The U.S. Chamber of Commerce and the Business Roundtable won their case against the Securities and Exchange Commission (“SEC”) when a court struck down a final Dodd-Frank “proxy-access” rulemaking. A three judge panel from the U.S. Court of Appeals in Washington, D.C. disallowed the rule because the SEC “inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters.”
The SEC, CFTC, and other regulatory agencies are required by law to conduct cost-benefit analyses for all new regulations, and a recent Executive Order from the White House has urged agencies to avoid “excessively burdensome” regulations. This is the fourth time Eugene Scalia, counsel for the Chamber of Commerce in this case, has won against the SEC citing inadequate cost-benefit analyses.
Thus far, only the SEC has been the target of these suits. The agency has been criticized before for ignoring the opinions of its of economists. However, that does not mean other regulators involved in Dodd-Frank rule-making are immune from similar suits. The CFTC, charged with creating rules governing the multi-billion dollar derivatives market, has already faced criticism from the public for proposing rules that are too insensitive to costs. This ruling may embolden interest groups to take new rules to court once they are finalized.