Question:
The Investment Company Act prohibits a mutual fund from engaging in certain transactions when there may be a conflict of interest between the manager of the fund and its shareholders. Under rules issued by the Securities and Exchange Commission (SEC), however, a fund that meets certain conditions may engage in an otherwise prohibited transaction. In June 2004, the SEC added two new conditions. A year later, the SEC reconsidered the new conditions in terms of the costs that they would impose on the funds. Within eight days, and without asking for public input, the SEC readopted the conditions. The Chamber of Commerce of the United States asked a federal appellate court to review the new rules. The Chamber argued that in readopting the rules, the SEC relied on materials not in the “rulemaking record” without providing an opportunity for public comment. The SEC countered that the information was otherwise “publicly available.” In adopting a rule, should an agency consider information that is not part of the rule-making record? Why or why not?