Opinion ID: 692264
Heading Depth: 3
Heading Rank: 2

Heading: Has the Commission abdicated its responsibility?

Text: 22 The petitioners next argue that because the Commission has yet to issue a formal order in any case arising under Sec. 2(a)(19)--except to grant an exemption from the strictures of that provision, as authorized by Sec. 6(c) of the Act--the Commission has abdicated its responsibility to enforce Sec. 2(a)(19). Accordingly, they say that this court should create a means by which a private party can compel the Commission to conduct an investigation that may lead to the issuance of an order. 23 That the Commission does not issue declaratory orders under Sec. 2(a)(19) does not demonstrate that the Commission has abandoned its responsibility to enforce the statute. The Commission has never denied its responsibility to enforce, and has in fact enforced, Sec. 2(a)(19) by advising investment companies informally that certain directors might in its view be interested persons. Furthermore, the Commission has recently taken action that is directly relevant to the petitioners' specific claim that a director is interested by virtue of his service on the boards of a number of funds in a family of funds. See Amendments to Proxy Rules for Registered Investment Companies, 59 Fed.Reg. 52689 (Oct. 19, 1994) (requiring disclosure of the aggregate compensation of directors who serve on the boards of more than one fund in a fund complex). 24 That the Commission will, upon the receipt of a qualifying application, provide an exemption under Sec. 6(c), does not advance the petitioners' claim that the SEC has abdicated its responsibility to enforce Sec. 2(a)(19); to the contrary, it is in part through the process of reviewing applications for an exemption that the Commission sees to it that investment companies and advisers comply with Sec. 2(a)(19). The process for seeking an exemption is open and an investor who believes that a particular director is an interested person may participate by suggesting in writing that an exemption be denied--or, for that matter, that the Commission issue an order under Sec. 2(a)(19). See 17 C.F.R. Sec. 270.0-5(a) (any interested person may submit written comments); see also Commission Policy and Guidelines for Filing of Applications for Exemption, 50 Fed.Reg. 19339, 19340 (Apr. 30, 1985). Moreover, the Commission has recently declared its intention to issue an order under Sec. 2(a)(19) when denying an application for exemption under Sec. 6(c). See, e.g., Matter of Founders Funds, Inc., Fed.Sec.L.Rep. (CCH) p 76,427 at 77,430, 1992 WL 210499 (Aug. 4, 1992). 25 Thus, we cannot agree that the Commission has refused to implement Sec. 2(a)(19); the agency has merely chosen thus far to enforce it informally rather than formally. So far, it appears, the Commission has found that sufficient to induce compliance with the law. That the petitioners prefer a different means of enforcement is irrelevant, for the very reason underlying the decision in Chaney: the agency alone, and neither a private party nor a court, is charged with the allocation of enforcement resources. 26