Financial Regulators Have Gotten the Memo—The “Brand Memo”

Following the lead of the Department of Justice, financial regulators recently released statements announcing the “important distinction” between statutes and regulations on the one hand, and agency guidance on the other. In those statements, financial regulators re-assured supervised entities that they will not take enforcement action for purported violations of guidance.

Background

Over the past year, top DOJ leadership has repeatedly criticized the unlawful use of federal-agency guidance to create binding legal obligations that do not otherwise exist in statute or regulation. On November 16, 2017, Attorney General Sessions issued a memorandum to all DOJ components instructing,

It has come to my attention that the Department has in the past published guidance documents—or similar instruments of future effect by other names, such as letters to regulated entities—that effectively bind private parties without undergoing the rulemaking process. The Department will no longer engage in this practice.

Consistent with that memorandum, on January 25, 2018, then-Associate Attorney General Rachel Brand instructed the heads of civil litigating components and U.S. Attorneys that “Department litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law in affirmative civil enforcement cases.” Deputy Attorney General Rod RosensteinDeputy Associate Attorney General Stephen Cox, and most recently Acting Associate Attorney General Jesse Panuccio have echoed those positions in public addresses.

As Crowell & Moring previously explained here, “DOJ’s top leadership has now essentially communicated to all federal agencies that using sub-regulatory guidance to expand statutory and regulatory requirements is inconsistent with promoting the rule of law, fair notice, and due process.”