On April 8, 2019, Commissioner Hester Peirce of the Securities and Exchange Commission (“SEC”) delivered a speech entitled “SECret Garden” at the Practicing Law Institute’s 2019 SEC Speaks conference. In her speech, Commissioner Peirce reflected on the benefits and pitfalls of SEC “no-action” letters. Over time, this case-by-case guidance, according to Commissioner Peirce, has created a “secret garden” of law outside the requirements of transparency and fairness mandated for the SEC in connection with the promulgation of new or amended rules. She asserted that guidance through no-action letters gives rise to questions about fairness and transparency, such as market participants wondering whether they are subject to the same requirements and standards as their competitors and if they are able to effectively push back on no-action letters that they believe are unreasonable. Commissioner Peirce summed it up by suggesting that unless there is some confidentiality requirement, “all of our regulatory gardens should be subject to public review.” The speech can be found in full here.

Separately, on April 11, 2019, the Office of Management and Budget (“OMB”) issued a memorandum to the heads of all federal departments and agencies titled, “Guidance on Compliance with the Congressional Review Act (“CRA”).” The CRA is an oversight tool that Congress may use to weigh in or overturn a “major” rule issued by a federal department or an agency, including rules issued by independent regulatory agencies such as the SEC. Such “major” federal activity is defined as regulatory action that could have an annual economic impact of at least $100 million or adversely impacts the economy, jobs, environment, public health or local communities.

According to the memo, instead of an independent agency determining on its own whether a forthcoming rule is a “major rule” under the CRA criteria, new rules and guidance documents shall be provided to the Office of Information and Regulatory Affairs (“OIRA”) for purposes of determining whether a rule is “major” under the CRA in advance of being made public. Agencies are required to submit rules to OIRA at least 30 days prior to publication of the rule in the Federal Register. This memo may have a significant impact on new guidance. The memorandum is to go into effect May 11, 2019 and is available in full here.