Republican Congresswoman Ann Wagner has sponsored the SEC Regulatory Accountability Act, H.R. 78, which requires the U.S. Securities and Exchange Commission to engage in more rigorous cost–benefit analysis before it can move forward with new regulations. Congresswoman Wagner called the bill “common-sense legislation” that regulators should already engage in.
Specifically, the Act requires the SEC to identify the nature, source, and significance of the problem each proposed regulation is intended to address; to adopt a regulation only after a reasoned determination that the regulation’s benefits justify its cost; to identify and assess available alternatives to additional regulation (including the alternative of not regulating); and to ensure that regulation is accessible and easy to understand. Under the Act, cost–benefit analysis requires the SEC to consider the impact of any regulation on investor choice, securities’ market liquidity, and small businesses. Costs and benefits are “both qualitative and quantitative.”
The Act also mandates additional action if the SEC amends or adopts a “major rule” in terms of economic impact. See U.S.C. § 804(2). Such amendment or adoption of a major rule requires the SEC to state (1) the regulation’s purposes and intended consequences, (2) metrics for measuring the regulation’s economic impact, (3) the plan to be used to assess whether the regulation has achieved its stated purposes, and (4) any foreseeable unintended or negative consequences of the regulation.
The Act, however, does not apply only to future SEC regulation. It also requires the SEC to review its existing regulations and modify, streamline, expand, or repeal those regulations that are outmoded, ineffective, insufficient, or excessively burdensome. The review must be completed within one year of the date of the SEC Regulatory Accountability Act’s enactment and every five years thereafter.
Congress passed H.R. 78 on January 12, 2017, but a motion to reconsider was laid on the table and agreed to without objection that same day. The bill is part of the Republican regulatory reform and will make it more difficult for the SEC to promulgate regulation. It has been attacked as protecting Wall Street interests and undermining investor protections.
Republican lawmakers have proposed the legislation before but have never cleared the Senate.