Regulatory Oversight Essentials, Part I: Finding Rules and Resources
Regulatory Oversight Essen3als Part I: Finding Rules and Resources Hester Peirce Senior Research Fellow Mercatus Center
Course Topics q Why do regula3ons maCer? q To what extent can oversight make a diﬀerence? q Where is informa3on about regula3ons found? q What should you be asking regulators before, during, and aKer the rulemaking process? q How are rules made?
The View the Agencies Want You to Have of the Regulatory Process RULES
The View You Want to Have of What Agencies Are Doing • Agency’s Plans • Agency’s Priori3es • Agency’s Process RULES • Agency’s People • Agency’s Problems • Agency’s Pals
Regulatory staffSource: Susan Dudley & Melinda Warren, The Regulators’ Budget (2012).
Regulatory constraints and pages in the Code of Federal RegulationsSource: Omar Al-Ubaydli and Patrick A, McLaughlin, “The Industry-Specific Regulatory Constraint Database,” Working Paper, Mercatus Center, July 2012.
What Is a Rule? • “the whole or a part of an agency statement of general or par3cular applicability and future eﬀect designed to implement, interpret, or prescribe law or policy or describing the organiza3on, procedure, or prac3ce requirements of an agency . . . “
What Is a Rulemaking Agency process for formula3ng, amending, or repealing a rule
Rulemaking Process in Brief Pre-‐rule ANPRM CCom-‐ Stage— NPRM Advanced ment the No3ce of No3ce of Period FINAL agency is Proposed Proposed and OMB RULE thinking Rule-‐ Rule-‐ Review about making making Period what to do
Gefng and Staying Involved Mee3ngs Weigh in Con-‐ with File File with OMB gress-‐regulators; comment Comment (reviews ional leCers; leCer in LeCer in draK Review ques3ons response Response proposed Act; about to ANPR to NPR and ﬁnal Law-‐ priori3es rules) suits
When Should I Weigh In? EARLY & OFTEN— LOOK WHAT’S COMING DOWN THE ROAD
Administra3ve Procedure Act q Federal rulemaking is governed by the Administra3ve Procedure Act of 1946. v Agencies are bound by the statute, which means they can’t regulate anybody or anything they want v Agencies have to follow established procedures for wri3ng rules v Agencies must solicit & consider public comment v Magic word is PROCEDURE
Types of Rulemaking q Formal Rulemaking v On-‐the-‐record aKer hearing v Not used very oKen q No3ce and Comment Rulemaking v No3ce published in Federal Register v Opportunity for public to comment by leCer v Most common form of rulemaking
Uniﬁed Regulatory Agenda q Supposed to be published twice a year q Lets people know which regulatory ac3ons government agencies are working on or considering q Gives 3meframe within which ac3ons are an3cipated to be taken q Basis for asking ques3ons q hCp://www.reginfo.gov/public/do/ eAgendaMain
Before a Rule Is Born An agency might begin a rulemaking for several reasons: v It discovers a problem that needs to be ﬁxed v It receives a statutory direc3ve from Congress v It receives a pe33on for rulemaking—something a member of the public (or of Congress) could do v Members of Congress can weigh in through leCers, hearings, phone calls, etc. before a rulemaking process starts
Exploring Op3ons With the Public q Advanced No3ce of Proposed Rulemaking/ Concept Release: Doesn’t set out a par3cular proposal, but lays out some diﬀerent op3ons and issues that the agency is considering. q Roundtables: Agency brings in people with diﬀerent perspec3ves to discuss whether and how to tackle a par3cular issue. q Pre-‐proposal comment solicita3ons: Agency asks for comments before issuing proposal.
This commenter is asking for rulemaking on an issue that has been controversial in the securi3es ﬁeld, the line between brokers and investment advisers.
The SEC held a roundtable on decimaliza3on on February 5, 2013. A prior no3ce explained the reason for the roundtable: . . . the SEC staﬀ recommended that the Commission solicit the views of investors, companies, market professionals, academics, and other interested par3es on decimaliza3on generally, its eﬀects on IPOs and on trading and liquidity for small and mid-‐cap companies, and what, if any, changes should be considered. The roundtable will provide a forum to discuss these issues and explore speciﬁc recommenda3ons on structuring pilot programs to gather addi3onal data and analysis on these issues. . . .
Public Comments on SEC Regulatory Ini7a7ves Under the Dodd-‐Frank Act The Dodd-‐Frank Wall Street Reform and Consumer Protec3on Act includes provisions that require the SEC to undertake various ini3a3ves, including rulemaking and studies touching on many areas of ﬁnancial regula3on. Members of the public interested in making their views known on these maCers, even before oﬃcial comment periods may be opened, are invited to submit those views via the email addresses below. BUT agencies may argue they are not legally obligated to consider pre-‐comment period comments, so resubmit during oﬃcial comment period.
Proposing a Rule q Agency prepares a proposed rule, which is published as a No3ce of Proposed Rulemaking in the Federal Register q The public typically has 30-‐120 days to comment on the rule. President Obama has directed agencies to provide 60 days, when feasible. q Agency reviews the comments
Agencies publish ANPRs, NPRs, and Final Rules in the Federal Register This ﬁnal CFPB rule consists of 37 pages of rule text and 176 pages of preamble.
Commen3ng on a Rule q Members of the public comment to help to guide the agency in an appropriate direc3on q Reviewing incoming comment leCers is a useful way to iden3fy the big issues on which you need to follow up q OKen, even comments that come in aKer a comment period closes will be considered q Every communica3on the agency has with outsiders should be memorialized in the comment ﬁle
Members of Congress A 54 page can and do weigh in comment during the comment leCer from Senators period. Merkley and Levin The purpose of this leDer is to oﬀer our views regarding the proposed rule to implement the prohibi7ons and restric7ons on proprietary trading and certain interests in, and rela7onships with, hedge funds and private equity funds. . . .
Final Rule q AKer considering the comments, an agency draKs a ﬁnal rule and publishes a No3ce of Final Rulemaking in the Federal Register q No3ce includes implementa3on dates q Agency can alterna3vely issue a revised no3ce of proposed rulemaking q OMB has a role to play, but we’ll save that for next 3me
The Code of Federal Regula3ons: Where Rules Go Once They Are Final
Excep3ons to Standard Rulemaking q The APA some3mes allows agencies not to comply with the standard rulemaking procedures v Certain types of rules, e.g., rules that deal with agency management v Certain circumstances—good cause not to comply with the procedures
Excep3onal Rules q Direct Final Rule v Supposed to be used for non-‐controversial rules v Rule is published in Federal Register and takes eﬀect unless a nega3ve comment comes in q Interim Final Rule v Rule takes eﬀect when it is published in the Federal Register v The public has an aKer-‐the-‐fact opportunity to comment
. . . The SEC implemented the registra3on provision on an interim basis in order for municipal advisors to meet the new laws October 1 registra3on deadline. The SEC expects to propose a permanent rule later this year. . . .
Congressional Review Act q Final rules don’t become eﬀec3ve un3l they are ﬁled with Congress and GAO q Major rules must be delayed by 60 days q Resolu3on of disapproval v Any member of Congress can introduce v If both Senate and House adopt, rule is eliminated v President can veto→2/3 vote in Senate and House required
Backdoor Rulemaking q A lot of de facto rulemaking happens in non-‐ rule rules q Examples are frequently asked ques3ons, forms, leCers, other subregulatory documents, and enforcement ac3ons that further clarify and reﬁne the rules issued q Keep an eye on these to ensure that regulators are not skir3ng the APA
Where to Look? • Agency Websites hCp://www.hhs.gov/regula3ons/index.html • Regula3ons.gov hCp://www.regula3ons.gov/#!home;tab=search • Federal Register hCps:// www.federalregister.gov/ar3cles/search • OpenRegs.com hCp://openregs.com/ • OMB’s OIRA Website hCp://www.reginfo.gov/public/ • GAO’s CRA website
This 7 page leCer from the CFTC includes some things that look a lot like rules. . . . Staﬀ believes that for cleared swap repor3ng to SDRs, DCOs should include a link between the original swap (and any applicable USI from the original swap) to the resul3ng or new swap between the DCO and each original counterparty (and any applicable USIs from the new swaps). . . .
There’s More . . . Regula3on University Regulatory Oversight Essen3als Part II March 12, 2013