Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, July 3, 2008

SEC Pubishes Final Rule and Guidance on SRO Rulemaking Process

The SEC published on its website the final rule and new interpretive guidance to improve the rulemaking process for exchanges and other self-regulatory organizations (SROs).  The SEC previously voted to approve the final rule and issue the guidance to help increase the competitiveness of U.S. markets, the speed with which new products and services can be made available to investors, and the effectiveness of measures designed to protect investors.

Under the Securities Exchange Act of 1934, when a proposed rule change is submitted by an SRO for Commission review, the Commission is required to approve it or institute proceedings to disapprove it within 35 days of its publication. This 35-day deadline can be extended for up to 90 days in certain cases.  To address concerns from market participants and others about rule-processing delays, the Commission has amended its internal rules of procedure to require that any proposed rule change filed by an SRO for review be published within 15 business days. In the rare instance when a rule change is unusually complex or raised novel issues, the Director of the Division of Trading and Markets would be able to make exceptions to this 15-day requirement.

The Commission also is issuing new interpretive guidance to elaborate on the Commission’s views regarding proposed rule changes that may properly be filed for immediate effectiveness, and specifically, those proposed rule changes filed pursuant to Exchange Act Rule 19b-4(f)(6), under which “non-controversial” rule changes may be filed. The guidance and rules will be effective upon their publication in the Federal Register.

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