House OKs Bill to Ramp Up SEC Cost-Benefit Analysis

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By Rob Tricchinelli

A bill to force the Securities and Exchange Commission to conduct more rigorous cost-benefit analysis in its rulemaking passed the House 243-184 Jan. 12, mostly along party lines.

The SEC was specifically targeted by House Republicans after the chamber passed separate measures that would give Congress broader authority over regulatory agencies’ rules.

The Jan. 12 bill ( H.R. 78), sponsored by Rep. Ann Wagner (R-Mo.), is identical to a measure introduced in previous congresses by former Rep. Scott Garrett (R-N.J.); one version was approved by committee in 2016 and another passed the House in 2013.

The SEC didn’t respond to a request for comment on the bill. The bill as a standalone measure is unlikely to attract Democratic support in the Senate.

Benefits Justify Costs

Under the bill, the agency’s chief economist would have to sign off on any proposed or adopted rule after making a “reasoned determination that the benefits of the intended regulation justify the costs.”

The SEC would have to “assess the costs and benefits of available regulatory alternatives, including the alternative of not regulating, and choose the approach that maximizes net benefits.”

That rubric would also apply to rules by the Public Company Accounting Oversight Board, Municipal Securities Rulemaking Board and Financial Industry Regulatory Authority.

It would also require the SEC to revisit all of its rules every five years to determine whether they are “outmoded, ineffective, insufficient, or excessively burdensome” and alter them accordingly.

Cost-benefit analysis has been a major weapon of conservative lawmakers and financial trade groups in attacking the SEC and other agency rules.

The D.C. Circuit has also cited inadequate agency cost-benefit analysis as a basis for striking down SEC rules affecting proxy access and mutual fund governance.

Legislative v. Executive

House Republican lawmakers have been fulminating against executive agencies early in the 2017 term. On Jan. 5, the chamber passed a bill that would require congressional approval of any major regulation adopted by an executive-branch agency.

Under current law, Congress is allowed to void regulatory actions with a disapproval resolution that either gets signed by the president or enacted over a veto, but H.R. 26 would require Congress to act for any major rules to take effect.

On Jan. 11, the House passed a bill (H.R. 5) that would set out additional requirements for agency rulemakings and defang a U.S. Supreme Court ruling that requires deference to agencies in lawsuits challenging their rules.

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editors responsible for this story: Phyllis Diamond at; Seth Stern at

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