Reed Smith Newsletters

It’s no secret that the U.S. Securities and Exchange Commission’s (SEC or Commission) enforcement agenda is aggressive, with reports of record-breaking penalties and claims by some that the SEC is regulating by enforcement rather than providing regulated financial institutions with the clarity they need to comply with the agency’s evolving standards. Navigating the regulatory landscape is complex, and it is critical that companies understand the core areas of risk and keep up to date on key SEC enforcement trends and top priorities to remain compliant. In our quarterly newsletter, our cross-practice team provides short summaries of notable developments in securities enforcement and regulation.

Trends

Impact of Loper on SEC Rulemaking and Enforcement

Background

Earlier this year, in Loper Bright Enterprises v. Raimondo (Loper), the U.S. Supreme Court historically overturned the Chevron doctrine, which guided judicial deference to administrative and regulatory agencies' expertise where legal ambiguity exists. Before Loper, the Chevron two-step framework required courts considering a challenge to a federal agency’s interpretation of a statute to (1) evaluate whether the language of a statute was ambiguous; and (2) if ambiguity was found, the court would defer to the agency’s interpretation if it was (a) “reasonable” and (b) supported by agency expertise.

In Loper, the Court held that federal agency expertise has the power to persuade a court but not to determine its decision. Courts are thus still permitted to consider the subject matter expertise of regulators as a factor to guide judicial decision-making (known as “Skidmore respect”).

Loper evidences the Court’s trend toward limiting the regulatory power of agencies, including by minimizing the role of agency expertise in the evaluation and enforcement of regulations, based on concerns about constitutional and statutory overreach.