A Rulemaking Question Confronts Wall Street

Levon Schlichter

A common rulemaking question has made its way to the financial news headlines recently: Has a federal government agency issued a binding regulation under the guise of “guidance” in violation of the Administrative Procedure Act (APA)? The APA requires agencies to undergo a time-consuming process before issuing a legally binding final regulation, including providing a comment period on proposed rules. However, this process is not required if the agency merely issues guidance, which, by definition is non-binding. This statutory framework has led to a body of case law where courts have tried to determine if a particular agency action is non-binding guidance (not requiring comment) or a legally binding regulation (requiring comment), regardless of how the agency characterizes its action. American Mining Congress v. Mine Safety & Health Administration, 995 F.2d 1106, 1112 (D.C. Cir. 1993) set forth a four-part test to determine whether the agency’s action was intended to announce a new policy that was binding on regulated parties, or whether the policy was meant to clarify existing law and left the agency with flexibility to enforce that existing law on a case-by-case basis in the future.

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