59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–799 

SEC REGULATORY ACCOUNTABILITY ACT 

SEPTEMBER 28, 2016.—Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 5429] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 5429) to improve the consideration by the Securities and 

Exchange Commission of the costs and benefits of its regulations 

and orders, having considered the same, report favorably thereon 

without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

Introduced by Representative Scott Garrett on June 9, 2016, 

H.R. 5429, the SEC Regulatory Accountability Act, subjects the Securities and Exchange Commission (SEC) to the President’s Executive Order 13579, which outlines enhanced cost-benefit analysis requirements and requires a review of existing regulations. 

BACKGROUND AND NEED FOR LEGISLATION

Following the adoption of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act in July 2010, the SEC received both 

new authority and enhancements to existing authorities to issue 

rules that govern the operation of the capital markets. Many of the 

rules issued to date by the SEC are significant rules. Significant 

regulations are those that: (1) have an annual economic impact of 

$100 million or more as defined by the Office of Management & 

Budget, (2) result in a major increase in costs or prices for conVerDate Sep 11 2014 05:33 Oct 04, 2016 Jkt 059006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR799.XXX HR799

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sumers, individual industries, federal, state, or local governments, 

or geographic regions, or (3) cause significant adverse effects on 

competition, employment, investment, productivity, innovation, or 

on the ability of U.S. enterprises to compete against their foreign 

counterparts. 

On July 11, 2011, President Obama issued Executive Order 

13579, ‘‘Regulation and Independent Regulatory Agencies’’ 

(‘‘Order’’), which, among other things, states that independent regulatory agencies, no less than executive agencies, should promote 

the goal, set forth in Executive Order 13563 of January 18, 2011, 

of a regulatory system that protects ‘‘public health, welfare, safety, 

and our environment while promoting economic growth, innovation, 

competitiveness, and job creation.’’ 

The U.S. capital markets change rapidly and it is incumbent 

upon those agencies that are charged with their oversight, including the SEC, to regularly review, revise, replace or eliminate regulations in order to facilitate economic growth and job creation, and 

ensure smart, cost-effective regulations. Pursuant to the Order, 

independent agencies are required to produce plans to reassess and 

streamline their existing regulations, and to disclose those plans 

for public comment. Additionally, the Order provides that agencies 

should follow the cost-saving, burden-reducing principles provided 

in Executive Order 13563. Executive Order 13565 provides that 

each agency must: 

(1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing 

that some benefits and costs are difficult to quantify); (2) 

tailor its regulations to impose the least burden on society, 

consistent with obtaining regulatory objectives, taking into 

account, among other things, and to the extent practicable, 

the costs of cumulative regulations; (3) select, in choosing 

among alternative regulatory approaches, those approaches that maximize net benefits (including potential 

economic, environmental, public health and safety, and 

other advantages; distributive impacts; and equity); (4) to 

the extent feasible, specify performance objectives, rather 

than specifying the behavior or manner of compliance that 

regulated entities must adopt; and (5) identify and assess 

available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing 

information upon which choices can be made by the public. 

The Order requires agencies to conduct retrospective analyses of 

existing rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal 

them in accordance with what has been learned. 

The SEC’s staff in the Division of Economic and Risk Analysis 

(DERA) appreciates the importance of cost-benefit analysis, as they 

note in the SEC’s Current Guidance on Economic Analysis in SEC 

Rulemakings: 

high-quality economic analysis is an essential part of SEC 

rulemaking. It ensures that decisions to propose and adopt 

rules are informed by the best available information about 

a rule’s likely economic consequences, and allows the ComVerDate Sep 11 2014 05:33 Oct 04, 2016 Jkt 059006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR799.XXX HR799

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mission to meaningfully compare the proposed action with 

reasonable alternatives, including the alternative of not 

adopting a rule. The Commission has long recognized that 

a rule’s potential benefits and costs should be considered 

in making a reasoned determination that adopting a rule 

is in the public interest. 

The SEC adopted guidance for economic analysis in SEC rulemaking in March 2012. As noted in the Current Guidance on Economic Analysis in SEC Rulemaking (Guidance), court cases, Government Accountability Office reports, the SEC’s Office of Inspector 

General, and congressional inquiries all have raised ‘‘questions 

about and/or recommended improvements to various components of 

the Commission’s economic analysis in its rulemaking, including: 

(1) identifying the need for the rulemaking and explaining how the 

proposed rule will meet that need; (2) articulating the appropriate 

economic baseline against which to measure the proposed rule’s 

likely economic impact (in terms of potential benefits and costs, including effects on efficiency, competition, and capital formation in 

the market(s) the rule would affect); (3) identifying and evaluating 

reasonable alternatives to the proposed regulatory approach; and 

(4) assessing the potential economic impact of the proposed rule 

and reasonable alternatives by seeking and considering the best 

available evidence of the likely quantitative and qualitative costs 

and benefits of each.’’ 

The Guidance was prepared by DERA to provide guidance to 

Commission staff involved in agency rulemaking. The SEC Chairman has directed the staff to follow the Guidance in SEC 

rulemakings. Unfortunately, many still believe that a robust costbenefit analysis is not a necessary component to SEC rulemaking— 

despite the Order issued by the President. Furthermore, some 

argue that if Congress requires the SEC to promulgate a rule, then 

no cost-benefit analysis is required. Given the significant number 

of rules that the SEC has proposed and adopted, it is critical that 

the SEC undertake a robust economic analysis and be able to demonstrate that the benefits truly outweigh the costs. H.R. 5429 

eliminates any confusion and makes clear that economic analysis 

is always required. 

Specifically, H.R. 5429 requires the SEC, prior to issuing a regulation, to (1) 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; (2) utilize 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; (3) 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; and (4) ensure that 

any regulation is accessible, consistent, written in plain language, 

and easy to understand and shall measure, and seek to improve, 

the actual results of regulatory requirements. 

It is often very rare for a regulatory agency to ever review their 

current rulebook to determine what is outdated, or redundant, even 


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though the Order actually necessitates this. H.R. 5429 addresses 

this issue by requiring the SEC to evaluate whether the new regulation is inconsistent, incompatible, or duplicative of other Federal 

regulations and to review its existing regulations to determine 

whether any such regulations are outmoded, ineffective, insufficient, or excessively burdensome, and shall modify, streamline, expand, or repeal them in accordance with such review. 

In testimony before the Capital Markets and Government Sponsored Enterprises Subcommittee on May 17, 2016, former SEC 

Commissioner Dan Gallagher noted: 

Chairman Garrett’s SEC Regulatory Accountability Act 

would promote and improve economic analysis at the SEC 

and make the agency even more accountable to the investing public. While the SEC has dramatically improved the 

economic analysis supporting its rules, there remains room 

for improvement. In particular, I believe that in certain 

mandated rulemakings, the SEC’s lawyers have played an 

outsized role in interpreting congressional intent thereby 

setting the ground rules by which the economists are expected to operate. 

The CEO pay ratio rulemaking is the best example of 

this. Finding benefits when Congress described none may 

help get a rule done. But it ensures that the economic 

analysis is not done right. This trend needs to stop before 

it becomes the loophole that devours the SEC’s 2012 commitment to proper economic analysis. Ultimately, Chairman Garrett’s bill will help ensure that economic analysis 

conducted by economists is firmly entrenched in every 

rulemaking the SEC conducts under the federal securities 

laws. 

HEARING

The Committee on Financial Services’ Subcommittee on Capital 

Markets and Government Enterprises held a hearing examining 

matters relating to H.R. 5429 on May 17, 2016. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

June 15 and 16, 2016, and ordered H.R. 5429 to be reported favorably to the House without amendment by a recorded vote of 34 

ayes to 25 nays (recorded vote no. FC–120), a quorum being 

present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole record vote 

in committee was a motion by Chairman Hensarling to report the 

bill favorably to the House without amendment. That motion was 

agreed to by a recorded vote of 34 ayes to 25 nays (Record vote no. 

FC–120), a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 5429 promotes 

market efficiency, competition, and capital formation and reduces 

unnecessary burden on regulated entities by requiring the SEC to 

conduct a more robust economic analysis process prior to issuing a 

rule. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, September 13, 2016. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 5429, the SEC Regulatory 

Accountability Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Stephen Rabent. 

Sincerely, 

MARK P. HADLEY

(For Keith Hall). 

Enclosure. 


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H.R. 5429—SEC Regulatory Accountability Act 

H.R. 5429 would specify several new requirements for the Securities and Exchange Commission (SEC) to meet when developing or 

amending regulations. The bill would direct the SEC to expand the 

scope of its analysis of the effects of regulations to include an assessment of the problem the proposed regulation is designed to address, its costs and benefits, and available alternatives, and would 

require the SEC to review and consider modifying its regulations 

every five years. Under the bill, when adopting or amending rules 

expected to have an economic impact greater than $100 million annually, the SEC would need to develop and publish a plan to assess 

whether the regulation has achieved its stated purpose. Within two 

years of publishing such a rule, the bill would require the SEC to 

publish a report on the rules’ costs, benefits, and other consequences using the performance measures identified in the plan 

issued when the rule was adopted. 

H.R. 5429 also would prohibit rules adopted by the Municipal Securities Rulemaking Board or any national securities association 

from taking effect unless the SEC determines that the board or association completed the same level of analysis for the rule that the 

SEC would complete, under the bill, in its own rulemaking process. 

Under current law, the SEC reviews and approves the rules of the 

affected organizations. 

Based on an analysis of information from the SEC about the 

number of staff required to undertake similar analyses of agency 

rules, CBO estimates that implementing H.R. 5429 would require 

24 additional staff (less than a 1 percent increase in the agency’s 

2015 staffing level) to handle the new rulemaking, reporting, and 

analytical activities required under the bill. At an average cost of 

about $250,000 per employee, CBO estimates those additional employees would cost $27 million over the 2017–2021 period. Such 

spending would be subject to appropriation. Under current law, the 

SEC is authorized to collect fees sufficient to offset its annual appropriation; therefore, CBO estimates that the net effect on discretionary spending would be negligible, assuming appropriations actions consistent with that authority. 

Enacting H.R. 5429 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. CBO estimates 

that enacting H.R. 5429 would not increase net direct spending or 

on-budget deficits in any of the four consecutive 10-year periods beginning in 2027. 

H.R. 5429 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA) and would not affect 

the budgets of state, local, or tribal governments. 

If the SEC increases fees to offset the costs of implementing the 

additional regulatory activities required by the bill, H.R. 5429 

would increase the cost of an existing mandate on private entities 

required to pay those fees. In addition, the bill would impose a private-sector mandate on private regulatory organizations associated 

with the SEC by requiring them to incorporate the same new analysis and reporting requirements into their rulemaking processes as 

would be required of the SEC. Based on an analysis of information 

from the SEC, CBO estimates that the increase in fees to offset the 

costs of the SEC would amount to no more than $27 million over 

the 2017–2021 period. Because private regulatory agencies issue 


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fewer rules than the SEC each year on average, the costs incurred 

by those organizations to comply with the mandate would probably 

amount to less than the additional costs that would be incurred by 

the SEC to implement the same requirements. Therefore, CBO estimates that the aggregate cost of both mandates would fall well 

below the annual threshold for private-sector mandates established 

in UMRA ($154 million in 2016, adjusted annually for inflation). 

The CBO staff contact for this estimate is Stephen Rabent. The 

estimate was approved by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 5429 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), the 

Committee states that no provision of H.R. 5429 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included 

in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or a program 

related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), the 

Committee states that H.R. 5429 contains no directed rulemaking. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1: Short title 

This section cites H.R. 5429 as the ‘‘SEC Regulatory Accountability Act.’’ 


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Section 2: Consideration by the Securities and Exchange Commission of the costs and benefits of its regulations and certain other 

agency actions 

This section amends Section 23 of the Securities Exchange Act 

of 1934 by requiring the SEC to conduct a qualitative and quantitative cost-benefit analysis of any intended regulation and propose or adopt such regulation only if the benefits of the intended 

regulation justify the costs. This section also requires the SEC to 

explore other available alternatives. Additionally, this section requires the SEC to conduct regular reviews of existing regulations. 

Section 3: Sense of Congress relating to other 

This section expresses a sense of Congress that the Public Company Accounting Oversight Board should also follow the same costbenefit analysis requirements. 

Section 4: Accountability provisions relating to other regulatory entities 

This section requires the SEC to conduct a cost-benefit analysis 

on rules adopted by the Municipal Securities Rule-making Board or 

any national securities association before such rules can take effect. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italics 

and existing law in which no change is proposed is shown in 

roman): 

SECURITIES EXCHANGE ACT OF 1934 

TITLE I—REGULATION OF SECURITIES EXCHANGES 

* * * * * * * 

RULES, REGULATIONS, AND ORDERS; ANNUAL REPORTS

SEC. 23. (a)(1) The Commission, the Board of Governors of the 

Federal Reserve System, and the other agencies enumerated in section 3(a)(34) of this title shall each have power to make such rules 

and regulations as may be necessary or appropriate to implement 

the provisions of this title for which they are responsible or for the 

execution of the functions vested in them by this title, and may for 

such purposes classify persons, securities, transactions, statements, 

applications, reports, and other matters within their respective jurisdictions, and prescribe greater, lesser, or different requirements 

for different classes thereof. No provision of this title imposing any 

liability shall apply to any act done or omitted in good faith in conformity with a rule, regulation, or order of the Commission, the 

Board of Governors of the Federal Reserve System, other agency 

enumerated in section 3(a)(34) of this title, or any self-regulatory 

organization, notwithstanding that such rule, regulation, or order 

may thereafter be amended or rescinded or determined by judicial 

or other authority to be invalid for any reason. 

(2) The Commission and the Secretary of the Treasury, in making rules and regulations pursuant to any provisions of this title, 


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shall consider among other matters the impact any such rule or 

regulation would have on competition. The Commission and the 

Secretary of the Treasury shall not adopt any such rule or regulation which would impose a burden on competition not necessary or 

appropriate in furtherance of the purposes of this title. The Commission and the Secretary of the Treasury shall include in the 

statement of basis and purpose incorporated in any rule or regulation adopted under this title, the reasons for the Commission’s or 

the Secretary’s determination that any burden on competition imposed by such rule or regulation is necessary or appropriate in furtherance of the purposes of this title. 

(3) The Commission and the Secretary, in making rules and regulations pursuant to any provision of this title, considering any application for registration in accordance with section 19(a) of this 

title, or reviewing any proposed rule change of a self-regulatory organization in accordance with section 19(b) of this title, shall keep 

in a public file and make available for copying all written statements filed with the Commission and the Secretary and all written 

communications between the Commission or the Secretary and any 

person relating to the proposed rule, regulation, application, or proposed rule change: Provided, however, That the Commission and 

the Secretary shall not be required to keep in a public file or make 

available for copying any such statement or communication which 

it may withhold from the public in accordance with the provisions 

of section 552 of title 5, United States Code. 

(b)(1) The Commission, the Board of Governors of the Federal 

Reserve System, and the other agencies enumerated in section 

3(a)(34) of this title shall each make an annual report to the Congress on its work for the preceding year, and shall include in each 

such report whatever information, data, and recommendations for 

further legislation it considers advisable with regard to matters 

within its respective jurisdiction under this title. 

(2) The appropriate regulatory agency for a self-regulatory organization shall include in its annual report to the Congress for each 

fiscal year, a summary of its oversight activities under this title 

with respect to such self-regulatory organization, including a description of any examination conducted as part of such activities of 

any organization, any material recommendation presented as part 

of such activities to such organization for changes in its organization or rules, and any such action by such organization in response 

to any such recommendation. 

(3) The appropriate regulatory agency for any class of municipal 

securities dealers shall include in its annual report to the Congress 

for each fiscal year a summary of its regulatory activities pursuant 

to this title with respect to such municipal securities dealers, including the nature of and reason for any sanction imposed pursuant to this title against any such municipal securities dealer. 

(4) The Commission shall also include in its annual report to the 

Congress for each fiscal year— 

(A) a summary of the Commission’s oversight activities with 

respect to self-regulatory organizations for which it is not the 

appropriate regulatory agency, including a description of any 

examination of any such organization, any material recommendation presented to any such organization for changes 


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in its organization or rules, and any action by any such organization in response to any such recommendations; 

(B) a statement and analysis of the expenses and operations 

of each self-regulatory organization in connection with the performance of its responsibilities under this title, for which purpose data pertaining to such expenses and operations shall be 

made available by such organization to the Commission at its 

request; 

(C) the steps the Commission has taken and the progress it 

has made toward ending the physical movement of the securities certificate in connection with the settlement of securities 

transactions, and its recommendations, if any, for legislation to 

eliminate the securities certificate; 

(D) the number of requests for exemptions from provisions of 

this title received, the number granted, and the basis upon 

which any such exemption was granted; 

(E) a summary of the Commission’s regulatory activities with 

respect to municipal securities dealers for which it is not the 

appropriate regulatory agency, including the nature of, and 

reason for, any sanction imposed in proceedings against such 

municipal securities dealers; 

(F) a statement of the time elapsed between the filing of reports pursuant to section 13(f) of this title and the public availability of the information contained therein, the costs involved 

in the Commission’s processing of such reports and tabulating 

such information, the manner in which the Commission uses 

such information, and the steps the Commission has taken and 

the progress it has made toward requiring such reports to be 

filed and such information to be made available to the public 

in machine language; 

(G) information concerning (i) the effects its rules and regulations are having on the viability of small brokers and dealers; 

(ii) its attempts to reduce any unnecessary reporting burden on 

such brokers and dealers; and (iii) its efforts to help to assure 

the continued participation of small brokers and dealers in the 

United States securities markets; 

(H) a statement detailing its administration of the Freedom 

of Information Act, section 552 of title 5, United States Code, 

including a copy of the report filed pursuant to subsection (d) 

of such section; and 

(I) the steps that have been taken and the progress that has 

been made in promoting the timely public dissemination and 

availability for analytical purposes (on a fair, reasonable, and 

nondiscriminatory basis) of information concerning government 

securities transactions and quotations, and its recommendations, if any, for legislation to assure timely dissemination of 

(i) information on transactions in regularly traded government 

securities sufficient to permit the determination of the prevailing market price for such securities, and (ii) reports of the 

highest published bids and lowest published offers for government securities (including the size at which persons are willing 

to trade with respect to such bids and offers). 

(c) The Commission, by rule, shall prescribe the procedure applicable to every case pursuant to this title of adjudication (as defined 

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termined on the record after notice and opportunity for hearing. 

Such rules shall, as a minimum, provide that prompt notice shall 

be given of any adverse action or final disposition and that such 

notice and the entry of any order shall be accompanied by a statement of written reasons. 

(d) CEASE-AND-DESIST PROCEDURES.—Within 1 year after the 

date of enactment of this subsection, the Commission shall establish regulations providing for the expeditious conduct of hearings 

and rendering of decisions under section 21C of this title, section 

8A of the Securities Act of 1933, section 9(f) of the Investment 

Company Act of 1940, and section 203(k) of the Investment Advisers Act of 1940. 

(e) CONSIDERATION OF COSTS AND BENEFITS.— 

(1) IN GENERAL.—Before issuing a regulation under the securities laws, as defined in section 3(a), the Commission shall— 

(A) 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; 

(B) utilize 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; 

(C) 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; and 

(D) ensure that any regulation is accessible, consistent, 

written in plain language, and easy to understand and 

shall measure, and seek to improve, the actual results of 

regulatory requirements. 

(2) CONSIDERATIONS AND ACTIONS.— 

(A) REQUIRED ACTIONS.—In deciding whether and how to 

regulate, the Commission shall assess the costs and benefits 

of available regulatory alternatives, including the alternative of not regulating, and choose the approach that 

maximizes net benefits. Specifically, the Commission 

shall— 

(i) consistent with the requirements of section 3(f) (15 

U.S.C. 78c(f)), section 2(b) of the Securities Act of 1933 

(15 U.S.C. 77b(b)), section 202(c) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(c)), and section 2(c) 

of the Investment Company Act of 1940 (15 U.S.C. 

80a–2(c)), consider whether the rulemaking will promote efficiency, competition, and capital formation; 

(ii) evaluate whether, consistent with obtaining regulatory objectives, the regulation is tailored to impose 

the least burden on society, including market participants, individuals, businesses of differing sizes, and 

other entities (including State and local governmental 

entities), taking into account, to the extent practicable, 

the cumulative costs of regulations; and 


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(iii) evaluate whether the regulation is inconsistent, 

incompatible, or duplicative of other Federal regulations. 

(B) ADDITIONAL CONSIDERATIONS.—In addition, in making a reasoned determination of the costs and benefits of a 

potential regulation, the Commission shall, to the extent 

that each is relevant to the particular proposed regulation, 

take into consideration the impact of the regulation on— 

(i) investor choice; 

(ii) market liquidity in the securities markets; and 

(iii) small businesses. 

(3) EXPLANATION AND COMMENTS.—The Commission shall 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 shall 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. 

(4) REVIEW OF EXISTING REGULATIONS.—Not later than 1 year 

after the date of enactment of the SEC Regulatory Accountability Act, and every 5 years thereafter, the Commission shall 

review its regulations to determine whether any such regulations are outmoded, ineffective, insufficient, or excessively burdensome, and shall modify, streamline, expand, or repeal them 

in accordance with such review. In reviewing any regulation 

(including, notwithstanding paragraph (6), a regulation issued 

in accordance with formal rulemaking provisions) that subjects 

issuers with a public float of $250,000,000 or less to the attestation and reporting requirements of section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)), the Commission 

shall specifically take into account the large burden of such regulation when compared to the benefit of such regulation. 

(5) POST-ADOPTION IMPACT ASSESSMENT.— (A) IN GENERAL.—Whenever the Commission adopts or 

amends a regulation designated as a ‘‘major rule’’ within 

the meaning of section 804(2) of title 5, United States Code, 

it shall state, in its adopting release, the following: 

(i) The purposes and intended consequences of the 

regulation. 

(ii) Appropriate post-implementation quantitative 

and qualitative metrics to measure the economic impact of the regulation and to measure the extent to 

which the regulation has accomplished the stated purposes. 

(iii) The assessment plan that will be used, consistent with the requirements of subparagraph (B) and 

under the supervision of the Chief Economist of the 

Commission, to assess whether the regulation has 

achieved the stated purposes. 

(iv) Any unintended or negative consequences that 

the Commission foresees may result from the regulation. 


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(B) REQUIREMENTS OF ASSESSMENT PLAN AND REPORT.— (i) REQUIREMENTS OF PLAN.—The assessment plan 

required under this paragraph shall consider the costs, 

benefits, and intended and unintended consequences of 

the regulation. The plan shall specify the data to be 

collected, the methods for collection and analysis of the 

data and a date for completion of the assessment. The 

assessment plan shall include an analysis of any jobs 

added or lost as a result of the regulation, differentiating between public and private sector jobs. 

(ii) SUBMISSION AND PUBLICATION OF REPORT.—The 

Chief Economist shall submit the completed assessment 

report to the Commission no later than 2 years after 

the publication of the adopting release, unless the Commission, at the request of the Chief Economist, has 

published at least 90 days before such date a notice in 

the Federal Register extending the date and providing 

specific reasons why an extension is necessary. Within 

7 days after submission to the Commission of the final 

assessment report, it shall be published in the Federal 

Register for notice and comment. Any material modification of the plan, as necessary to assess unforeseen 

aspects or consequences of the regulation, shall be 

promptly published in the Federal Register for notice 

and comment. 

(iii) DATA COLLECTION NOT SUBJECT TO NOTICE AND

COMMENT REQUIREMENTS.—If the Commission has 

published its assessment plan for notice and comment, 

specifying the data to be collected and method of collection, at least 30 days prior to adoption of a final regulation or amendment, such collection of data shall not 

be subject to the notice and comment requirements in 

section 3506(c) of title 44, United States Code (commonly referred to as the Paperwork Reduction Act). 

Any material modifications of the plan that require collection of data not previously published for notice and 

comment shall also be exempt from such requirements 

if the Commission has published notice for comment in 

the Federal Register of the additional data to be collected, at least 30 days prior to initiation of data collection. 

(iv) FINAL ACTION.—Not later than 180 days after 

publication of the assessment report in the Federal 

Register, the Commission shall issue for notice and 

comment a proposal to amend or rescind the regulation, or publish a notice that the Commission has determined that no action will be taken on the regulation. 

Such a notice will be deemed a final agency action. 

(6) COVERED REGULATIONS AND OTHER AGENCY ACTIONS.— Solely as used in this subsection, the term ‘‘regulation’’— 

(A) means an agency statement of general applicability 

and future effect that is designed to implement, interpret, 

or prescribe law or policy or to describe the procedure or 

practice requirements of an agency, including rules, orders 

of general applicability, interpretive releases, and other 


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15 

statements of general applicability that the agency intends 

to have the force and effect of law; and 

(B) does not include— 

(i) a regulation issued in accordance with the formal 

rulemaking provisions of section 556 or 557 of title 5, 

United States Code; 

(ii) a regulation that is limited to agency organization, management, or personnel matters; 

(iii) a regulation promulgated pursuant to statutory 

authority that expressly prohibits compliance with this 

provision; and 

(iv) a regulation that is certified by the agency to be 

an emergency action, if such certification is published 

in the Federal Register. 

* * * * * * * 


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(16) 

MINORITY VIEWS 

H.R. 5429 ignores the Securities and Exchange Commission’s 

(SEC or Commission) history of effectively using economic analysis 

to inform its rulemaking. Instead, the bill cripples the Commission 

by requiring it to address a long list of analytical requirements 

prior to issuing any rule or general order and to fend off a wave 

of industry lawsuits. The bill also requires the SEC to review and 

possibly modify all existing regulations dating back to the 1930s 

within one year of enactment and every five years thereafter. Imposing such statutory analytical requirements on the SEC without 

providing additional funding would also divert significant resources 

away from other divisions, including enforcement. 

Under current law, the SEC is already required to conduct economic analyses, as dictated by the Paperwork Reduction Act, the 

Congressional Review Act, and the Regulatory Flexibility Act. Additionally, in 2012, the SEC issued internal guidance on economic 

analyses for rulemaking in accordance with Executive Orders 

12866 and 13563. The Government Accountability Office (GAO) 

and the Office of the Inspector General (IG) of the SEC have 

praised the agency for its high standards in its economic analysis. 

For example, the SEC’s IG wrote the following regarding the SEC’s 

use of economic analysis: 

All of the rules that we [the IG] evaluated specified the 

justification for the rule, considered alternatives, and integrated the economic analysis into the rulemaking process. 

We determined that the SEC’s use of the Current Guidance has been effective in incorporating economic analysis 

into the rulemaking process. Further, we found no notable 

differences in economic methodologies in support of 

rulemakings across rulemaking divisions. (SEC Office of 

Inspector General, Implementation of the Current Guidance on Economic Analysis in SEC Rulemakings, June 

2013) 

H.R. 5429 ignores the SEC’s efforts over the last four years to 

improve its economic analysis, as well as the fact that the SEC is 

already subject to more statutory analytical requirements than any 

other financial regulator. 

Although Republicans have suggested that the bill is simply an 

effort to codify the Presidential executive orders directing the use 

of economic analysis in rulemaking, the sponsors forgot to include 

one key provision of E.O. 13563—no private right of action. Given 

that the SEC has already implemented guidance that the GAO 

says is consistent with the President’s executive orders and that 

H.R. 5429 does not include a prohibition on private rights of action, 

Democrats are concerned that the true intent of the bill is to proVerDate Sep 11 2014 05:33 Oct 04, 2016 Jkt 059006 PO 00000 Frm 00016 Fmt 6604 Sfmt 6604 E:\HR\OC\HR799.XXX HR799

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vide a roadmap for industry to file a lawsuit when the Commission 

does not promulgate a rule industry wants. 

H.R. 5429 is the third attempt spanning five years to bring such 

legislation forward to impose divisive requirements on the Commission, and open it up to attacks from industry lawyers. The bill dictates that the SEC must report on any ‘‘any unintended . . . consequences that [it] foresees’’, a seemingly impossible task and one 

that could paralyze the Commission. The bill would also likely impede or even negate the SEC’s ability to provide rapid relief to 

businesses as the SEC would have to determine that such relief 

maximizes the net benefits, and simultaneously is the least burdensome. For example, if it were enacted, the bill would have likely 

significantly delayed or prevented the SEC from issuing its exemptive relief in the wake of Hurricane Sandy to affected market participants. Ironically, this bill is also being proposed at a time when 

the sponsor of the bill has publicly criticized the SEC for its failure 

to meet rulemaking deadlines imposed by the FAST Act (P.L. 114– 

94)—this bill only further delays this and all future SEC 

rulemakings. 

The costs of imposing such stringent burdens on the SEC’s rule- making process are at least $23 million according to the Congressional Budget Office (CBO). However, the CBO does not attempt to 

quantify the resources the Commission would have to dedicate to 

defending its rulemakings in court, which could be enormous. Because H.R. 5429 does not authorize additional funding, the SEC 

would be forced to redirect funds from other functions of the agency, including enforcement, severely hindering its ability to protect 

investors. 

Finally, and most troublingly, H.R. 5429 fundamentally changes 

the SEC by requiring the Commission to consider the impact of its 

rules on industry, but is silent on how the SEC would consider the 

rules in relation to its number one mission: protecting investors, 

which include the savings of hardworking Americans and retirees. 

For all of these reasons, Democrats strongly oppose H.R. 5429. 

MAXINE WATERS. 

EMANUEL CLEAVER. 

GWEN MOORE. 

AL GREEN. 

WM. LACY CLAY. 

JUAN VARGAS. 

DENNY HECK. 

KEITH ELLISON. 

STEPHEN F. LYNCH. 

ED PERLMUTTER. 

JOYCE BEATTY. 

RUBE ́ N HINOJOSA. 

Æ 


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