SEC Rule Watch

Russell L. Forkey, Esq., Securities Litigation and FINRA Arbitration Lawyer.

The Securities and Exchange Commission has a number of responsibilities, which include, interpreting the federal securities laws, issuing new rules and amending existing rules, overseeing the inspection of securities firms, brokers, investment advisers, and rating agencies, overseeing private regulatory organizations in the securities, accounting, and auditing fields and coordinating U.S. regulation with federal, state, and foreign authorities.

The purpose of this section is to generally describe how the rule and regulation process works. This information is being provided for educational purposes only and is not designed to be complete in all material respects. It should not be relied upon as proving legal or investment advice. If you have any questions, you should contact a qualified professional.

Rulemaking is the process by which federal agencies implement legislation passed by Congress and signed into law by the President. Major pieces of legislation, such as the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Sarbanes-Oxley Act, provide the framework for the SEC's oversight of the securities markets. These statutes are broadly drafted, establishing basic principles and objectives. To ensure that the intent of Congress is carried out in specific circumstances - and as the securities markets evolve technologically, expand in size, and offer new products and services - the SEC, as well as other federal agencies, engages in rulemaking.

Rulemaking can involve several steps such as concept release, rule proposal, and rule adoption.

Concept Release: The rulemaking process usually begins with a rule proposal, but sometimes an issue is so unique and/or complicated that the Commission seeks out public input on which, if any, regulatory approach is appropriate. A concept release is issued describing the area of interest and the Commission's concerns and usually identifying different approaches to addressing the problem, followed by a series of questions that seek the views of the public on the issue. The public's feedback is taken into consideration as the Commission decides which approach, if any, is appropriate.

Rule Proposal: The Commission publishes a detailed formal rule proposal for public comment. Unlike a concept release, a rule proposal advances specific objectives and methods for achieving them. Typically the Commission provides between 30 and 60 days for review and comment. Just as with a concept release, the public comment is considered vital to the formulation of a final rule.

Rule Adoption: Finally, the Commissioners consider what they have learned from the public exposure of the proposed rule, and seek to agree on the specifics of a final rule. If a final measure is then adopted by the Commission, it becomes part of the official rules that govern the securities industry.

As the reader can well imagine, during any time period there are a number of concept releases, rule proposals and rule adopts that are published in the federal register or otherwise disseminated by, in this case, the SEC. We review these and present information on those that we believe may be of interest to the average investor. If the reader would like to browse this information, it is only necessary to follow the popups associated with this section of our website.