SEC Chair Jay Clayton confirmed the SEC's "longstanding position" that staff statements to SEC-regulated institutions or stakeholders regarding rules or regulations are non-binding.

In a statement, Mr. Clayton clarified the distinction between SEC rules and regulations, which have the full force and effect of law, and staff views, which do not create enforceable legal rights or obligations. Mr. Clayton stated that he has instructed certain SEC directors to emphasize this distinction to their staff. Additionally, Mr. Clayton affirmed that SEC divisions and offices will continue to modify, rescind or supplement prior staff statements "in light of market or other developments."

Commentary / Steven Lofchie

The SEC Chair's statement regarding staff pronouncements comes immediately on the heels of a collective statement by the bank regulators that regulatory guidance does not have the force of rule. See Banking Regulators Say Supervisory Guidance Is Not a Basis for Enforcement Actions. This does not look coincidental. Perhaps this is part of coordinated effort to bring the exercise of regulatory agency authority into the control process that is required by law. By way of example, the CFTC's issue of "guidance" on the application of the CEA to cross-border swap transactions, without going through a formal rulemaking process, seemed highly questionable, even if the CFTC's action was affirmed by a District Court. It will be interesting to see whether the CFTC now issues similar statements as to the non-binding effect of its guidance.

While it seems a good thing that neither a regulatory commission nor its staff should create binding rules without complying with procedural requirements, it is, on the other hand, worrisome if it would not be possible to obtain liberalizing "no-action" advice from the staff. As it is, obtaining such advice is often difficult, even when it seems clear that the right thing to do, given the various demands on the attention of the staff. But if any liberalizing advice would require action by the regulatory commission, that will make the granting of such advice, at best, very long delayed, and more likely, prevent it, as the commission will often have bigger priorities.

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