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From Securities Regulation Daily, March 11, 2014

Senate hearing reveals growing bipartisan support for retrospective review of federal regulations

By Jim Hamilton, J.D., LL.M.

Hearings before a Senate panel revealed a growing and deepening bipartisan consensus to move forward with legislative reform of the federal regulatory process, including the retrospective review of existing regulations. Senator Jon Tester (D-Mont.), chair of the Subcommittee on Efficiency and Effectiveness of Federal Programs, said that many senators support efforts to achieve meaningful reform of the federal regulatory process to make it more transparent and responsive to congressional intent.

Senator David Pryor (D-Ark.) said that it is time to review the foundations of the federal  regulatory system. He mentioned that the Regulatory Accountability Act, S. 1029, which he is co-sponsoring, if done right would make the regulatory system better, cheaper, and fairer. Under S. 1029, an agency must state its statutory authority for adopting a regulation. Senator Pryor noted that the legislation does not go after any one agency or regulation. It amends the Administrative Procedure Act to place a stronger emphasis on early engagement between regulators and those affected by the regulations issued. The ranking member of the subcommittee, Sen. Rob Portman (R-Ohio), introduced S. 1029.

Retrospective review. Senator Angus King (I-Me.) testified before the subcommittee about his Regulatory Improvement Act, S. 1390, co-sponsored by Sen. Roy Blunt (R-Mo.), which would provide an additional, expeditious mechanism through which a retrospective review of old regulations could be conducted. The bill is designed to deal with what Sen. King called “regulatory accumulation,” which is a byproduct of the increasing number of entities vested with varying missions to protect the public. It is imperative to find a way to revisit old regulations to ensure that they are still relevant to present circumstances and are not in conflict with requirements from other regulating bodies.

Currently, Sen. King acknowledged, federal agencies embark upon periodic self-reviews in order to examine the utility of older regulations. However, the existing process is limited for a number of reasons, including  restricted budgetary and personnel resources, insufficient data collection, and competing priorities. The Regulatory Improvement Act would provide an additional, expeditious mechanism through which a review of old regulations could be conducted.

The Act would create an independent Regulatory Improvement Commission that would be tasked with reviewing outdated regulations with the goals of modifying, consolidating, or repealing regulations in order to reduce compliance costs, encourage growth and innovation, and improve competitiveness. The composition of the Commission would be determined by congressional leadership and the president, and the Commission would be tasked with identifying a single sector or area of regulations for consideration. After extensive review involving broad public and stakeholder input, the Commission would submit to Congress a report containing regulations in need of streamlining, consolidation, or repeal. This report would enjoy expedited legislative procedures and would be subject to an up-or-down vote in both houses of Congress without amendment.

Howard Shelanski, director of the Office of Information and Regulatory Affairs (OIRA), testified that retrospective review of existing regulations is a top priority. Executive Orders 13563 and 13610 make clear that flexibility and removal of unnecessary burdens are essential elements of the federal rulemaking process, as is improving rules already on the books.

Shelanski said that retrospective review is a crucial way to ensure that the federal regulatory system is modern, streamlined, and does not impose unnecessary burdens. Even regulations that were well crafted when first promulgated can become unnecessary or excessively burdensome over time and with changing conditions. Similarly, rules that are not achieving their objectives may be in need of revision in light of experience, new evidence, or new technology. Retrospective review of regulations on the books helps to ensure that those regulations continue to help promote safety, health, welfare, and well-being without imposing unnecessary costs or missing the opportunity to achieve greater net benefits.

Executive Order 13610 asks agencies to report regularly on the progress of their retrospective review activities. Federal agencies have provided updates on their initiatives, he noted, many of which are new efforts that agencies added since their July 2013 listing of look-back plans. These efforts are already saving more than $10 billion in regulatory costs in the near term, with more savings to come.

While there has been important progress on retrospective review, said Shelanski, OIRA need to do even better. OIRA is working with colleagues elsewhere in OMB and at the agencies on several ways to further institutionalize retrospective review as an essential component of government regulatory policy. As part of this effort, OIRA is considering and developing several components that will make regulatory look-back a more systematic priority for agencies. Such institutionalization of retrospective review, both to ensure follow-through on existing plans and to help agencies develop their future plans, will be one of OIRA’s key objectives moving forward.

Senator Portman mentioned to Shelanski that he is concerned about a possible conflict of interest inherent in an agency conducting a retrospective review of its own regulations. Shelanski said that he has not seen this conflict of interest. Indeed, the federal regulatory agencies appear anxious to conduct retrospective reviews in good faith.

Executive Orders. President Obama issued two significant executive orders on the federal regulatory process during his first term: Executive Order No. 13563, 76 Fed. Reg. 3,821 (Jan. 21, 2011) and Executive Order No. 13579, 76 Fed. Reg. 41,587 (July 14, 2011). Executive Order No. 13563 set out general requirements directed to executive agencies concerning public participation, integration and innovation, flexible approaches, and science. It also reaffirmed that executive agencies should conduct a cost-benefit analysis of regulations. Executive Order No. 13579 states that independent regulatory agencies should follow Executive Order No. 13563.

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