[House Report 114-799]
[From the U.S. Government Publishing Office]


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 consumers, 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 Commission 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 
cost-benefit 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 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.


                      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.

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 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.''

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 
cost-benefit 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, 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 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 in section 551 of title 5, United States Code) not 
required to be determined 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
                          (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.
                  (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 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.

           *       *       *       *       *       *       *


                             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 provide 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 
rulemaking 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.
                                   Ruben Hinojosa.

                                  [all]