Another Court Lambasts SEC, Calls Its Rules “Vague and Loosey-Goosey”   

SEC suffers another criticism in court as the Court of Appeals for the Fifth Circuit describes its rules as vague and “loosey-goosey.”

The United States Securities and Exchange Commission (SEC) is no stranger to criticisms, as it continues to attract condemnation from multiple United States judges. 

In a recent development, Ripple’s Chief Legal Officer (CLO) called attention to a lawsuit where a judge in the U.S. Court of Appeals for the Fifth Circuit slammed the SEC over its buyback disclosure rule. 

Ripple CLO Reacts as Court Calls SEC Rules “Vague and Loosey-Goosey 

The judge overseeing the case between the National Center for Public Policy Research (NCPPR) and the SEC described the regulator’s rule as “vague and loosey-goosey.”

According to the judge, no one seems to know whether they would be at risk if they fail to ask for clarifications about the SEC’s rules. 

Although the NCPPR v. SEC lawsuit is unrelated to crypto, Ripple’s CLO still shared it on X, looking to call attention to the SEC’s perceived inability to present clear rules.

Alderoty noted that there is a possibility that the Fifth Circuit Judge could be “on to something” for criticizing the SEC’s rules as vague. 

I don’t know much about this proxy access case argued in the 5th Circuit yesterday, but when a judge says the SEC’s rules are “so vague and loosey-goosey that nobody knows whether they’ll be at risk…,” she may be on to something. NCPPR v SEC. pic.twitter.com/Nj08JTpaEu

— Stuart Alderoty (@s_alderoty) March 6, 2024

Background of NCPPR Case Against SEC 

For context, NCPPR sued the SEC in the Fifth Circuit, challenging the regulator’s decision to accept a proposal from Nasdaq. The proposal requires listed companies to disclose information about their board and allow specific firms access to a board recruiting service. 

Unsatisfied with the SEC’s approval, NCPPR and Alliance for Fair Board Recruitment (AFBR) filed a petition to review the rule. 

A three-judge panel of the Fifth Circuit first denied the petition last year. However, the court later granted another petition filed in February for an en banc hearing to reconsider the challenge of the approved rules. 

Courts Criticizes SEC 

Meanwhile, the NCPPR case was not the first time a U.S. judge criticized the SEC. 

Recall that in the Grayscale v. SEC lawsuit last year, the Court of Appeals for the District of Columbia Circuit slammed the SEC for acting arbitrarily and capriciously by denying the asset manager’s request to convert its Bitcoin fund into a spot BTC ETF. 

Similarly, the judge in the Ripple case called out the SEC’s lawyers for their hypocritical stance during the argument over William Hinman’s draft speech. Magistrate Sarah Netburn went a step further to slam the SEC for “lacking faithful allegiance to the law.”

In addition, a U.S. federal judge threatened to sanction SEC lawyers after they obtained a temporary restraining order (TRO) by presenting false claims against crypto startup Digital Licensing Inc. (DEBT Box). 

Ripple CLO has continued to track all cases in which U.S. judges have criticized the SEC under Gary Gensler’s leadership. He believes this bad reputation could make it difficult for Gensler to secure a job outside the SEC.