The Long Road Back: Business Roundtable and the Future of SEC Rulemaking
Jill E. Fisch
Institute for Law and Economics, University of Pennsylvania Law School
October 15, 2012
Seattle University Law Review, 2013
U of Penn, Inst for Law & Econ Research Paper No. 12-34
The Securities and Exchange Commission has suffered a number of recent setbacks in areas ranging from enforcement policy to rulemaking. The DC Circuit’s 2011 Business Roundtable decision is one of the most serious, particularly in light of the heavy rulemaking obligations imposed on the SEC by Dodd-Frank and the JOBS Act. The effectiveness of the SEC in future rulemaking and the ability of its rules to survive legal challenge are currently under scrutiny.
This article critically evaluates the Business Roundtable decision in the context of the applicable statutory and structural constraints on SEC rulemaking. Toward that end, the essay questions the extent to which deficiencies in the SEC’s rulemaking process can accurately be ascribed to inadequate economic analysis, arguing instead that existing constraints impede the SEC’s formulation of regulatory policy, and that this failure was at the heart of Rule 14a-11.
Bad rules make bad law, and Rule 14a-11 was a bad rule. This essay argues that the flaws in SEC rule-making are quite different, however, than those identified by the DC Circuit. Moreover, in the case of Rule 14a-11, Congress played a critical role by explicitly authorizing the SEC to adopt a proxy access rule. By substituting its own policy judgment for that of Congress, the DC Circuit threatens not just the ability of administrative agencies to formulate regulatory policy, but the ability of Congress to direct agency policymaking.
Number of Pages in PDF File: 44
Keywords: Securities regulation, shareholder proxy access, corporate governance, directors, shareholders, shareholder voting, corporate ballot, corporate elections, proxy fights, proxy contests, proxy rules, SEC, Securities and Exchange Commission, law and economics, rulemaking, administrative law
JEL Classification: G23, G32, G34, G38, K22, P16Accepted Paper Series
Date posted: October 20, 2012
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