Jill E. Fisch


The Securities and Exchange Commission (SEC or Commission) has faced a number of challenges in the last few years. Judge Rakoff’s decision in Citigroup, the Madoff scandal, and the Business Roundtable decision are just a few of the developments that have dealt lasting damage to the SEC’s reputation. Critics have scrutinized the agency’s decisionmaking on multiple fronts—from its enforcement policy to the quality of its rulemaking—and the SEC has largely come up short in the analysis. The once-revered top cop of the securities markets has taken a hit, and it is unclear whether it can recover. The Business Roundtable decision is of particular importance. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) tasked the SEC with an unprecedented number of required rulemakings. Although the SEC has failed to complete many of these within the statutorily mandated time frames, the Jumpstart Our Business Startups Act (JOBS Act), signed by President Obama on April 5, 2012, requires additional SEC rulemaking in connection with its implementation. Commentators have observed that these rulemakings must withstand the rigorous scrutiny to which the D.C. Circuit subjected the SEC’s proxy access rule. Indeed, the media reports that regulators are “paralyzed” by the threat of litigation. The SEC has also announced a number of changes to its rulemaking practices in response to the Business Roundtable decision. As a first step, it is necessary to evaluate the Business Roundtable decision more carefully. This Article examines the decision and the context in which it was decided in Part II. In Part III, this Article discusses the statutory obligations imposed on SEC rulemaking that the court applied in the Business Roundtable case—the Administrative Procedure Act (APA) and section 2(b) of the Securities Act of 1933. Part IV explores two critical structural constraints on SEC rulemaking—the noticeand- comment procedure imposed by the APA, as well as the Government in the Sunshine Act (the Sunshine Act)—and describes the practical effect that these constraints have on the rulemaking process in general and on Rule 14a-11 in particular. In Part V, this Article considers the effect of Dodd-Frank’s legislative policy choices on judicial oversight of agency rulemaking.