In this post from July 2016, I took the Securities and Exchange Commission to task for adding Item 16 to Form 10-K as an "Interim Final Rule". As I then explained, Interim Final Rules constitute an end-run on the notice and comment requirements of the Administrative Procedure Act.
The SEC requested comment on the proposal in its adopting release and I submitted two sets of comments (which can be read here and here). Inexplicably, however, the SEC provided no link to those comments as it does with other Interim Final Temporary Rules (See below, the SEC did immediately fix the problem when I brought it to their attention).
More troubling, however, is the fact that the SEC has never adopted final regulations. Thus, it has never addressed the comments that it solicited when it adopted the interim final rule. In addition, the link to "Final Rule Release No. 33-10332" is inapposite as that release does not mention the addition of a Form 10-K Summary.
Thus, I was heartened to see that I am not alone in my concern about the use of Interim Final Temporary Rules. In a recent post, Professor Kristin E. Hickman criticized federal agency use of interim final rules, observing:
"Moreover, requiring agencies to consider feedback from interested parties improves the quality of regulations. Meanwhile, post-promulgation notice and comment are an inadequate substitute for pre-promulgation procedures that themselves are already a second-best proxy for the legislative process."
Granted, the addition of Item 16 to Form 10-K has not proven to be controversial. There is, however, an bigger principle at stake. As an enforcement agency, the SEC must set an example of fidelity to the law. In demanding compliance from those that it regulates, the SEC must itself be seen to obey the law.