SEC Cost-Benefit Analysis a Topic in Confirmation Hearing as Legislation Introduced to Codify Rigorous Analysis

March 14, 2013

During this week’s confirmation hearing for SEC Chairman designate Mary Jo White, her testimony, as well as several questions from Republican Senators focused on the SEC’s efforts to reform its rulemaking processes to adopt a more rigorous cost-benefit analysis.  When the D.C. Circuit invalidated the SEC’s proxy access rules, the agency was forced to revamp its process, which is still under legal challenge, and that revised process is currently subject to litigation involving the SEC’s conflict minerals rules.  Last week, Senator Richard Shelby (R-AL) introduced a bill which would require the SEC and other financial regulatory agencies to perform a rigorous cost-benefit analysis as part of regulatory rulemakings.  The aptly named Financial Regulatory Responsibility Act (S. 450) would also:
  • require cost-benefit reports to be filed with the Senate Banking Committee and allow public inspection of the analysis; 
  • impose mandatory five-year regulatory reviews; 
  • provide a right of action for those "adversely affected" by rules; and 
  • create an Office of the Chief Economist to oversee the agencies' cost-benefit efforts.  
The requirements far exceed the current cost-benefit analysis required of or performed by any federal agency.  The bill has three cosponsors, Senate Banking Committee ranking Republican Sen. Mike Crapo (R-ID) Sen. Mike Johanns (R-Neb), Sen. Saxby Chambliss (R-GA).  While the bill is unlikely to move without substantial changes, Republicans will continue to push for a more rigorous cost-benefit review by the SEC to ensure balanced rulemaking under Dodd-Frank and the JOBs Act.