January 3, 2013

More Sensible Regulations Require Predictable Disclosure

Hester Peirce

Former Senior Research Fellow
Summary

The Administration tardily released the Fall 2012 Unified Agenda of Federal Regulatory and Deregulatory Actions on December 21, 2012. The Spring 2012 edition was never released, thus breaking a nearly two-decade practice of agencies telling the public twice a year which regulations are under consideration. The semi-annual publication of agencies' regulatory agendas is not simply good government; it fulfills a legal mandate.

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The Administration tardily released the Fall 2012 Unified Agenda of Federal Regulatory and Deregulatory Actions on December 21, 2012. The Spring 2012 edition was never released, thus breaking a nearly two-decade practice of agencies telling the public twice a year which regulations are under consideration. The semi-annual publication of agencies' regulatory agendas is not simply good government; it fulfills a legal mandate.

The remarkable laxity with respect to the Unified Agenda's publication engenders problems beyond merely irritating a few regulatory wonks waiting on the edge of their seat for its release. It frustrates productive public participation in agency rulemakings. The Unified Agenda offers those attempting to determine the regulatory actions to expect in the next year a single place to look for the information. It gives people a window into what regulatory agencies are planning to do and not do in the upcoming year.

For example, people awaiting the Securities and Exchange Commission's rules on crowdfunding -- which were required by the JOBS Act by the end of the year -- will see that the SEC plans on missing that deadline. The omission of the Volcker Rule from the SEC's agenda, even though it is on other regulators' agendas, raises interesting questions about whether the hotly debated rule will be finalized during 2013.

The Administration's careless disregard for its obligations with respect to the Unified Agenda is especially troubling at a time of such active rulemaking. In particular, with so many Dodd-Frank regulations on the drawing board, it is important for investors, financial service providers, and the general public to have a clear picture of regulators' plans and how different agencies' priorities will interact with one another.

In the long-delayed agenda, the financial regulators collectively announced more than 180 actions during the upcoming year. The SEC's tally was highest with 63 anticipated actions. The Federal Deposit Insurance Corporation, by contrast, had only 7 regulatory actions on its 2012 agenda. The Bureau of Consumer Financial Protection fell in between with 22 regulatory actions planned, but many of these promise to have substantial effects on consumers. The Bureau also emphasized that many of its activities are not rulemakings, so they don't show up on the agenda.

The agencies describe many of their regulatory actions as "nonsignificant". The methodology they use to categorize rules in this way is puzzling, because important rulemakings fall into that category. For example, according to some of the regulators responsible for implementing the Volcker Rule, it is nonsignificant, even though it is expected to have far-reaching effects on financial institutions and markets. Similarly, the much-feared rules governing when and how securitizers of mortgages and other assets must retain an interest in the securitized assets are characterized as nonsignificant.

The classification of important components of Dodd-Frank as nonsignificant calls into question the relevance of the fact highlighted by the Office of Management and Budget that there are slightly fewer "economically significant" actions in this year's agenda than in previous years' agendas. By definition, economically significant regulatory actions have an annual effect on the economy of at least $100 million or have other material adverse effects. Little weight can be accorded to designations made by agencies that fail to classify major parts of Dodd-Frank as significant, which is an even lower threshold than economically significant.

The Unified Agenda missteps are one contributor to the poorly choreographed Dodd-Frank rulemaking process. A renewed commitment to producing the Unified Agenda in a timely fashion would be a good first step towards more sensible rulemaking.