The Securities and Exchange Commission (SEC) on Oct. 7, 2022, reopened the comment periods for 11 proposals and a request for comment because of a technological error on the commission’s website for comment form. This internet error, which goes back to as early as June 2021, resulted in almost 200 comment letters not being received by the agency.
The commission said that the glitch was fixed, and the majority of the comments that were impacted were submitted in August 2022. Affected commenters as well as any other interested parties will get at least two more weeks to submit comments. The 14-day deadline starts when the reopening release is published in the Federal Register, which could take anywhere from a few days to several weeks.
‘Embarrassing for the SEC’
“I imagine that this is a little embarrassing for the SEC given how long it has been going on,” said Dave Brown , a partner with Alston & Bird LLP, adding that “this is a potentially significant development given the scope of the rules that it impacts, particularly the climate change rules.”
A few of the other significant rule proposals that were impacted include special purpose acquisition companies (SPACs) and cybersecurity, although comment periods for these proposals ended well before August.
Still, this means that the commission will be forced to slow down on its aggressive rulemaking effort. Critics said that the SEC under Chair Gary Gensler’s leadership has been providing a rather short comment period compared to other chairs in the past. The controversial rulemaking project on climate change, which Gensler had hoped to complete by the end of the year, will likely be pushed back to early 2023.
“Issuers and stockholders were anticipating adoption of final climate rules this calendar year,” Brown said. “That may still happen, but it certainly could potentially push back the SEC’s previously published timeline.”
As for SPACs, this would prolong anxiety in the market, “particularly given the difficulties and uncertainties in the SPAC market right now,” he said.
0.3 Percent of Total Comment Letters Affected
SEC officials said that some market participants in August let the staff know that their comment letters submitted via the SEC’s website had not been posted publicly on the proposed rule’s page. After studying the issue, the staff found that when comment letters were submitted on the website as an attachment, that attachment was not sent to the Office of the Secretary, where the comment letters are processed.
Because the website generated and stored error messages, the staff were able to figure out which releases were affected. SEC officials said that they are confident that the staff have properly reviewed and identified all the affected comment letters.
While the internet errors affected almost 200 comment letters, SEC officials believe that represents only a small percentage of the total number of public comments posted on the website. More than 25,000 unique comment letters and more than 45,000 form comment letters were posted between June 2021 and August 2022, which comes out to be about 0.3 percent of the letters, according to SEC officials.
To date, the SEC has gotten and posted about 90 percent of comments that were affected by the technological glitch.
“All commenters who submitted a public comment to one of the affected comment files through the internet comment form between June 2021 and August 2022 are advised to check the relevant comment file on SEC.gov to determine whether their comment was received and posted,” the SEC said. “If a comment has not been posted, commenters should resubmit that comment.”
List of Rules Affected
The following 12 releases were affected, according to Release No. 33-11117, Resubmission of Comments and Reopening of Comment Periods for Certain Rulemaking Releases:
- Release No. 34-93613, Reporting of Securities Loans, Dec. 8, 2021
- Release No. 34-93784, Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions, Feb. 4, 2022
- Release No. IC-34441, Money Market Fund Reforms, Feb. 8, 2022
- Release Nos. 34-93783, Share Repurchase Disclosure Modernization, Feb. 15, 2022
- Release No. 34-94313, Short Position and Short Activity Reporting by Institutional Investment Managers, March 16, 2022; see also Release No. 34-94314, Notice of the Text of the Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data Collection, March 16, 2022
- Release No. 33-11038, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, March 23, 2022
- Release No. IA-5955, Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews, March 24, 2022
- Release No. 33-11042, The Enhancement and Standardization of Climate-Related Disclosures for Investors, April 11, 2022
- Release No. 33-11048, Special Purpose Acquisition Companies, Shell Companies, and Projections, May 13, 2022
- Release Nos. 33-11067, Investment Company Names, June 17, 2022
- Release No. 33-11068, Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices, June 17, 2022
- Release Nos. IA-6050, Request for Comment on Certain Information Providers Acting as Investment Advisers, June 22, 2022
This article originally appeared in the October 10, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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