While reaffirming its commitment to smart and effective regulations and the value of cost-benefit analysis, the Obama Administration opposes passage of the SEC Accountability Act, H.R. 1062, because its burdensome and disruptive new procedures would impede the ability of the SEC to protect investors, maintain orderly and efficient markets, and facilitate capital formation. In a Statement of Policy, the Administration said that H.R. 1062 would add onerous procedures that would threaten the implementation of key reforms related to financial stability and investor protection.
H.R. 1062 would direct the SEC to conduct time resource intensive assessments after it adopts or amends major regulations before the impacts of the regulations may have occurred or be known. According to the Administration, the bill would add analytical requirements that could result in unnecessary delays in the rulemaking process, thereby undermining the ability of the SEC to effectively execute its statutory mandates.
The Administration is committed to a regulatory system that is informed by science, cost-justified, and consistent with economic growth. Through efforts including Executive Order 13579, the Administration is taking important steps to encourage independent agencies to follow cost-saving and burden-reducing principles in their reviews of new regulations, and to examine their existing rules to identify those that should be modified, streamlined, or repealed.
By a vote of 235 to 161 the House of Representatives passed the SEC Regulatory Accountability Act, H.R. 1062. Seventeen Democrats voted to pass the bill. Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets, introduced the SEC Regulatory Accountability Act, which would require the SEC to conduct robust cost-benefit analysis on each new rulemaking to ensure that its costs do not outweigh its benefits, and would make certain that all new and existing regulations are accessible, consistent, written in plain language, and easy to understand.
Executive Orders. The legislation is designed to essentially codify Executive Orders issued by President Obama reforming the regulatory process. Chairman Jeb Hensarling (R-TX) of the Financial Services Committee said that in many respects the Act carries out Executive Order 13563.
President Obama issued two Executive Orders during his first term on the reform of the federal regulatory process. Executive Order No. 13563 set out general requirements directed to executive agencies concerning public participation, integration and innovation, flexible approaches, and science. It also reaffirmed that executive agencies should conduct a cost-benefit analysis of regulations. Executive Order No.13579 states that independent regulatory agencies, such as the SEC, should follow EO No. 13563. To facilitate the periodic review of existing significant regulations, EO No. 13579 said that independent regulatory agencies should consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.
There is a debate over whether EO No. 13579 directed independent regulatory agencies to conduct a cost-benefit analysis of regulations. The use of the word “should’’ in the Executive Order has led some to conclude that it is not mandatory. Thus, as an independent agency, the SEC is not clearly required to follow Executive Orders No. 13563 and 13579, but former SEC Chairman Mary Schapiro indicated that the Commission would abide by the Executive Orders and in Senate confirmation hearings testimony SEC Chair–Designate Mary Jo White acknowledged that the SEC should seek to assess the economic impacts of its contemplated rulemaking.