FIU Administrative Procedure Act Debate Paper

• Debate This: Admin Law
• 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 makes a new rule, declaring that it has the statutory authority to bring enforcement actions against individuals even if they did not personally profit from the insider trading. The SEC simply announces the new rule without conducting a rulemaking proceeding. A stockbrokerage 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.

1. Is the SEC an executive agency or an independent regulatory agency? Does it matter to the out-come of this dispute? 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.

888
UNIT SIX: Government Regulation
37–5d Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act (SBREFA)14 includes various
provisions intended to ease the regulatory burden on small businesses:
1. Federal agencies must prepare guides that explain in plain English how small businesses can comply
with federal regulations.
2. Congress may review new federal regulations for at least sixty days before they take effect, giving
opponents of the rules time to present their arguments.
3. The courts may enforce the Regulatory Flexibility Act. This provision helps to ensure that
federal agencies will consider ways to reduce the economic impact of new regulations on small
businesses.
4. The Office of the National Ombudsman at the Small Business Administration was established to
receive comments from small businesses about their dealings with federal agencies. Based on
these comments, Regional Small Business Fairness Boards rate the agencies and publicize their
findings.
14. 5 U.S.C. Sections 801 et seq.
Practice and Review
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 makes a new rule, declaring that it has the statutory authority to bring
enforcement actions against individuals even if they did not personally profit from the insider
trading. The SEC simply announces the new rule without conducting a rulemaking proceeding.
A stockbrokerage 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.
1. Is the SEC an executive agency or an independent regulatory agency? Does it matter to the outcome of this dispute? 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.
30301_ch37_hr_871-892.indd 888
8/30/18 1:57 PM