H.R. 1062: SEC Regulatory and Accountability Act

H.R. 1062

SEC Regulatory and Accountability Act

May 17, 2013 (113th Congress, 1st Session)

Staff Contact

Floor Situation

On Friday, May 17, 2013, the House will consider H.R. 1062, the SEC Regulatory and Accountability Act, under a rule. H.R. 1062 was introduced by Representative Scott Garrett (R-NJ) on March 12, 2013 and has 23 cosponsors.  H.R. 1062 was marked up by the House Committee on Financial Services on May 7, 2013 and was ordered to be favorably reported by a vote of 31-28.[1]

Bill Summary

H.R. 1062 requires the Securities and Exchange Commission (SEC) to identify and assess the significance of problems prior to regulating.  The bill further requires the SEC’s Chief Economist to conduct a cost-benefit analysis when promulgating regulations (including alternatives) and to provide an explanation describing the decision-making process, including the implications of not regulating.  The bill requires the SEC to review existing regulations within one year of the bill’s enactment, and every five years thereafter, to determine the sufficiency, effectiveness, and burdens associated with the regulations.  Moreover, the SEC is required to conduct a post-adoption or post-assessment review of any major regulation[1] to measure its impact. The SEC is not required to conduct cost-benefit analyses for orders that are not “generally applicable,” formal rulemakings related to enforcement, or regulations certified by the SEC as emergency.[2]  Finally, H.R. 1062 includes a sense of Congress that the Public Company Accounting and Oversight Board, the Municipal Securities Rulemaking Board, and any national securities association registered under section 15A of the Securities and Exchange Act of 1934 should comply with the requirements of the bill.

[1] Major regulations are those that have an economic impact greater than $100 million annually.


The Administrative Procedures Act of 1946 (APA) sets out the framework for agency rulemaking. Under the APA, agencies are required to publish a notice of proposed rulemaking in the Federal Register; provide the opportunity for public comment; and publish a final rule in the Federal Register. Since its enactment, there have been a number of executive orders issued over the years impacting the rulemaking process. Two executive orders, in particular, have focused on the implementation of a cost-benefit analysis when rulemaking.

Executive Order 12866, which was issued in 1993 under President Bill Clinton, directs agencies to conduct cost-benefit analyses for “significant” rules, both in their proposed and final form, and to send those rules to the Office of Management and Budget’s Office of Information and Regulatory Affairs for review.[1]  Executive Order 13563 was issued in January 2011 by President Obama to further encourage agencies “to tailor 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” and to “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).”[2] Executive Order 13563 also encourages agencies to review existing regulations that are outdated, ineffective, insufficient, or burdensome.[3] 

Both executive orders excluded “statutorily designated” independent regulatory agencies such as the Securities and Exchange Commission.[4]  According to CRS, the “exemption of independent regulatory agencies from various requirements provides them with an element of independence from presidential control.”[5]  However, as the Financial Services Committee found, independent regulatory agencies practices are often left unchecked.  According to the Committee report, “the most compelling rationale for H.R. 1062 was offered by the U.S. Court of Appeals for the D.C. Circuit when it struck down the SEC’s proxy access rule… . [T]he SEC in promulgating its rule ‘inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself and failed to respond to substantial problems raised by commenters (sic).’”[6]

[1] See CRS: Independent Regulatory Agencies, Cost-Benefit Analysis and Presidential Review of Regulations, November 16, 2012, page 3.

[2] See id at page 4.

[3] See id.

[4] See id at page 2.

[5] See id.

[6] See House Committee on Financial Services Report 113-53, page 2 citing “Bus.Roundtable v. SEC, 2011 WL 2936808 (D.C. Cir. July 22, 2011).


According to CBO, it “estimates that the commission would ultimately need 20 additional staff positions (less than a 1 percent increase in the agency’s 2012 staffing level) to handle the new rulemaking, reporting, and analytical activities required under the bill. CBO estimates that implementing H.R. 1062 would cost the SEC $23 million over the 2013-2018 period, assuming appropriation of the necessary amounts, for additional personnel and overhead expenses. Under current law, the SEC is authorized to collect fees sufficient to offset its annual appropriation; therefore, CBO estimates that the net budgetary effect of the SEC’s activities to implement H.R. 1062 would not be significant, assuming appropriation actions consistent with the commission’s authorities. Pay-as-you-go procedures do not apply to this legislation because it would not affect direct spending or revenues.”

“H.R. 1062 contains no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would impose no costs on state, local, or tribal governments.”[1]

[1] See http://www.cbo.gov/publication/44174


The following amendments were made in order:

1.         Representative Sessions (R-TX) Amendment #3 – amendment mandates that assessment plans required under this Act include analysis of any jobs added or lost as a result of the regulation, differentiating between public and private sector jobs.

2.         Representative Hurt (R-VA) Amendment #5 – amendment expresses the sense of Congress that rules adopted by the Public Company Accounting Oversight Board (PCAOB) comply with the same standards required of the SEC.  Requires the SEC to ensure that any rules adopted by the Municipal Securities Rulemaking Board (MSRB), and other national securities associations comply with the standards set forth in the bill.

3.         Representative Maloney (D-NY) Amendment #2 – amendment strikes all after the enacting clause and inserts findings and a sense of Congress that the SEC is already required to conduct economic analysis as part of its rulemaking.