April 24, 2012
JOBS Act Forum: Congress Does Some Weird Drafting
Posted by David Zaring

This is going to be the least substantial post in this forum by far, but ....

One strange thing about the statute, as Gaston de los Reyes has pointed out to me, is the part of it where Congress directs the SEC to add language to its regulations ... and basically provides the language!  Why not just make that part of the statute?  And that's just one of the admittedly somewhat arid administrative law mysteries provided by the move.  Does the SEC have to take comment on its amendment to the regulations?  Probably, though it isn't clear what purpose the comment would serve. Could a court view the language lifted from the statute as arbitrary if the SEC doesn't explain why it is using it?   You can think up more of these all day.  Anyway, have a look at Section 401(a) of the Act (and section 201 is somewhat similar):  

The Commission shall by rule or regulation add a class of securities to the securities exempted pursuant to this section in accordance with the following terms and conditions:

(A) The aggregate offering amount of all securities offered and sold within the prior 12-month period in reliance on the exemption added in accordance with this paragraph shall not exceed $50,000,000. 

(B) The securities may be offered and sold publicly.

(C) The securities shall not be restricted securities within the meaning of the Federal securities laws and the regulations promulgated thereunder.

(D) The civil liability provision in section 12(a)(2) shall apply to any person offering or selling such securities.


There are other parts of the section, to be sure, where the SEC has some discretion.  But I suspect that Congress expects to see these exact words in the CFR soon, which seems like unnecessary agency commandeering, though there's nothing illegal about it.

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