Securities and Exchange Commission Chair Mary Schapiro said a bill recently introduced by House Republicans, which adds new requirements to pending rules, directly conflicts with the federal agency's mission.
Rep. Scott Garrett (R-N.J.) introduced The SEC Regulatory Accountability Act, H.R. 2308, in June. It provides 11 new considerations the agency must take before it finalizes a rule.
According to the bill, the SEC must assess how the rule protects market participants and the public, the rule's effect on efficiency and competitiveness, impact on market liquidity, sound risk management practices, unseen risks from the rule, whether the rule is inconsistent or duplicative of others, and if it is "tailored to impose the least burden on society."
The SEC must also take into consideration investor choice, price discovery, the rule's impact on capital formation, and whether or not other regulatory approaches could provide more benefits.
Schapiro said at a House Financial Services Committee hearing Thursday, the SEC is already required to consider the economic effects of its rules and perform cost-benefit analysis. She added that the the new factors under Garrett's bill are unrelated to SEC rulemaking and duplicative of existing requirements.
"For example, the bill's direction to 'assess the best ways of protecting market participants' could conflict with the SEC's mission," Schapiro said. "The SEC's mission is to protect investors, which in some cases means protecting them from certain market participants."
Garrett said he introduced the legislation in response to President Obama's order to improve regulation and regulatory review.
"In addition, my bill would strengthen the commission’s cost-benefit analysis by first requiring the commission to clearly identify the nature of the problem that the proposed regulation will be designed to address and by requiring cost-benefit analysis be performed by the SEC’s Office of the Chief Economist," Garrett said.
A separate bill currently being drafted would restructure nearly every office under the SEC. Rep. Robert Dold (R-Ill.) said the financial crisis of 2008 showed these agencies are in need of constant review from Congress.
"Like every other regulatory agency, the SEC is not perfect. The financial crisis manifested some of those imperfections," Dold said. "Even without the crisis Congress should regularly review the agency and other regulatory agencies to ensure they are cost effective, transparent, accountable, responsive and efficient especially in this constantly changing and competitive global marketplace."
Under the Dodd-Frank Act, the Boston Consulting Group was charged with studying and recommending improvements to the agency. According to Schapiro, the agency has undertaken some of the recommendations, but budget constraints will prove to be a major hurdle in implementing more.
The consultant estimates "$42 million to $55 million will be required over approximately the next two years, in addition to the costs associated with the significant commitment of SEC management and staff time," Schapiro said.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
