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The Financial Services Institute sent a letter Thursday to the leadership of the House of Representatives urging the House to pass H.R. 1062, which the House Financial Services Committee approved on May 7; the bill is scheduled to be considered by the full House on Friday morning.
Introduced by Rep. Scott Garrett, R-N.J., in March, the bill would direct the SEC, in the FSI letter’s words, to “implement practical and necessary changes by codifying the cost-benefit analysis requirements of Executive Order No. 13563 and applying its directives to the SEC.”
President Barack Obama issued that order on Jan. 18, 2011. Among other directives, it ordered that the U.S. regulatory system “must take into account benefits and costs, both quantitative and qualitative,” and that each agency of the government should “propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs.”
In a May 7 statement, Rep. Garrett (right) said H.R. 1062 would “require the SEC to ensure that the benefits of any rulemaking outweigh the costs and that both new and existing regulations are accessible, consistent, written in plain language and easy to understand. I regularly hear from constituents, especially job creators, about how Washington red tape needs to be cut.”
The White House Office of Management and Budget (OMB) in a statement Wednesday expressed administration opposition to the bill. “By adding burdensome and disruptive new procedures, H.R. 1062 would impede the ability of the SEC to protect investors, maintain orderly and efficient markets, and facilitate capital formation.
"The administration believes in the value of cost-benefit analysis. However, H.R. 1062 would add onerous procedures that would threaten the implementation of key reforms related to financial stability and investor protection.”
Subtitled the SEC Regulatory Accountability Act , Garrett’s bill would amend the Securities Exchange Act of 1934 by directing the SEC, before issuing a regulation under the securities laws, to: (1) identify the nature and source of the problem that the proposed regulation is designed to address in order to assess whether any new regulation is warranted; (2) use the SEC Chief Economist to assess the costs and benefits of the intended regulation and adopt it only upon a reasoned determination that its benefits justify the costs; (3) identify and assess available alternatives that were considered; and (4) ensure that any regulation is accessible, consistent, written in plain language, and easy to understand.
The bill would also require the SEC to “consider the impact of the regulation upon investor choice,” and explain in its final rule “the nature of comments received concerning the proposed rule or rule change; and respond to those comments, explaining any changes made in response and the reasons that it did not incorporate industry group concerns regarding potential costs or benefits.”
As for the costs related to H.R. 1062, CBO estimated that the SEC would need to hire an additional 20 staff members to comply with the bill, and that personnel and overhead would cost the agency $23 million over the 2013-2018 period. However, CBO also estimates that “the net budgetary effect of the SEC’s activities to implement H.R. 1062 would not be significant, assuming appropriation actions consistent with the commission’s authorities.”
Referencing the CBO estimates in its letter under CEO Dale Brown’s signature, FSI argued that despite the $23 million in extra costs to the SEC, the bill “has the potential to save Main Street investors and financial services providers significantly more. Unclear and inefficient regulations drive up compliance costs and increase litigation expenses for those serving the financial and securities industry, and this in turn raises the cost of investment and retirement planning for investors.”
Read House Bill to Require SEC, DOL Fiduciary Collaboration on AdvisorOne.