SEC Regulatory Analysis : 'A Long Way to Go and a Short Time to Get There'

Federal appeals courts have vacated several Securities and Exchange Commission (SEC) rules due to inadequate economic analysis. The SEC, pledging to do better, published staff economic analysis guidance in March 2012 that covers many of the same topics executive branch agencies address in regulatory impact analyses (RIAs) of major regulations. This paper employs the Mercatus Center at George Mason University's Regulatory Report Card methodology to evaluate the quality of the SEC's regulatory analysis. The economic analysis accompanying a sample of final SEC regulations published in 2010 and 2011 was seriously incomplete and rarely used. The SEC analyses scored well below the RIAs produced by executive branch agencies during the same period. The SEC often ignored relevant academic literature and declined to examine alternatives, benefits, and costs that expert financial regulators should have been aware of. Thus, our baseline assessment of pre-2012 regulations shows that the SEC's new economic analysis guidance was necessary and appropriate