January 30, 2017
H.J. Res. 41
Sponsor: Rep. Huizenga (R-MI)
House of Representatives: passed 235-187 on February 1, 2017
Senate: passed 52-47 on February 3, 2017
The resolution disapproves SEC Rule 13q-1 under Section 1504 of the Dodd-Frank Act.
Rule 13q-1 requires energy companies to annually report payments made to foreign governments for the commercial development of oil, natural gas, or minerals. The rule became effective in its current form in September 2016.
Congress exercised its authority under the Congressional Review Act (CRA) to disapprove the rule. The CRA generally allows Congress to disapprove a rule by simple majority votes within a specified period of time.
Upon the President’s signature, Rule 13q-1 will no longer be in effect. In addition, pursuant to the CRA, a rule that is substantially the same cannot be adopted in the future unless it is specifically authorized by subsequently enacted legislation.
This action by Congress marks one of the first times that a rule has been disapproved by Congress under the CRA. It is likely that Congress will be considering a series of further disapproval actions in the near future.Bill Text
January 3, 2017
SEC Regulatory Accountability Act, H.R. 78
Sponsor: Rep. Ann Wagner (R-MO)
House of Representatives passed 243-184: on January 12, 2017
The Act would require the SEC, prior to issuing a regulation under the securities laws (i.e., the Securities Act of 1933, Securities Exchange Act of 1934, Sarbanes-Oxley Act of 2002, Trust Indenture Act of 1939, Investment Company Act of 1940, Investment Advisers Act of 1940, and Securities Investor Protection Act of 1970) to: (i) identify the nature and source of the problem that the proposed regulation is intended to address; (ii) assess the costs and benefits of the proposed regulation and make a determination that the benefits justify the costs; and (iii) identify and assess available alternatives.
The SEC would also be required, when issuing any regulation that qualifies as a “major rule” (a rule that the Office of Management and Budget determines is likely to result: (i) an annual effect on the economy of $100 million or more, (ii) a major increase in costs or prices for consumers, individual industries, governments, or geographic regions, or (iii) significant adverse impacts on competition, employment, investment, productivity, innovation, or on the ability of U.S.-based enterprises to compete with foreign-based enterprises in domestic and export markets) to set forth quantitative and qualitative metrics to measure the economic impact of the regulation and to measure the extent to which the regulation has accomplished the stated purposes and the assessment plan the agency will use. An assessment plan must consider the costs, benefits, and intended and unintended consequences of the regulation.
The SEC would generally be required to publish an assessment report on a regulation within two years after its adoption. The agency would be required to seek public comment on the assessment report. No later than 180 days after publication of the assessment report the SEC would be required to issue for notice and comment a proposal to amend or rescind the regulation, or publish a notice that no action will be taken in regard to the regulation.
The Act would also require the SEC to periodically review its existing regulations to determine whether any regulations are outmoded, ineffective, or excessively burdensome and make modifications, expansions or repeals of based on its review.
Under current law, in adopting a rule, the SEC is required to consider, in addition to the protection of investors, whether the rule will promote efficiency, competition, and capital formation. The U.S. Court of Appeals for the D.C. Circuit, in applying these requirements, has vacated an SEC regulation based on a finding that the agency had failed adequately to assess the economic effects of the regulation. Business Roundtable v. SEC, 647 F.3d 1144 (D.C. Cir. 2011). The Act would expressly require the SEC to make a determination that the benefits of a rule justify its costs.
A requirement that the benefits of a rule justify the costs would appear to be a lower standard than the Supreme Court applied in Michigan v. EPA, 576 U.S. ___, (2015), where, in the context of rulemaking authority that required a rule to be “necessary and appropriate,” the Supreme Court found that an agency had to show that the benefits of the rule outweighed its costs.
The Act would significantly impact the SEC’s rulemaking process both in regard to an enhanced cost-benefit requirement at the time of adoption of a rule as well as a rigorous post-adoption assessment process. These requirements would likely provide opponents of a regulation with expanded opportunities to challenge a proposed or existing regulation either before the SEC or in court.
The Act would likely divert SEC staff resources to rulemaking and review of existing rules and away from other functions.
February 6, 2017
Public Statement from Acting SEC Chairman Michael S. Piwowar regarding Reconsideration of Pay Ratio Rule Implementation
The SEC adopted the Pay Ratio Rule in August 2015 to implement Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The rule requires a public company to disclose the ratio of the median of the annual total compensation of all employees to the annual total CEO compensation. Companies must comply with the rule their first fiscal year beginning on or after January 1, 2017. This compliance date reflects a one-year additional delay as compared to the proposed rule.
Piwowar stated that companies are experiencing difficulties in preparing to comply with the rule, and he requested further public comment on whether relief is needed. The comment period will last 45 days.
This action could signal a further delay in the implementation of the rule, and may mark the first step towards additional SEC action to amend or rescind the rule (which would require notice and a public-comment period). See Dechert Newsflash, Trump Administration Discloses Another Rule in Doubt – SEC Questions the "Pay Ratio" Regulation.