Mar. 31, 2023
March 31, 2023 The Commission cranks out dozens and dozens of rules every year. Yet inexplicably, it has failed to produce a legally sufficient rulemaking. The rulemaking does not meet the basic standards required by the Administrative Procedure Act and does not adhere to the Commission's own Economic Guidance. 1) The release fails to meaningfully identify the problem(s) that the Commission is trying to address with this rulemaking. In particular, with regard to the 3rd party vendor requirement, the release fails to articulate the problem with the current collection process that would necessitate the need to outsource this process. Indeed, the proposal is undermined by the Commission's own admission that the \"current process has been successful.\" There is therefore no reason for this amendment. 2) Relatedly, the release fails to explain how the proposed rule changes will address or resolve the Commission's problems. Without such an explanation, the rulemaking is legally deficient. 3) The release fails to articulate an economic baseline against which the purported benefits can be measured. Indeed, the word \"baseline\" does not appear anywhere in the document. This analysis is required by the case law and its omission renders the release legally deficient. See American Equity Inv. Life Ins. Co. v. SEC, 613 F.3d 166, 178-79 (D.C. Cir. 2010). 4) The release fails to meaningfully explain the potential costs and benefits of the proposed rules. Instead, the release provides cursory and unsupported statements about costs and benefits. 5) The release fails to quantify these cursory costs or benefits. No numbers are presented in the release. Failure to quantify or explain why cost/benefits cannot be reasonably quantified, renders the release legally deficient. 6) Section 2(b) of the Securities Act, section 3(f) of the Exchange Act, section 2(c) of the Investment Company Act, and section 202(c) of the Advisers Act require the Commission, when engaging in rulemaking, to consider whether the proposal will promote efficiency, competition, and capital formation. The rulemaking is legally deficient because other than a perfunctory footnote, there is no analysis of the impact of the proposal (and each proposed change) on efficiency, competition and capital formation which is explicitly required by these statutes. 7) The release fails to identify and evaluate reasonable alternatives to each of the proposed changes. Such an analysis is required by case law and its omission renders the rulemaking legally deficient. See Chamber of Commerce v. SEC, 412 F.3d 133, 144-5 (D.C. Cir. 2005). 8) Is there a Paperwork Reduction Act requirement? There is no analysis.