President Donald Trump signed a pair of executive orders on October 9 that may limit the impact of an agency’s use of informal guidance documents. The executive orders express concern that agency guidance, which includes policy statements, memoranda, and letters, has become a backdoor for regulators to change the laws and expand their scope and reach.
The “Improved Agency Guidance Documents” executive order requires agencies to post all of their guidance documents on easily searchable websites. The order recognizes that agencies can clarify existing obligations through guidance documents but states that agencies may not use guidance documents as a means to engage in regulation without following the rulemaking procedures of the Administrative Procedure Act. Even when guidance documents include a disclaimer that the document is not binding, the executive order notes that the guidance document “may carry the implicit threat of enforcement action if the regulated public does not comply.” The executive order directs agencies to note on their websites and in their guidance documents that the guidance documents lack the force and effect of law. It also directs agencies to review its guidance documents and rescind guidance documents that should no longer be in effect.
The “Transparency and Fairness” executive order prohibits agencies from enforcing rules that they have not made publicly known in advance. It states that, with respect to enforcement actions and adjudications, an agency can only apply standards of conduct that have been “publicly stated in a manner that would not cause unfair surprise.” To be considered “publicly stated,” the rule or standard must be published in the Federal Register or posted in the agency’s website, which must include a searchable database of all guidance documents in effect.
These executive orders apply to executive agencies (i.e., an executive department, a corporation owned or controlled by the US government, and an independent establishment). However, independent regulatory agencies, such as the Federal Energy Regulatory Commission (FERC) and the US Commodity Futures Trading Commission (CFTC), are not subject to presidential executive orders. Nevertheless, the FERC and the CFTC may follow the directives in the executive orders to further the transparency of their enforcement programs and activities.
FERC routinely uses policy statements to provide clarity to the industry and regularly relies on policy statements in support of its actions and decisions, including its orders to show cause and notices of proposed penalty. FERC has made its policy statements available on its website, where it states that its policy statements “provide guidance and regulatory certainty regarding statutes, orders, rules, and regulations that the Commission administers” and “typically discuss the factors that the Commission will use to evaluate future proceedings.”
The CFTC recently published an enforcement manual that establishes general policies and procedures that underlie its enforcement actions. This manual is also available on the CFTC’s website and specifically states that it provides general guidance only. Although not required, to conform to the directives set forth in the executive orders, the FERC and CFTC may wish to review their guidance documents to ensure that they clarify their existing obligations, do not attempt to expand the scope of their regulation, and are made publicly available. Both agencies may also wish to confirm that their orders on enforcement actions are based on statutes and legally binding rules and regulations and not solely on guidance documents. However, it is unlikely that the new executive orders will result in material changes to FERC’s and CFTC’s practices.