Since 1997, the SEC’s Manual of Publicly Available Telephone Interpretations has been available online (see here). It is also searchable on Westlaw (see the FSEC-MISC database). The manual contains a bevy of interpretations of various SEC regulations. As to legal status of these interpretations, the manual states as follows:
The responses discussed in this manual do not necessarily reflect the views and policies of the Commission or the Division of Corporation Finance. These responses are not rules, regulations, or statements of the Commission. Further, the Commission has neither approved nor disapproved these responses. The responses discussed in this manual do not necessarily contain a discussion of all material considerations necessary to reach the conclusions stated. Accordingly, these responses are intended as general guidance and should not be relied on as definitive. There can be no assurance that the information in this manual is current, as the positions expressed may change without notice.
Nonetheless, securities practitioners routinely rely on manual statements in large part because it provides the only “authority� on the minutiae of various securities regulations. This is similar to widespread reliance on SEC no-action letters notwithstanding SEC pronouncements that no-action letters do not constitute official expressions of SEC views (for an excellent analysis of the legal status of no-action letters, see Donna Nagy, Judicial Reliance on Regulatory Interpretation in SEC No-Action Letters: Current Problems and a Proposed Framework, 83 Cornell L. Rev. 921 (1998)). And courts do frequently defer to interpretations reflected in no-action letters, although Professor Nagy argues automatic deference is inappropriate.
So what about the legal status of manual interpretations? My quick research found nothing definitive on the issue. While nine SEC releases and twenty-eight no-action letters cite the manual, only a single judicial opinion does. Should manual provisions be viewed the same as no-action letters? They seem less formal than no-action letters but, unlike no-action letters, are not addressed to a specific party under a backdrop of specific facts.
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Telephone interpretations have the same legal status as no-action letters. Both no-action letters and the telephone interpretations are issued pursuant to the staff’s implicit authority to issue informal guidance. See 17 CFR 202.1(d) & .2. It wouldn’t surprise me if both no-action letters and the telephone interpretations are being approved by the same Associate Director.
I take small issue with your view that no-action letters are “formal.†I agree that they are formal in that they are the staff’s considered view, and are the result of much care and contemplation. They are not, however, formal in the sense of having any binding precedential value, except perhaps upon the staff itself. (They are not, for example, an interpretation or an adjudication under the APA.) They are merely the staff’s interpretive views, whatever they are worth, or the staff’s expression, “scout’s honor,†that it will not sue on a particular transaction or set of facts. (Very rarely, they may represent the Commission’s tacit approval of a transaction. See 17 CFR 202.1(d).) They really are informal, although their wide public availability post- ’71 or so has lent them a perception of formality greater than they probably deserve, as the Nagy article ably shows.
Also, I disagree with your views regarding the requestor-specific nature of no-action letters. There is a bit of a divergence of view on that matter. Corp. Fin. typically takes the view that they are requestor specific, while IM typically takes the view that they are of general applicability to anyone with similar facts (they often issue “close-out†letters in which they note that, having stated their views on a particular matter, they will no longer entertain further requests unless those requests present novel facts.) I don’t know which is the better approach, but I would note that, as a practical matter, Enforcement would have a very hard time bringing a case against Party B if the facts of their situation were identical to those of Party A, to whom a no-action letter was issued.
Interesting post. From a practitioner’s perspective, the telephone interpretations manual is one of the first sources I look at. If the SEC’s interpretations are completely non-binding, I wish the SEC would host on its site a Q&A similar to what the thecorporatecounsel.net has. In the meantime, Broc (and his staff) may become the de facto interpretations manual, when the SEC staff has been silent on the matter.
JHK, KMK