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On May 1, 2023, the Supreme Court of the United States granted certiorari in Murray v. UBS Securities, LLC.[1] Yesterday, the Commission joined an amicus brief filed by the Solicitor General in the Supreme Court, which supports the petitioner in that case.[2] We dissent from the decision to join the amicus brief for the reasons set forth below.
Murray v. UBS involves the whistleblower protection provision of the Sarbanes-Oxley Act of 2002 (“SOX”).[3] In a decision by the U.S. Court of Appeals for the Second Circuit that vacated the jury verdict,[4] the Second Circuit held that a SOX anti-retaliation claim “requires a whistleblower-employee…to prove by a preponderance of the evidence that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent—i.e., an intent to ‘discriminate against an employee…because of’ lawful whistleblowing activity.”[5]
Murray v. UBS poses a difficult legal question. An earnest attempt at arriving at a reasoned conclusion requires significant research, analysis, and understanding. In a similar context, the Commission’s Canons of Ethics counsels that a member of the Commission should show “a full understanding of the matter before him, [avoid] the suspicion of arbitrary conclusion, [and promote] confidence in his intellectual integrity…”[6] In the case of the amicus brief, we were unable to fulfill that duty.
In our view, the Commission’s process for deciding whether to join the Solicitor General’s amicus brief did not facilitate full and careful consideration of the recommendation. Some context should be provided. At the same time the Commission was asked to review the amicus brief, the Commissioners were asked to consider and provide feedback on two major rulemakings that will be considered at an open meeting to be held on July 12, 2023, which is one week from the date that the amicus brief was filed.[7]
The two major rulemaking initiatives are: (1) the adoption of money market fund reforms, and (2) the proposal of amendments to Rule 15c3-3 under the Securities Exchange Act of 1934, which is the broker-dealer customer protection rule.[8] Together, these rulemakings amount to more than 500 pages. In the case of the money market fund reforms, Commissioners have the obligation to consider public comments on the proposal, a process that is complicated by the highly technical and complex aspects of the matter being considered.
A robust deliberative process is an essential component of proper agency action. Because the Commission has limited resources, it can engage in only so many robust deliberative processes at one time. Therefore, the Commission cannot pursue every item on its wish list all at once, but instead it must prioritize. It is not clear to us that such prioritization is taking place.
Unfortunately, the simultaneous consideration of numerous complex items – many of them rulemaking initiatives – has become commonplace within the Commission. On June 13, 2023, the Commission published its Spring 2023 Regulatory Agenda, which includes 55 total rules – 18 of which are at the proposed rule stage and 37 of which are at the final rule stage.[9] As the Supreme Court has previously observed, “[i]t is fair to assume generally that Congress contemplates administrative action with the effect of law when it provides for a relatively formal administrative procedure tending to foster the fairness and deliberation that should underlie a pronouncement of such force.”[10] The Commission can do much better at this process and, for the sake of investors, ought to do so.
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