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SEC Commissioners Criticize SEC Rulemaking Process

SEC Commissioners Gallagher and Piwowar recently issued a dissent to the SEC’s rulemaking process surrounding the recently adopted rules regarding swaps reporting.  The rules were originally approved on January 14 (over the dissenting votes of Gallagher and Piwowar).  Subsequently, however, the SEC staff discovered that a significant letter commenting on the rule had been omitted from the public comment file.   As a consequence, the letter was not part of the public record nor was it considered by the staff or the Commission during the rulemaking process.  An “Administrative Notice” published by the SEC on February 11 accompanied a revised rule release, which noted that “the preamble section of the release reflects the consideration of a comment letter submitted by the International Swaps and Derivatives Association that was not originally considered by the Commission on January 14, 2015 due to a clerical error.”  The Notice explains that the release as modified was approved by the Commission on February 10, 2015.

According to their statement, Commissioners Gallagher and Piwowar asked that the comment period for the rules be reopened in order to consider the letter.  Instead, the Commission apparently voted to approve an amended release which included references to the letter.  Gallagher and Piwowar stated, “[w]e cannot support the publication of this modified rulemaking release, as it glosses over a significant failure of our internal processes.   Therefore, we continue to dissent on the substance of Regulation SBSR for the reasons set forth in our original dissenting statements, and we now must dissent with respect to this process.”