Why Regulation by Enforcement Hurts Transparency
In this episode of The SPAC Podcast, Nick Morgan, Partner at Paul Hastings LLP and co-founder of ICAN (Investor Choice Advocates Network), critiques the SEC’s use of regulation by enforcement, particularly in the SPAC context.
Nick points to the Momentus Stable Road case of 2021 as a clear example, noting Commissioner Hester Peirce’s concerns about the practice. Instead of transparent rulemaking under the Administrative Procedure Act (APA), the SEC at times has chosen to set policy through one-off enforcement actions, leaving companies and sponsors to defend against shifting standards without public input.
Nick argues that real accountability requires:
- Public rulemaking under the APA
- Open comment and critique
- Finalized rules that can be challenged in court
For sponsors, boards, and investors, this discussion underscores why transparency and predictability matter more than one-off enforcement actions.
Connect with the Guest:
Nick Morgan – Partner, Paul Hastings LLP | Co-Founder, ICAN
LinkedIn: https://www.linkedin.com/in/nicholasrmorgan/
View all of their episodes here:
https://www.thespacpodcast.com/guests/nick-morgan/
Connect with the Hosts & The SPAC Podcast:
Michael Blankenship LinkedIn:
https://www.linkedin.com/in/mikeblankenship/
Joshua Wilson LinkedIn:
https://www.linkedin.com/in/joshuabrucewilson/
YouTube Channel:
https://www.youtube.com/@Thespacpodcast
Contact The SPAC Podcast:
https://www.thespacpodcast.com/contact/
#SPACs #CapitalMarkets #SPACPodcast #SEC #RegulationByEnforcement #ICAN #Transparency
Disclaimers:
The views, opinions, and statements expressed by the guest are solely their own and do not necessarily reflect the views of The SPAC Podcast, its hosts, or affiliated organizations. This content is for informational purposes only and should not be construed as investment, legal, tax, or accounting advice.
Michael J. Blankenship is a licensed attorney and is a partner at Winston & Strawn LLP. Joshua Wilson is a licensed Florida real estate broker and holds FINRA Series 79 and Series 63 licensure. The content of this podcast is intended for informational and educational purposes only and should not be interpreted as legal, financial, or compliance advice. The views and opinions expressed by the hosts and guests are their own and do not necessarily reflect the official policies or positions of any regulatory agency, law firm, employer, or organization.
Listeners are encouraged to consult their own legal counsel, compliance professionals, or financial advisors to ensure adherence to applicable laws and regulations, including those enforced by the SEC, FINRA, and other regulatory bodies. This podcast does not constitute a solicitation, offer, or recommendation of any financial products, securities transactions, or legal services.
Let’s Connect on LinkedIn:
👉 Michael J. Blankenship - https://www.linkedin.com/in/mikeblankenship/
👉 ...
Michael Blankenship:
Nick, what are your views on regulating by enforcement? When the SEC does that, how do you react and what do you advise your clients?
Nick Morgan:
We’re not fans of regulation by enforcement. We’ve seen it in many SEC contexts, including SPACs.
The Momentus Stable Road enforcement in 2021 was a prime example, and Commissioner Hester Peirce even commented on it.
If the SEC wants to change policy or direction, the APA lays out a rulemaking process: propose a rule, publish it, take public comment, finalize it, and then let courts review it if challenged.
None of that applies under regulation by enforcement. Instead, policy shifts come case by case, leaving defendants to fight precedent-setting enforcement without transparency.
We believe in transparent, public rulemaking, not policy made behind closed doors through enforcement.
Nick Morgan
President
Nick Morgan is a pro bono trial counsel who focuses on SEC investigations and litigation. He is the President and Founder of the Investor Choice Advocates Network (ICAN). Before founding ICAN, Morgan was a partner and office litigation chair at the law firm Paul Hastings and previously served as a Senior Trial Counsel at the SEC.