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Schapiro on SEC Economic Analysis

On April 17, SEC Chairman Mary Schapiro testified about the SEC's approach to economic analysis in its rulemakings before the House Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs Oversight and Government Reform Committee.  Chairman Schapiro noted that "high quality economic analysis is an essential part of SEC rulemaking."  She also discussed the difficulties presented by the rulemakings required by Dodd-Frank.

Chairman Schapiro discussed the agency's efforts to improve economic analysis, including the creation of the Division of Risk, Strategy and Financial Innovation ("Risk Fin"), noting that the division has 24 economists who assist in economic analysis for rules.

Chairman Schapiro then described recent SEC guidance drafted by Risk Fin and the Office of the General Counsel following reports by the General Accounting Office and SEC Inspector General regarding the SEC's cost benefit analyses.  She outlined improvements contained in the guidance, including: more involvement by Risk Fin in all stages of SEC rulemaking; requiring rule releases to clearly state the SEC's justification for a rule; consideration of economic effects of rules required by statute, including portions required by law as well as those chosen in the SEC's discretion; quantifying costs and benefits when possible and explaining when quantification is not possible and also describing qualitative issues; better integrating economic analysis into rule releases; explicitly encouraging commenters to provide verifiable costs and benefits and including more discussion of the information in final rule releases; and more discussion of alternatives to the chosen rule.

The full text of the testimony is available at http://sec.gov/news/testimony/2012/ts041712mls.htm.