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US Securities and Exchange Commission

House Republicans Seek Full SEC Hearing Amid ‘Scorched Earth’ Rulemaking Push

Bill Flook  Editor, Accounting and Compliance Alert

Bill Flook  Editor, Accounting and Compliance Alert

Top Republicans on the House Financial Services Committee on May 5, 2022, urged Chair Maxine Waters to immediately call a hearing with the full SEC to discuss the commission’s recent rulemaking blitz.

In a letter to the California Democrat, Reps. Patrick McHenry of North Carolina and Bill Huizenga of Michigan pointed to a similar request they made in October 2021, seeking a hearing with the full commission no later than April.

“It is now May, and we have yet to hear from you,” the lawmakers wrote. “However, since then, the SEC has taken several actions outside the scope of its authority and jurisdiction, and it has done so without giving stakeholders a fair chance to provide input. It is imperative that our full Committee convene to discuss the SEC’s unprecedented rulemaking agenda and hear the full range of views on the Commission.”

McHenry is the ranking Republican on the committee. Huizenga is the ranking member of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets.

“Hearing from the Chair alone is insufficient to fully understand the Commission’s ongoing deliberations,” they wrote. “Moreover, at the time of the hearing, Chair Gensler repeatedly refused to testify about forthcoming rulemakings. In fact, as of October 2021, only one open meeting with one rulemaking had occurred—leaving Members unable to question him or obtain additional information. His responses to questions including those for the record have been less than forthcoming and insufficient. This is unacceptable.”

The commission today is still missing a Republican member following the departure of Elad Roisman earlier this year. President Joe Biden nominated Mark Uyeda to fill that vacancy, and Jaime Lizarraga to succeed outgoing Democratic Commissioner Allison Herren Lee. Uyeda is an SEC attorney temporarily working at the Senate Banking Committee, while Lizarraga is a senior advisor to House Speaker Nancy Pelosi.

McHenry’s and Huizenga’s letter reiterates recent grievances with the SEC’s rapid implementation of Gensler’s agenda, a push that has been marked by a string of complex rulemakings with 30-day comment deadlines. The two lawmakers accused the SEC of a moving forward with a “scorched earth rulemaking agenda” containing more than 50 items. And they warned the short comment periods “undermines the public’s role in the rulemaking process and invites litigation, among other things.”

That latter complaint has recently picked up bipartisan momentum, with more than two dozen House Democrats joining a comment letter on the SEC’s private fund adviser proposal in Release No. IA-5955Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews, broadly calling for longer comment periods on commission proposals. (See Lawmakers, Industry Continue Criticism over Short SEC Comment Deadlines in the May 4, 2022, edition of Accounting & Compliance Alert.)

The Republicans further attacked the commission for implementing a rulemaking agenda that does “not include one capital formation proposal,” pointing to the recent 10-year anniversary of former President Barack Obama’s signing of the JOBS Act. pl112-106

“There is precedent for this Committee inviting the full Commission. As you will recall, you invited the full Commission to testify before the Committee in the 116th Congress,” McHenry and Huizenga wrote. “Our Members deserve to hear from the full Commission. Moreover, the public has a right to know the full range of views among the SEC Commissioners, especially in the absence of a meaningful notice-and-comment process under Chair Gensler.”

 

This article originally appeared in the May 9, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.

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