Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, June 11, 2013

SEC's Office of Inspector General Makes Recommendations to Strengthen Economic Analysis of Rulemaking

The SEC's Office of Inspector General recently issued a report, Use of the Current Guidance on Economic Analysis in SEC Rulemakings, Report No. 518, detailing the results of its evaluation of the SEC's use of the current guidance on economic analysis in its rulemakings.  The final report contains six recommendations that, if fully implemented, should strengthen the SEC's economic analysis process and requests, within 45 days, a written corrective action plan that addresses the recommendations.  The report is available at the SEC Office of Inspector General's website.

The Report finds that the SEC rules in its sample followed "the spirit and intent" of the Current Guidance; all of the rules specified the justification for the rule, considered alternatives, and integrated the economic analysis into the rulemaking process.  However, some rules could have better clarified and specified the baselines in the economic analysis section.  In addition, only one of the twelve rules included a quantification of benefits of the regulatory action.  The report also finds that FINRA, other SROs, and PCAOB are not required to follow the SEC's Current Guidance in their rulemakings.

The report contains six recommendations to improve the SEC’s application of the requirements in the Current Guidance. One is that, in consultation with the rulemaking divisions and offices, RSFI develop a general outline for economic analysis sections in rule releases. The report also recommends that RSFI consider whether to create a management control, such as a guide, to achieve greater consistency in presentation of economic analyses.

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