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Providing for Consideration of H.R. 1062, SEC Regulatory Accountability Act

Floor Speech

Location: Washington, DC


Mr. McHENRY. Thank you, Mr. Chair.

This debate is actually really absolutely bizarre. President Obama asked for a cost-benefit analysis for independent regulatory agencies in an executive order. It's absolutely bizarre because the chairman of the SEC, then Mary Schapiro, committed in writing to Congressman Garrett, Congressman Issa, and me, committed in writing to a cost-benefit analysis. Chairman Schapiro even in September of 2011 agreed to a retrospective review of offering and reporting requirements and posting this on a Web page seeking public input.

So the complaints from the other side of the aisle seem absolutely bizarre because we have commitments. What we're trying to do is codify in law what was a process a former chairman of the SEC committed to. We want to make sure that this is not ad hoc, that it goes forward, that it's in the statute, and that it's clear. Why are we doing this? Well, we've heard from the other side of the aisle that we need to focus on investor protection.

There's the other part of the SEC which is supposed to foster capital formation. Now, what is capital formation? Capital formation is the capacity, or the ability, of a business to get the moneys they need to grow and employ more people and to offer more products or more services. It's the money a business needs, the investors of the business need, in order to grow and help get this economy moving. I thought that's what we're all about. We hear speech after speech from the President that's what he's all about. But we hear from the other side of the aisle that they don't like this approach because they're not focused on that, which is unfortunate.

The reason why we're putting this in statute is that the SEC too often just puts rules into place without consideration of the cost. Their process has never been formalized until the last 2 years of actually weighing both the costs and benefits of a rule. They simply say they're benefits. Well, we all know, and I hope the other side of the aisle would admit, that there is a cost to regulation. I would hope that they would admit that.

Now, I will give you an example: regulation A is the ability of small businesses to get capital from the public markets. Regulation A in 1998 gave 57 offerings through regulation A. It meant 58 businesses getting money from outside investors through this regulation. This is for the smaller size businesses. By 2001, you only had one take advantage of this regulation A to get moneys for their small- and medium-sized businesses.

Well, what happened? The market changed, but the SEC, because they were not obligated to, did not review their rules. They did not update their rules. They did not think about the cost of cutting off capital to small businesses that absolutely, desperately need this, mainly because of the changing nature of the economy and the impact of the awful Dodd-Frank act that has imposed enormous cost burdens on banks, and so we have less banks lending so businesses need a different opportunity to get money.

So what we're putting in place is a 5-year review of those rules so the SEC is forced to weigh both the costs and benefits of these regulations, and we can get this economy moving again and capital flowing again. That's what it's really all about. That's not a great deal of fuss; but we have folks on the other side of the aisle that simply want to make a fuss about that, which is unfortunate.

We need to be focused on capital formation. We need to be focused on making sure that we foster regulations and review regulations so that we can get this economy moving again. That's what this is all about.

I would say to my colleague on the other side of the aisle who raised the question of the cost of this, what this cost comes from is what the SEC says, right, that it's going to cost us additional money to review these regulations, implicitly saying that they have regulations on the books that they don't review, that they don't look back on a regular basis and see if they actually fit to the modern marketplace. And we have rules on the books that have been on the books for over 80 years. So I think it's high time we forced the SEC to do something that is responsible, that is right, and that even this President has called for.

I hope the folks on the other side of the aisle would join us in making sure that we have this bill pass on a unanimous basis. With that, I would also encourage us to pass this rule.


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