner Piwowar’s remarks are here.