[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Rules and Regulations]
[Pages 85512-85514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27537]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 200

[Release No. 33-10900; 34-90623; IA-5644; IC-34134]


Delegation of Authority to Director of the Division of 
Enforcement

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
revising its regulations with respect to the delegations of authority 
to the Director of the Division of Enforcement. These revisions are the 
result of the Commission's experience with its nonpublic 
investigations, litigation in Federal court, and disgorgement and Fair 
Fund plans in administrative and cease-and-desist proceedings 
instituted by the Commission. The revisions are intended to conserve 
Commission resources and make Commission operations more efficient by 
delegating to the Director the discretion to take the actions described 
below.

DATES: Effective December 29, 2020.

FOR FURTHER INFORMATION CONTACT: Joseph K. Brenner, Chief Counsel, at 
(202) 551-5055, Division of Enforcement, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-6553.

SUPPLEMENTARY INFORMATION:

Background

    The Commission is revising its delegations of authority to the 
Director of the Division of Enforcement as a result of its experience 
with its nonpublic investigations, litigation in Federal court, and 
disgorgement and Fair Fund plans in administrative and cease-and-desist 
proceedings instituted by the Commission. The revisions are intended to 
conserve Commission resources and make Commission operations more 
efficient. Congress has authorized such delegation by Public Law 87-
592, 76 Stat. 394, 15 U.S.C. 78d-1(a), which provides that the 
Commission ``shall have the authority to delegate, by published order 
or rule, any of its functions to . . . an employee or employee board, 
including functions with respect to hearing, determining, ordering, 
certifying, reporting, or otherwise acting as to any work, business or 
matter.''
    The Commission is authorized to bring actions in United States 
District Court seeking injunctive and other relief for violations of 
the Federal securities laws and regulations. See Section 20(b) of the 
Securities Act of 1933 (15 U.S.C. 77t(b)); Section 21(d)(1) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(1)); Section 42(d) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-41(d)); Section 
209(d) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-9(d)). 
With respect to Federal court litigation, the Commission routinely 
authorizes its staff to commence litigation against particular parties 
seeking particular relief. The addition of 17 CFR 200.30-4(a)(18) will 
allow the Director to carry out these authorizations more efficiently 
by taking the following actions: (i) Dismissing claims against entities 
that are defunct, the subject of bankruptcy proceedings, or without 
material assets; and (ii) dismissing claims against persons or entities 
that are duplicative of other pending claims against those persons or 
entities.
    The Commission is authorized to conduct investigations concerning 
potential violations of the Federal securities laws and regulations 
and, as part of those investigations, to require the production of 
records. See Section 19(c) of the Securities Act of 1933 (15 U.S.C. 
77s(c)); Section 21(b) of the Securities Exchange Act of 1934 (15 
U.S.C. 78u(b)); Section 42(b) of the Investment Company Act of 1940 (15

[[Page 85513]]

U.S.C. 80a-41(b)); Section 209(b) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b-9(b)). Pursuant to Section 21(h)(4)(A) of the 
Securities Exchange Act of 1934, (15 U.S.C. 78u(h)(4)(A)), United 
States District Courts are authorized to issue orders delaying prior 
notice of a subpoena for records subject to the Right to Financial 
Privacy Act (12 U.S.C. 3401 et seq.) and prohibiting financial 
institutions from disclosing that records have been sought or obtained. 
The addition of 17 CFR 200.30-4(a)(19) will authorize the Director to 
file applications in United States District Court with respect to such 
orders.
    The Commission is authorized to deny, suspend the effective date 
of, suspend for a period not exceeding 12 months, or revoke the 
registration of a security if the Commission finds, on the record after 
notice and opportunity for hearing, that the issuer of the security has 
failed to comply with the Federal securities laws or regulations. See 
Section 12(j) of the Securities Exchange Act of 1934 (15 U.S.C. 
78l(j)). The Commission also is authorized to suspend trading in any 
security (other than an exempted security) for a period not exceeding 
ten business days if, in its opinion, the public interest and 
protection of investors so require. See Section 12(k)(1)(A) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78l(k)(1)(A)). The addition 
of 17 CFR 200.30-4(a)(20) will authorize the Director to institute 
public administrative proceedings pursuant to Section 12(j) with 
respect to a security based on the issuer's alleged failure to file 
required periodic reports and, in connection with the institution of 
such proceedings, issue an order pursuant to Section 12(k)(1)(A).
    In administrative and cease-and-desist proceedings instituted by 
the Commission to enforce the Federal securities laws, the Commission, 
in the exercise of its discretion, may distribute to investor victims 
amounts collected as disgorgement, prejudgment interest, and civil 
money penalties. See Section 308 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7261). The addition of Sec.  200.30-4(a)(21) will improve the 
efficiency of the Commission's distribution processes by authorizing 
the Director to: (i) Grant extensions of time to submit proposed 
distribution plans to the Commission; (ii) appoint tax administrators, 
pursuant to a Commission-approved omnibus order; (iii) publish notice 
of proposed plans, including plans that omit elements required by 17 
CFR 201.1101, Rule 1101 of the Commission's Rules on Fair Fund and 
Disgorgement Plans; (iv) issue orders adopting plans as to which no 
negative comments have been received; (v) approve disbursements to 
investors in accordance with the plans; (vi) approve payment of the 
fees and expenses of administration; and (vii) approve final fund 
accountings.
    The Division of Enforcement will report periodically to the 
Commission on the Director's use of these delegations. Notwithstanding 
these delegations, the Director may submit any matter he or she 
believes appropriate to the Commission. Furthermore, any action taken 
by the Director pursuant to delegated authority is subject to 
Commission review as provided by 17 CFR 201.430 and 201.431 and 15 
U.S.C. 78d-1(b), Rules 430 and 431 of the Commission's Rules of 
Practice.

Administrative Law Matters

    The Commission finds, in accordance with the Administrative 
Procedure Act (``APA''), that this amendment relates solely to agency 
organization, procedure, or practice. Title 5 U.S.C. 553(b)(3)(A). 
Accordingly, the APA's provisions regarding notice of rulemaking and 
opportunity for public comment are not applicable. These changes are 
therefore effective on December 29, 2020. In accord with the APA, we 
find that there is good cause to establish an effective date less than 
30 days after publication of these rules. 5. U.S.C. 553(d). These rules 
do not substantially affect the rights or obligations of non-agency 
parties and pertain to increasing efficiency of internal Commission 
operations. For the same reasons, the provisions of the Small Business 
Regulatory Enforcement Fairness Act are not applicable. See 5 U.S.C. 
804(3)(C) (the term ``rule'' does not include ``any rule of agency 
organization, procedure, or practice that does not substantially affect 
the rights or obligations of non-agency parties''). Additionally, the 
provisions of the Regulatory Flexibility Act, 5 U.S.C. 60 et seq., 
which apply only when notice and comment are required by the APA or 
other law, are not applicable. See 5 U.S.C. 601(2). These amendments do 
not contain any collection of information requirements as defined by 
the Paperwork Reduction Act of 1995. See 5 CFR 1320.3. Further, because 
these amendments impose no new burdens on private parties, the 
Commission does not believe that the amendments will have any impact on 
competition for purposes of Section 23(a)(2) of the Exchange Act. 15 
U.S.C. 78w(a)(2).

Statutory Authority

    This rule is adopted pursuant to statutory authority granted to the 
Commission, including Section 19 of the Securities Act, 15 U.S.C. 77s; 
Sections 4A, 4B, and 23 of the Exchange Act, 15 U.S.C. 78d-1, 78d-2, 
and 78w; Section 38 of the Investment Company Act, 15 U.S.C. 80a-37; 
Section 211 of the Investment Advisers Act, 15 U.S.C. 80b-11; and 
Section 3 of the Sarbanes-Oxley Act, 15 U.S.C. 7202.

List of Subjects in 17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies).

Text of Amendments

    For the reasons set out in the preamble, the Commission is amending 
title 17, chapter II of the Code of Federal Regulations as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

Subpart A--Organization and Program Management

0
1. The authority citation for part 200, subpart A, continues to read, 
in part, as follows:

    Authority: 15 U.S.C. 77c, 77o, 77s, 77z-3, 77sss, 78d, 78d-1, 
78d-2, 78o-4, 78w, 78ll(d), 78mm, 80a-37, 80b-11, 7202, and 7211 et 
seq., unless otherwise noted.
* * * * *

0
2. Section 200.30-4 is amended by adding paragraphs (a)(18) through 
(21) to read as follows:


Sec.  200.30-4   Delegation of authority to Director of Division of 
Enforcement.

* * * * *
    (a) * * *
    (18) With respect to enforcement proceedings in Federal court, to:
    (i) Dismiss claims against entities that are defunct, the subject 
of Federal or foreign bankruptcy proceedings, or without material 
assets; and
    (ii) Dismiss claims against persons or entities that duplicate or 
overlap with other pending claims against those persons or entities, 
unless the dismissal would involve claims requiring a higher level of 
intent than that required by the remaining claims, result in a 
reduction of disgorgement available for the claims in the Commission's 
complaint, or eliminate the statutory basis for a bar sought in the 
Commission's complaint.
    (19) To file applications in Federal court to seek an order 
pursuant to section 21(h)(2) of the Securities Exchange Act of 1934 (15 
U.S.C. 78u(h)(2)) in connection with

[[Page 85514]]

investigations pursuant to section 19(c) of the Securities Act of 1933 
(15 U.S.C. 77s(c)), section 21(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78u(b)), section 42(b) of the Investment Company Act of 
1940 (15 U.S.C. 80a-42(b)), and section 209(b) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-9(b)).
    (20) To institute proceedings pursuant to section 12(j) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78l(j)) with respect to a 
security based on the issuer's alleged failure to file required 
periodic reports and, in connection with the institution of such 
proceedings, issue orders pursuant to section 12(k)(1)(A) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78l(k)(1)(A)).
    (21) With respect to disgorgement funds and Fair Fund plans 
established in administrative or cease-and-desist proceedings 
instituted by the Commission pursuant to the Federal securities laws, 
to:
    (i) Grant extensions of time to submit proposed distribution plans 
to the Commission;
    (ii) Appoint tax administrators, pursuant to a Commission-approved 
omnibus order;
    (iii) Publish notice of proposed plans, including plans that omit 
elements required by Sec.  201.1101 of this chapter (Rule 1101 of the 
Rules on Fair Fund and Disgorgement Plans);
    (iv) Issue orders adopting plans as to which no negative comments 
have been received;
    (v) Approve disbursements to investors in accordance with the 
plans;
    (vi) Approve payment of the fees and expenses of administration; 
and
    (vii) Approve final fund accountings.
* * * * *

    By the Commission.

    Dated: December 10, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-27537 Filed 12-28-20; 8:45 am]
BILLING CODE 8011-01-P


