In a previous article, we wrote about the case Thrivent Financial for Lutherans et al. v. SEC, in which Thrivent sought to challenge the SEC’s dismissal of its rulemaking petition regarding FINRA’s arbitral code.
Oral arguments took place on December 1, 2025, and the D.C. Circuit issued a partial ruling on July 21, 2026, agreeing with Thrivent’s arguments that the SEC had failed to reasonably justify its decision-making process in its threadbare response to Thrivent containing “generic language” that “did not engage with Thrivent’s arguments.” The D.C. Circuit ultimately remanded the case to the SEC for further consideration of Thrivent’s original petition.
The D.C. Circuit began by presenting a broad summation of federal judicial review of administrative agencies’ decisions: “Our review of agency denials of petitions for rulemaking is quite deferential.” However, the Court noted, “the agency still must ‘provide analysis that follows a discernible path to which the court may defer.’” [1] Here, the Court noted bluntly that, “[The SEC’s] largely boilerplate letter does not even clear that low bar.”
Ultimately, the Court held that the SEC’s response to Thrivent’s petition, which spanned just three paragraphs in total, failed to provide the Court with that path. Among the vague generalities by which the SEC attempted to justify its decision was that the SEC’s “[r]esources and personnel [we]re being used for other matters.”
The Court reiterated that its review of an agency’s decisions to not undertake rulemaking is highly deferential.[2] However, the decision “must be reasoned if it is to survive arbitrary and capricious review,” and mere “conclusory statements” will not suffice.[3]
To highlight just how insufficient and unreliable the SEC’s justifications herein were, the Court referred to them as “short winded,” “cursory,” “a truism, not a reason,” “boilerplate,” “threadbare,” “devoid of…substance,” “perfunctory,” and “thinly reasoned.” “We cannot defer,” the Court held, “to an explanation that consists of nothing more than boilerplate ipse dixit that could be cut and pasted into all manner of rulemaking petition decisions indiscriminately.”
Although the Court did not address the now-abrogated Chevron deference doctrine, it nonetheless maintained a highly deferential posture towards administrative decision-making. However, the Court emphasized that the agency must provide “some explanation” as to why it reached its conclusion.
The Court cited a recent D.C. Circuit case, which was decided following the overruling of Chevron in Loper Bright Enterprises, pointing to Cf. Coinbase, Inc. v. SEC.[4] In Cf. Coinbase, the SEC’s justification for not engaging in rulemaking was that it was focusing on “higher-priority agenda items—namely, everything else that it was doing.”
In that case, as in Thrivent, the Court held that the SEC had failed to provide a reasoned explanation for denying a rulemaking petition. “When an agency decides not to engage in rulemaking because it has concluded that its resources are better directed elsewhere, it must—at a minimum—offer some explanation of why it has reached that conclusion in terms of such considerations as identified priorities, urgency, or relative resource intensiveness” (emphasis in original).
The SEC is now required to go back to the drawing board and attempt to craft such an explanation. It remains to be seen how the SEC will address this issue and whether the SEC will follow the Trump administration’s general preference for deregulation.
At least one of the current SEC Commissioners, Mark Uyeda, has publicly posed the question of whether “arbitrations involving investment advisers and their clients are more costly than necessary,” specifically highlighting instances where multiple arbitrators are mandated when only one would suffice.
Barton will continue to monitor this case for any future developments. If you or your business have any questions about the regulatory landscape facing financial advisors, broker-dealers, or other financial industry queries, please contact James Heavey, A.J. Monaco, and Thomas White.
[1] Environmental Health Trust v. FCC, 9 F.4th 893, 903 (D.C. Cir. 2021)
[2] Flyers Rights Educ. Fund v. Federal Aviation Admin., 864 F.3d 738, 743 (D.C. Cir. 2017)
[3] Environmental Health Trust, 9 F.4th at 903
[4] 126 F.4th 175, 181 (3d Cir. 2025)
James E. Heavey
A.J. Monaco
Thomas C. White