Business Law- Admin Law

Business Law- Admin Law

Question 1: Is the SEC an executive agency or an independent regulatory agency? Does it matter what the outcome of this dispute is? Explain.

The Security and Exchange Commission (SEC) is an independent federal regulatory agency, not an executive agency. The SEC was established according to the Securities Exchange Act of 1934 to regulate the operations of public corporations. It is a five-member commission, and the commissioners are appointed by the president but approved by the Senate.[1] The SEC’s independence does not matter to the outcome of the dispute because it is within the law for the SEC to conduct public participation and follow rule-making proceedings before enacting a law; therefore, the SEC is not in order when it decides to make rules without following the rule-making procedure and with public participation.[2] Therefore, the court can easily overturn the rule because the SEC did not follow the right procedure in making the rule.

Question 2: Suppose that the SEC asserts that it has always had the statutory authority to pursue persons for insider trading regardless of whether they profit from the transaction. This is the only argument the SEC makes to justify changing its enforcement rules. Would a court be likely to find that the SEC’s action was arbitrary and capricious under the Administrative Procedure Act (APA)? Why or why not?

Yes, the court would find the SEC to be on the wrong side of the law because its independence and its statutory authority to pursue individuals for insider trading do not mean that it has the power to adjust rules without following the rule-making procedures. The SEC is a federal institution serving federal corporations.[3] Hence, it has no power to start adjusting laws anyhow without consultations and adhering to the rules.  The administrative procedures help establish the legitimacy of the management action, in this case, the commission’s actions, by ensuring that the commission decisions are objective, fair, and consistent. The administrative procedures also help in ensuring accountability. Therefore, the SEC would go against the administrative procedure when it formulates its law, which seems unfair to corporations.

Question 3: Would a court be likely to give Chevron deference to the SEC’s interpretation of the law on insider trading? Why or why not?

In this case, the court would not grant Chevron deference to the SEC because it is very clear that the SEC’s rules imposed on the corporates are unfair and inconsistent; hence, the SEC does not qualify to be given Chevron deference. The court would find the SEC to have violated the Administrative Procedure Act, hence disqualifying it from the relief that comes with Chevron deference.[4] In the context of administrative law, the deference applies when the federal court yields to the agency’s interpretation of a statute that Congress gave the agency to administer by the agency.[5] For Chevron deference to be applied, the court must determine whether Congress expressed intent in the statute. The court should also examine the agency’s reasonable construction of the argument.[6] The court must assess and determine whether the decisions of the agency were fair and reasonable.

Question 4: Now assume that a court finds that the new rule is merely “interpretive.” What effect would this determination have on whether the SEC had to follow the APA’s rule-making procedures?

If the court finds that the new rule is interpretive, it will grant it a Chevron deference. For the new rule to be interpretive, it must have adhered to the Administrative Procedure Act (APA). For instance, the APA allows the agency, for instance, the SEC, to forgo notice and comment procedures in the case of interpretive rules.[7] The Administrative Procedure Act exempts both the interpretive rules and the general statements of the policy from the rule-making requirements, which include both notice and comment. This exemption mostly enhances the commission’s capability to interpret and also enforce the law by using the guidance documents as they are always known.[8] However, there is a strong argument that an interpretive rule cannot qualify for rule-making exemption unless the commissions allow it to be contested at the administrative level.

Debate

Yes, since the administrative law judges and serves as a judge and part of the jury, it is to always have at least three judges in every administrative hearing. The three judges are to make it possible for the hearing to have a fair hearing. The hearing is always determined by the number of judges that support or dissent. Therefore, having more than three judges will help find a fair judgment compared to when the judges would have been one or two.

Bibliography

Ballotpedia. (2021). Chevron deference (doctrine). Available at https://ballotpedia.org/Deference (administrative state). Accessed on 5th June 201.

Emerson, B. & Levoin, R. (2019). Interpretive Rules in Practice. The regulatory review. Available https://www.theregreview.org/2019/10/30/emerson-levin-interpretive-rules-practice. Accessed on 5th June 2021.

Miller, R. (2017). Business law today. 11th Ed. Cengage Learning, Arlington, Texas

[1] Miller, R. (2017). Business law today. 11th Ed. Cengage Learning, Arlington, Texas

[2] Emerson, B. & Levoin, R. (2019). Interpretive Rules in Practice. The regulatory review. Available https://www.theregreview.org/2019/10/30/emerson-levin-interpretive-rules-practice. Accessed on 5th June 2021.

[3] Miller, R. (2017).

[4] Emerson, B. & Levoin, R. (2019).

[5] Ballotpedia. (2021). Chevron deference (doctrine). Available at https://ballotpedia.org/Deference (administrative state). Accessed on 5th June 201.

[6] Miller, R. (2017).

[7] Emerson, B. & Levin, R. (2019). 21.

[8] Ballotpedia. (2021).

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Debate This: Admin Law
From Business Law II
Chapter 37, p. 888

Assume that the Securities and Exchange Commission (SEC) has a rule under which it enforces statutory provisions prohibiting insider trading only when the insiders make monetary profits for themselves. Then, the SEC made a new rule, declaring that it has the statutory authority to bring enforcement actions against individuals even if they did not personally profit from insider trading. The SEC announces the new rule without conducting a rulemaking proceeding. A stock brokerage firm objects and says that the new rule was unlawfully developed without opportunity for public comment. The brokerage firm challenges the rule in an action that ultimately is reviewed by a federal appellate court. Using the information presented in the chapter, answer the following questions.

Business Law- Admin Law

1. Is the SEC an executive agency or an independent regulatory agency? Does it matter what the outcome of this dispute is? Explain.

2. Suppose that the SEC asserts that it has always had the statutory authority to pursue persons for insider trading regardless of whether they personally profited from the transaction. This is the only argument the SEC makes to justify changing its enforcement rules. Would a court be likely to find that the SEC’s action was arbitrary and capricious under the Administrative Procedure Act (APA)? Why or why not?

3. Would a court be likely to give Chevron deference to the SEC’s interpretation of the law on insider trading? Why or why not?

4. Now assume that a court finds that the new rule is merely “interpretive.” What effect would this determination have on whether the SEC had to follow the APA’s rulemaking procedures?

Debate This:
Because an administrative law judge (ALJ) acts as both judge and jury, there should always be at least three ALJs in each administrative hearing.