On May 9, 2022, the SEC extended the comment periods for proposed rulemaking on climate-related disclosures and reopened the comment period for proposed rulemaking relating to private funds and what it means to be an "exchange" under Exchange Act Rule 3b-16. Each of these proposals originally provided 30 days for public comment after the date on which they were published in the Federal Register. But the SEC has customarily provided 60- or 90-day comment periods for complex rulemakings like these. Under the revised timelines, the comment period for climate disclosure proposal will end on June 17, 2022 and the comment period for the 3b-16 and private funds proposals will end 30 days after the extension notices are published in the Federal Register.
The SEC has recently come under heavy scrutiny from industry stakeholders and lawmakers for the brief comment periods it has allotted for rulemakings. The exchange proposal, for example, surpassed 650 pages in length. Given its breadth and potential significant effects, the proposal generated robust and spirited feedback from all corners of the markets, many of which decried the brief comment window. The criticism lobbed on the agency also results from the sheer volume of rulemaking it has advanced in a very brief period of time, which collectively account for over 3,570 pages of text and 2,260 questions the SEC has posed to the industry.1
In fairness to the agency, the comment periods do not begin until the rulemaking proposals are published in the Federal Register. That often takes weeks or months to occur. For the exchange proposal, for example, the industry had nearly 90 days between posting on the SEC's website on January 26, 2022 to the ultimate comment deadline on April 18, 2022. The problem, however, is the uncertainty introduced by the 30-day comment period beginning on the Federal Register publication date. Industry stakeholders are unable to reasonably predict when the clock will start to run and the compressed timeline deprives them of the opportunity to fully consider the effects these rulemakings will have. That, in turn, leads to a suboptimal sharing of views by the industry to the SEC and a final rule that may not address all likely and potential outcomes.
Some will certainly applaud the agency for listening to the industry and providing the extensions. Our guess is that the larger camp will consist of those who will condemn the SEC for cramming so many proposals through with abbreviated comment periods in the first place. After all, one can be given only so much credit for a solving a problem of its own creation. Market participants will want to consider whether the extra time provides them with a window through which they can serve additional feedback to the SEC and its staff, whether as an initial comment or to supplement earlier letters.
1. See Joint Letter to Gary Gensler, SEC, on behalf of 25 industry associations regarding the importance of appropriate length of comment periods (Apr. 5, 2022).
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