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  •  Agency’s  People  •  Agency’s  Problems  •  Agency’s  Pals  

RULES  

Regulatory staff

Source: Susan Dudley & Melinda Warren, The Regulators’ Budget (2012).

Federal Register pages

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Regulatory constraints and pages in the Code of Federal Regulations

Source: 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  Stage—the  

agency  is  thinking  about  

what  to  do  

ANPRM  Advanced  No3ce  of  Proposed  Rule-­‐making  

NPRM  No3ce  of  Proposed  Rule-­‐making  

CCom-­‐ment  Period  

and  OMB  Review  Period  

FINAL  RULE  

Gefng  and  Staying  Involved  

Mee3ngs  with  

regulators;  leCers;  

ques3ons  about  

priori3es  

File  comment  leCer  in  response  to  ANPR  

File  Comment  LeCer  in  Response  to  NPR  

Weigh  in  with  OMB  (reviews  draK    

proposed  and  final  rules)  

Con-­‐gress-­‐ional  Review  Act;  Law-­‐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  can  and  do  weigh  in  during  the  comment  period.  

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.  .  .  .  

A  54  page  comment  leCer  from  Senators  Merkley  and  Levin  

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  law's  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