The Department of Justice Threw Out the Use of Guidance Documents

President Trump has set de-regulation as one of his priorities. We saw this in his Executive Order that required the repeal of two regulations before enacting a new regulation. The Department of Justice is embracing this mandate.

Associate Attorney General Rachel Brand issued a memorandum  limiting the use of agency guidance documents in affirmative civil enforcement cases. This is an extension of November 15, 2017 memo from Attorney General Sessions that prohibits the DOJ from promulgating guidance documents that create rights or obligations that are binding on regulated parties.

The Brand Memo applies to affirmative civil enforcement cases.  I was not sure what those were. I found out that they are civil lawsuits on behalf of the United States is to recover government money lost to fraud or other misconduct or to impose penalties for violations of Federal health, safety, civil rights or environmental laws. This would include ADA lawsuits, environmental clean up lawsuits, as well as healthcare reimbursement fraud.

The November memo from the Attorney General was intended to attack guidance that gets implemented as a de facto regulation without going through the formal notice and comment rulemaking process.

Any guidance documents now have to follow five principles:

  1. Guidance has to disclaim any force of law, and avoid language suggesting that the public has obligations that go beyond those set forth in the applicable statutes or legislative rules.
  2. Guidance must clearly state that they are not final agency actions, have no legally binding effect on persons or entities outside the federal government, and may be rescinded or modified.
  3. Guidance should not be used to coerce persons into taking any action or refraining from taking any action beyond what is required by the terms of the applicable statute or regulation.
  4. Guidance should not use mandatory language such as “shall,” “must,” “required,” or “requirement”, except when restating with citations to statutes or regulations.
  5. To the extent guidance set out voluntary standards, they should clearly state that compliance with those standards is voluntary and that noncompliance will not, in itself, result in any enforcement action.

This leaves me scratching my head on how this might affect guidance from the Securities and Exchange Commission that the compliance professionals rely on.

The Brand Memo clearly states that it applies to DOJ litigators in using other agencies’ guidance documents. Although, it limits itself to affirmative civil enforcement cases. I would have to assume that this may bleed over into the DOJ’s prosecution of cases referred from the SEC.

Guidance cuts both ways. Attorney General Sessions is clearly focused on guidance that imposes more obligations on regulated parties. But I think that is a simplistic way to look at things. Some of the guidance provides safeguards that help firms navigate uncertainty in the legislation and regulations.

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