IB 

Union Calendar No. 317 

112TH CONGRESS 

2D SESSION H. R. 2308 

[Report No. 112–453] 

To improve the consideration by the Securities and Exchange Commission 

of the costs and benefits of its regulations and orders. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 23, 2011 

Mr. GARRETT (for himself, Mr. BACHUS, Mr. HENSARLING, Mr. NEUGEBAUER, Mr. JONES, Mr. MCHENRY, Mr. CONAWAY, Mr. KING of New 

York, Mr. CAMPBELL, Mr. SCHWEIKERT, Mr. STIVERS, Mr. DOLD, Mr. 

MANZULLO, Mr. HURT, Mr. CANSECO, and Mr. YODER) introduced the 

following bill; which was referred to the Committee on Financial Services 

APRIL 25, 2012 

Additional sponsors: Mr. GRIMM, Mr. HUIZENGA of Michigan, Mr. GARY G. 

MILLER of California, and Mr. BISHOP of Utah 

APRIL 25, 2012 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 


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A BILL 

To improve the consideration by the Securities and Exchange 

Commission of the costs and benefits of its regulations 

and orders. 


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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘SEC Regulatory Ac5 countability Act’’. 

6 SEC. 2. CONSIDERATION BY THE SECURITIES AND EX7 CHANGE COMMISSION OF THE COSTS AND 

8 BENEFITS OF ITS REGULATIONS AND OR9 DERS. 

10 Section 23 of the Securities Exchange Act of 1934 

11 (15 U.S.C. 78w) is amended by adding at the end the fol12 lowing: 

13 ‘‘(e) CONSIDERATION OF COSTS AND BENEFITS.— 

14 ‘‘(1) IN GENERAL.—Before promulgating a reg15 ulation under the securities laws, as defined in sec16 tion 3(a), or issuing any order pursuant to such 

17 laws, the Commission shall— 

18 ‘‘(A) clearly identify the nature of the 

19 problem that the proposed regulation is de20 signed to address, as well as assess the signifi21 cance of that problem, to enable assessment of 

22 whether any new regulation is warranted; 

23 ‘‘(B) utilize the Office of the Chief Econo24 mist to assess the costs and benefits, both qual25 itative and quantitative, of the intended regulaVerDate Mar 15 2010 21:24 Apr 25, 2012 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6401 E:\BILLS\H2308.RH H2308

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1 tion or order and propose or adopt a regulation 

2 or order only on a reasoned determination that 

3 the benefits of the intended regulation or order 

4 justify the costs of the intended regulation or 

5 order; and 

6 ‘‘(C) ensure that any regulation or order is 

7 accessible, consistent, written in plain language, 

8 and easy to understand and shall measure, and 

9 seek to improve, the actual results of regulatory 

10 requirements. 

11 ‘‘(2) CONSIDERATIONS.—In deciding whether 

12 and how to regulate, the Commission shall assess 

13 the costs and benefits of available regulatory alter14 natives, including the alternative of not regulating. 

15 In addition, the Commission may also take the fol16 lowing actions in making a reasoned determination 

17 of the costs and benefits of a potential regulation— 

18 ‘‘(A) assess the best ways of protecting 

19 market participants and the public; 

20 ‘‘(B) take into consideration investor 

21 choice; 

22 ‘‘(C) consider the impact on capital forma23 tion; 


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1 ‘‘(D) evaluate the effect on the efficiency, 

2 competitiveness, and financial integrity of secu3 rities markets; 

4 ‘‘(E) consider the impact on market liquid5 ity in the securities markets; 

6 ‘‘(F) take into consideration price dis7 covery; 

8 ‘‘(G) evaluate sound risk management 

9 practices; 

10 ‘‘(H) evaluate the degree and nature of the 

11 risks posed by various activities within the 

12 scope of its jurisdiction; 

13 ‘‘(I) determine whether, consistent with ob14 taining regulatory objectives, the regulation is 

15 tailored to impose the least burden on society, 

16 including market participants, individuals, busi17 nesses of differing sizes, and other entities (in18 cluding State and local governmental entities), 

19 taking into account, to the extent practicable, 

20 the cumulative costs of regulations; 

21 ‘‘(J) determine whether the regulation is 

22 inconsistent, incompatible, or duplicative of 

23 other Federal regulations; and 


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1 ‘‘(K) determine whether, in choosing 

2 among alternative regulatory approaches, those 

3 approaches maximize net benefits. 

4 ‘‘(3) REVIEW OF EXISTING REGULATIONS.— 

5 The Commission shall periodically review its regula6 tions and orders in effect before the date of enact7 ment of this subsection to determine whether any 

8 such regulations or orders are outmoded, ineffective, 

9 insufficient, or excessively burdensome, and shall 

10 modify, streamline, expand, or repeal them in ac11 cordance with such review.’’. 

12 SECTION 1. SHORT TITLE. 

13 This Act may be cited as the ‘‘SEC Regulatory Ac14 countability Act’’. 

15 SEC. 2. CONSIDERATION BY THE SECURITIES AND EX16 CHANGE COMMISSION OF THE COSTS AND 

17 BENEFITS OF ITS REGULATIONS AND CER18 TAIN OTHER AGENCY ACTIONS. 

19 Section 23 of the Securities Exchange Act of 1934 (15 

20 U.S.C. 78w) is amended by adding at the end the following: 

21 ‘‘(e) CONSIDERATION OF COSTS AND BENEFITS.— 

22 ‘‘(1) IN GENERAL.—Before issuing a regulation 

23 under the securities laws, as defined in section 3(a), 

24 the Commission shall— 


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1 ‘‘(A) clearly identify the nature and source 

2 of the problem that the proposed regulation is de3 signed to address, as well as assess the signifi4 cance of that problem, to enable assessment of 

5 whether any new regulation is warranted; 

6 ‘‘(B) utilize the Chief Economist to assess 

7 the costs and benefits, both qualitative and quan8 titative, of the intended regulation and propose 

9 or adopt a regulation only on a reasoned deter10 mination that the benefits of the intended regula11 tion justify the costs of the regulation; 

12 ‘‘(C) identify and assess available alter13 natives to the regulation that were considered, 

14 including modification of an existing regulation, 

15 together with an explanation of why the regula16 tion meets the regulatory objectives more effec17 tively than the alternatives; and 

18 ‘‘(D) ensure that any regulation is acces19 sible, consistent, written in plain language, and 

20 easy to understand and shall measure, and seek 

21 to improve, the actual results of regulatory re22 quirements. 

23 ‘‘(2) CONSIDERATIONS AND ACTIONS.— 

24 ‘‘(A) REQUIRED ACTIONS.—In deciding 

25 whether and how to regulate, the Commission 


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1 shall assess the costs and benefits of available 

2 regulatory alternatives, including the alternative 

3 of not regulating, and choose the approach that 

4 maximizes net benefits. Specifically, the Commis5 sion shall— 

6 ‘‘(i) consistent with the requirements of 

7 section 3(f) (15 U.S.C. 78c(f)), section 2(b) 

8 of the Securities Act of 1933 (15 U.S.C. 

9 77b(b)), section 202(c) of the Investment 

10 Advisers Act of 1940 (15 U.S.C. 80b–2(c)), 

11 and section 2(c) of the Investment Company 

12 Act of 1940 (15 U.S.C. 80a–2(c)), consider 

13 whether the rulemaking will promote effi14 ciency, competition, and capital formation; 

15 ‘‘(ii) evaluate whether, consistent with 

16 obtaining regulatory objectives, the regula17 tion is tailored to impose the least burden 

18 on society, including market participants, 

19 individuals, businesses of differing sizes, 

20 and other entities (including State and 

21 local governmental entities), taking into ac22 count, to the extent practicable, the cumu23 lative costs of regulations; and 


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1 ‘‘(iii) evaluate whether the regulation 

2 is inconsistent, incompatible, or duplicative 

3 of other Federal regulations. 

4 ‘‘(B) ADDITIONAL CONSIDERATIONS.—In 

5 addition, in making a reasoned determination of 

6 the costs and benefits of a potential regulation, 

7 the Commission shall, to the extent that each is 

8 relevant to the particular proposed regulation, 

9 take into consideration the impact of the regula10 tion on— 

11 ‘‘(i) investor choice; 

12 ‘‘(ii) market liquidity in the securities 

13 markets; and 

14 ‘‘(iii) small businesses 

15 ‘‘(3) EXPLANATION AND COMMENTS.—The Com16 mission shall explain in its final rule the nature of 

17 comments that it received, including those from the 

18 industry or consumer groups concerning the potential 

19 costs or benefits of the proposed rule or proposed rule 

20 change, and shall provide a response to those com21 ments in its final rule, including an explanation of 

22 any changes that were made in response to those com23 ments and the reasons that the Commission did not 

24 incorporate those industry group concerns related to 

25 the potential costs or benefits in the final rule. 


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1 ‘‘(4) REVIEW OF EXISTING REGULATIONS.—Not 

2 later than 1 year after the date of enactment of the 

3 SEC Regulatory Accountability Act, and every 5 

4 years thereafter, the Commission shall review its regu5 lations to determine whether any such regulations are 

6 outmoded, ineffective, insufficient, or excessively bur7 densome, and shall modify, streamline, expand, or re8 peal them in accordance with such review. 

9 ‘‘(5) POST-ADOPTION IMPACT ASSESSMENT.— 

10 ‘‘(A) IN GENERAL.—Whenever the Commis11 sion adopts or amends a regulation designated 

12 as a ‘major rule’ within the meaning of section 

13 804(2) of title 5, United States Code, it shall 

14 state, in its adopting release, the following: 

15 ‘‘(i) The purposes and intended con16 sequences of the regulation. 

17 ‘‘(ii) Appropriate post-implementation 

18 quantitative and qualitative metrics to 

19 measure the economic impact of the regula20 tion and to measure the extent to which the 

21 regulation has accomplished the stated pur22 poses. 

23 ‘‘(iii) The assessment plan that will be 

24 used, consistent with the requirements of 

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1 vision of the Chief Economist of the Com2 mission, to assess whether the regulation has 

3 achieved the stated purposes. 

4 ‘‘(iv) Any unintended or negative con5 sequences that the Commission foresees may 

6 result from the regulation. 

7 ‘‘(B) REQUIREMENTS OF ASSESSMENT PLAN

8 AND REPORT.— 

9 ‘‘(i) REQUIREMENTS OF PLAN.—The 

10 assessment plan required under this para11 graph shall consider the costs, benefits, and 

12 intended and unintended consequences of 

13 the regulation. The plan shall specify the 

14 data to be collected, the methods for collec15 tion and analysis of the data and a date for 

16 completion of the assessment. 

17 ‘‘(ii) SUBMISSION AND PUBLICATION

18 OF REPORT.—The Chief Economist shall 

19 submit the completed assessment report to 

20 the Commission no later than 2 years after 

21 the publication of the adopting release, un22 less the Commission, at the request of the 

23 Chief Economist, has published at least 90 

24 days before such date a notice in the Fed25 eral Register extending the date and proVerDate Mar 15 2010 21:24 Apr 25, 2012 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H2308.RH H2308

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1 viding specific reasons why an extension is 

2 necessary. Within 7 days after submission 

3 to the Commission of the final assessment 

4 report, it shall be published in the Federal 

5 Register for notice and comment. Any mate6 rial modification of the plan, as necessary 

7 to assess unforeseen aspects or consequences 

8 of the regulation, shall be promptly pub9 lished in the Federal Register for notice and 

10 comment. 

11 ‘‘(iii) DATA COLLECTION NOT SUBJECT

12 TO NOTICE AND COMMENT REQUIRE13 MENTS.—If the Commission has published 

14 its assessment plan for notice and comment, 

15 specifying the data to be collected and meth16 od of collection, at least 30 days prior to 

17 adoption of a final regulation or amend18 ment, such collection of data shall not be 

19 subject to the notice and comment require20 ments in section 3506(c) of title 44, United 

21 States Code (commonly referred to as the 

22 Paperwork Reduction Act). Any material 

23 modifications of the plan that require collec24 tion of data not previously published for no25 tice and comment shall also be exempt from 


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1 such requirements if the Commission has 

2 published notice for comment in the Federal 

3 Register of the additional data to be col4 lected, at least 30 days prior to initiation 

5 of data collection. 

6 ‘‘(iv) FINAL ACTION.—Not later than 

7 180 days after publication of the assessment 

8 report in the Federal Register, the Commis9 sion shall issue for notice and comment a 

10 proposal to amend or rescind the regulation, 

11 or publish a notice that the Commission has 

12 determined that no action will be taken on 

13 the regulation. Such a notice will be deemed 

14 a final agency action. 

15 ‘‘(6) COVERED REGULATIONS AND OTHER AGEN16 CY ACTIONS.—Solely as used in this subsection, the 

17 term ‘regulation’— 

18 ‘‘(A) means an agency statement of general 

19 applicability and future effect that is designed to 

20 implement, interpret, or prescribe law or policy 

21 or to describe the procedure or practice require22 ments of an agency, including rules, orders of 

23 general applicability, interpretive releases, and 

24 other statements of general applicability that the 


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1 agency intends to have the force and effect of 

2 law; and 

3 ‘‘(B) does not include— 

4 ‘‘(i) a regulation issued in accordance 

5 with the formal rulemaking provisions of 

6 section 556 or 557 of title 5, United States 

7 Code; 

8 ‘‘(ii) a regulation that is limited to 

9 agency organization, management, or per10 sonnel matters; 

11 ‘‘(iii) a regulation promulgated pursu12 ant to statutory authority that expressly 

13 prohibits compliance with this provision; 

14 and 

15 ‘‘(iv) a regulation that is certified by 

16 the agency to be an emergency action, if 

17 such certification is published in the Fed18 eral Register.’’. 

19 SEC. 3. SUBMISSION OF PLAN FOR SUBJECTING OTHER 

20 REGULATORY ENTITIES TO COST AND BEN21 EFIT REQUIREMENTS. 

22 Not later than 1 year after the date of enactment of 

23 this Act, the Securities and Exchange Commission shall 

24 provide to the Committee on Financial Services of the 

25 House of Representatives and the Committee on Banking, 


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1 Housing, and Urban Affairs of the Senate a report setting 

2 forth a plan for subjecting the Public Company Accounting 

3 Oversight Board, the Municipal Securities Rulemaking 

4 Board, and any national securities association registered 

5 under section 15A of the Securities Exchange Act of 1934 

6 (15 U.S.C. 78o–4(a)) to the requirements subsection (e) of 

7 section 23 of such Act, as added by this Act. 


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Union Calendar No. 317 

112TH CONGRESS 

2D SESSION H. R. 2308 

[Report No. 112–453] 

A BILL 

To improve the consideration by the Securities and 

of its regulations and orders. Exchange Commission of the costs and benefits 

APRIL 25, 2012 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


srobinson on DSK4SPTVN1PROD with BILLS