Do Public Comment Letters on Proposed SEC Regulations Matter?
Authors
Abstract
The U.S. Securities and Exchange Commission (SEC) encourages
the public to comment on proposed rules during an open comment period. Various constituents,
including companies, individual investors, associations, and audit firms, frequently provide
comments on these proposed rules. Constituents may wonder whether or not their comments influence
the final rules.
This research report examines two proposed rules that were recently finalized by the SEC after a
public comment period. The report assesses the impact of the comment letters by analyzing the
letters submitted by stakeholder groups, identifying letters referenced by the SEC in the final
rule, and interviewing a group of subject matter experts. The report describes the criteria for
good comment letters, discusses reasons why companies may choose not to write a comment letter, and
provides insights into whether or not comment letters affect the final rules.
Financial Executives Research Foundation (FERF) interviewed subject matter experts who have
participated in drafting rules, sent comment letters to the SEC, or have experience in reviewing
SEC letters. Additionally, researchers at Case Western University examined comment letters received
and used to finalize Crowdfunding (Release Nos. 33-9974) and Pay Ratio Disclosure (Release Nos.
33-9877) rules to determine if comment letters seem to influence the final rules issued by the SEC.
The report also analyzes comment letters submitted by various stakeholders, such as individuals,
companies, and associations, and their opinions (neutral, favorable, unfavorable) to determine
whether the SEC considers certain types or sources of letters more seriously than others.
Our research revealed the following:
• The quantity of letters received by the SEC does not
outweigh the quality of the letters received. The SEC received an overwhelming response from
individual stakeholders, but favored unique, well articulated letters received from businesses and
associations when considering a final rule.
•
Stakeholders appear to be considered equally. However, the SEC is more likely to consider letters
that provide specific suggestions and alternatives
•
Interviewees suggest that the SEC finds comment letters that include examples and alternatives more
effective and influential. This observation is consistent with analysis of the individual
letters—and how often they’re referenced by the SEC.
•
For the Crowdfunding release, approximately 50 percent of the comment letters submitted by
constituents were referenced by the SEC. Letters received from businesses and associations provided
the most influence when it came to the changes made to the proposed rule
•
For the Pay Ratio release, approximately seven percent of the comment letters received were
referenced in the consideration for the final rule. Even though individuals sent the most comments,
businesses and associations
were referenced most frequently.
