Deregulation News: Calm Yourselves
Cool your jets, all you compliance professionals who might be giddy at President Trump’s latest broadside over government regulation — most of the regulatory guidance you encounter on a daily basis is not covered by what Trump announced this week.
For those who missed it, Trump issued two executive orders Wednesday meant to curb the use of memos, letters, and other “pernicious kinds of regulation imposed by unaccountable bureaucrats.” Such missives are a popular target for the president and his minions, who call the stuff “regulatory dark matter” because it avoids the formal public notice-and-comment process required by the Administrative Procedures Act.
Trump’s latest executive orders direct government agencies to publish new policies and procedures for issuing guidance. For all pieces of guidance, those processes must include a statement that the guidance is only guidance, not binding on the public; and a procedure for people to petition that the guidance be amended or withdrawn.
For “significant guidance” (typically defined as having an annual effect on the economy of $100 million or more) the processes must also include a 30-day notice-and-comment period; and direct approval by an agency head appointed by the president; and review and approval by the Office of Information and Regulatory Affairs, which is bureaucrat-ese for the White House.
To the anti-regulation crowd, this all sounds great. Their complaint — which is exaggerated, but not entirely unwarranted — is that too many agencies give guidance the same force as regulation. Then your company gets sideways with a regulator because you did something that goes against a piece of guidance that somebody posted in an agency blog or “Dear Executive” letter somewhere, and your choice is either to let outside counsel run up the billable hours fighting the matter or to admit defeat for something that doesn’t actually violate any law or regulation.
Anyway, that all might seem nice to exasperated compliance officers, but here’s the reality: these orders won’t bring you much relief.
Devil in the Details
First, independent agencies are exempt from this order. The definition of “agency” in Trump’s order (stated in Section 2) refers to the definition of the word used in Section 3(b) of Executive Order 12866. That’s the granddaddy of all executive orders about curbing regulation, signed by President Clinton in 1993 — and Section 3(b) defines agency as “any authority of the United States… other than those considered to be independent regulatory agencies” (emphasis added).
So that rules out agencies such as the Securities & Exchange Commission, the Federal Reserve, the Food & Drug Administration, the Federal Trade Commission, the Occupational Health & Safety Administration, and many more. (See the complete list if you want.)
Sure, those agencies can obey the spirit of Trump’s order if they choose, and many probably will. But their compliance is only optional, not required.
Second, agencies’ internal guidance to employees is exempt — but on a practical basis, compliance officers take their cues from such guidance all the time. For example, the Justice Department has published one piece of guidance after another about how it will enforce the FCPA, appoint compliance monitors, evaluate compliance programs, and more. The assistant attorney general announced guidance just this week about how prosecutors will evaluate a company’s claims that it can’t afford to pay monetary penalties.
Technically, however, that guidance takes the form of memos from Justice Department superiors to federal prosecutors across the country. We can also say the same for the SEC’s Financial Reporting Manual.
The compliance community might study that material closely to divine clues about how to proceed, but it’s not guidance designated for you. It’s internal guidance, exempt from Trump’s order.
Third, most items that compliance officers study for guidance aren’t really guidance. They are speeches, press releases, enforcement orders, litigation settlements, corporate integrity agreements, and the like. We might use the facts stated in those documents to guide the thinking about our own companies (“How similar is this fact pattern to our own mess we’re trying to resolve?”), but that’s not the same as guidance.
Taken altogether, that’s a wide swath of material compliance officers consume as guidance on a regular basis, that won’t be subject to Trump’s order.
Why Are We Doing This?
By my count this is at least the fourth time Trump has proclaimed jihad on regulation.
In April he announced a plan that all proposed new rules, including those from independent agencies, would be subject to White House review. That one might not have the force of law, since it’s unclear whether Trump could fire an agency head who ignored him.
In January 2018, the Trump Administration’s then-regulatory czar announced plans to sweep up independent agencies and sub-regulatory guidance under OIRA review. She then decamped to the federal judiciary, and her replacement at OIRA is there in an acting capacity.
And in January 2017, one of Trump’s first presidential actions was to tout a 2-for-1 regulatory kill order — but that order only directed agencies to propose killing two old rules for every new one they wanted to adopt, not actually kill them.
In other words, Trump’s posturing about sub-regulatory guidance this week was just that: posturing. It was red meat to throw to his political base, a distraction from impeachment, Turkey, and all the other misconduct swirling around this man. Compliance officers can ignore it.
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