The U.S. Financial Industry Regulatory Authority (FINRA) has published a framework that it plans to use to assess the economic impact of proposed rules.
The self-regulatory organization says that the framework, which sets out how it will evaluate significant new rule proposals, will help ensure that its rules are better designed and minimizes unnecessary burdens.
“The framework we have outlined increases transparency around FINRA’s analysis of the need for and potential consequences of proposed rules. It allows us to expand on FINRA’s traditional approach to rulemaking by ensuring that we more formally, rigorously, and consistently develop rules that are effective and efficient,” said FINRA’s chief economist, Jonathan Sokobin.
FINRA notes that the framework is focused on three core principles: the need for public consultation; that it should be clear about the objectives, and potential impacts, of rule proposals and; and, that it should obtain supporting evidence where it’s practical to do so.
“FINRA believes that clarity with regard to the potential economic impact of proposed rulemaking increases both transparency and accountability,” it says in the framework. “By adhering to the principles outlined here, FINRA’s rulemaking will clearly present our analysis, including assumptions and risks, as to why the proposal is necessary and how it best achieves its stated goals.”
As a result, it suggests that for future rule proposals, its economic assessments will address: the problem that requires regulatory action; the objective of the proposed action; the baseline against which it will measure the likely economic consequences; the proposed solution and how it addresses the problem; possible alternatives; and, the anticipated economic impacts of various options, including the costs and benefits and distributional impacts.