SEC Chief Economist and Director, Craig M. Lewis, delivered a speech at the Pennsylvania Association of Public Employee Retirement Systems Annual Spring Forum on the role of economic analysis in furthering the Commission’s mission to protect investors and the ways in which the public can help craft regulations to effectively accomplish this goal. Lewis specifically discussed what the Commission considers the four basic elements of a robust economic analysis. These elements include: (1) an identification of the justification for the regulatory action; (2) a definition of the baseline against which to measure the economic effects of that regulatory action; (3) an identification of reasonable alternative regulatory approaches; and (4) an evaluation of the economic consequences of the proposed rule and the principal regulatory alternatives.
Lewis notes that analyzing the benefits and costs of a proposed regulation can be complicated and nuanced, especially considering that not all benefits and costs can be quantified. Lewis also discusses how the SEC staff recommends engaging in rulemaking using authority provided in the Dodd-Frank Act to adopt rules with a uniform fiduciary standard of conduct for all broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers.