The House passed with
a bi-partisan vote of 245-172 the Red Tape Reduction and Small Business Job
Creation Act , HR 4078, to prohibit any federal agency from taking any
significant regulatory action until the Secretary of Labor reports that the
Bureau of Labor Statistics average of monthly unemployment rates for any
quarter after the enactment of the Act is 6 percent or less. HR 4078 would also
require the SEC to conduct a more
thorough cost-benefit analysis of proposed regulations.
HR 4078 permits an
agency to take a significant regulatory action notwithstanding such prohibition
if the President determines by executive order that such action is necessary
because of an imminent threat to health or safety or other emergency, necessary
for the enforcement of criminal laws, necessary for U.S. national security, or
issued to implement an international trade agreement.
Under Title VI of HR
4078, the SEC must clearly identify the nature and
source of the problem that the proposed regulation is designed to address, as
well as assess the significance of that problem, to enable assessment of whether
any new regulation is warranted. The SEC must also use the Chief Economist to
assess the costs and benefits, both qualitative and quantitative, of the
intended regulation and propose or adopt a regulation only on a reasoned
determination that the benefits of the intended regulation justify the costs of
the regulation.
The Commission must also identify and
assess available alternatives to the regulation that were considered, including
modification of an existing regulation, together with an explanation of why the
regulation meets the regulatory objectives more effectively than the
alternatives. The SEC must ensure that any regulation is accessible, consistent,
written in plain language, and easy to understand and must measure, and seek to
improve, the actual results of regulatory requirements.
In deciding whether and how to
regulate, the Commission must assess the costs and benefits of available
regulatory alternatives, including the alternative of not regulating, and
choose the approach that maximizes net benefits. In addition, in making a
reasoned determination of the costs and benefits of a potential regulation, the
Commission must, to the extent that each is relevant to the particular proposed
regulation, take into consideration the impact of the regulation on investor
choice; market liquidity in the securities markets; and small businesses.
The Commission must explain in its
final rule the nature of comments that it received, including those from the
industry or consumer groups concerning the potential costs or benefits of the
proposed rule or proposed rule change, and must provide a response to those
comments in its final rule, including an explanation of any changes that were
made in response to those comments and the reasons that the Commission did not
incorporate those industry group concerns related to the potential costs or
benefits in the final rule.
Within one year after enactment, and
every five years thereafter, the
Commission must review its regulations to determine whether any are outmoded,
ineffective, insufficient, or excessively burdensome, and must modify,
streamline, expand, or repeal them in accordance with such review. The SEC must
also conduct a post-adoption impact assessment.
The House approved,
by a bi-partisan 251-166 vote, a floor amendment offered by Rep. Mike Fitzpatrick (R-PA)
that would require the SEC, when reviewing regulations, to consider the burden of applying
Section 404(b) of Sarbanes Oxley to companies with a public float of less than
$250 million. Section 404(b) requires outside auditor attestation of
management’s assessment of the company’s internal controls. According to Rep.
Fitzpatrick, the amendment would merely require the SEC to consider the burden
of Section 404(b) when reviewing its regulations and would not change current
law. The amendment would apply to all companies and would not discriminate based
on when a company issued their IPO (Cong Record, July 25, 2012, H 5278).
The House also approved, by a bi-partisan 245-171 vote, an amendment
offered by Rep. Bill Posey (R-FL) prohibiting the SEC from issuing any
interpretive guidance with respect to disclosures related to climate change. In 2010, the SEC issued
an interpretative guidance for companies to disclose the impact global climate
change might have on their businesses. The Posey Amendment, according to its
author, does not stop companies from mentioning bona fide weather and
environmental risks in disclosures. And if a company really wants to weigh in
climate change for some reason, they are free to volunteer that information.