Document Type

Article

Publication Date

3-16-2020

Abstract

Congress routinely enacts statutes mandating that federal agencies adopt specific regulations. For example, when Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, it required the Securities and Exchange Commission (SEC) to adopt a regulation compelling energy companies to disclose payments they make to governmental entities. Although this disclosure regulation is specifically required by the Dodd-Frank Act, it is also a regulation subject to disapproval by Congress under a process outlined in a separate statute known as the Congressional Review Act (CRA).

In 2017, Congress passed a joint resolution disapproving the SEC’s disclosure rule under the process authorized in the CRA. That resolution nullified the SEC’s rule, but it did not amend the Dodd-Frank Act. It did, though, make relevant a provision in the CRA that prohibits an agency from adopting any regulation that is “substantially the same” as one that Congress has disapproved. As a result, the SEC still must issue a disclosure regulation, but it cannot issue one that is substantially the same as the old one. Although normally this might not pose a major problem to an agency, the Dodd-Frank Act not only requires a disclosure regulation, it also provides considerable detail about what must be included in that regulation.

The SEC faces what appears to be a conundrum. On the one hand, it must adopt a regulation that comports with the detailed provisions of the Dodd-Frank Act. But on the other hand, it is prohibited under the CRA from adopting a regulation that is “substantially the same” as the old regulation. What is the agency to do? Earlier this year, the SEC announced a proposal for a new disclosure regulation that differs in several ways from the old one—but the proposed regulation would also appear in some respects to violate the Dodd-Frank Act’s requirements for how the disclosure rule should be designed.

In this paper— originally submitted as a public comment on the SEC’s proposed rule—I explain that the SEC need not violate the Dodd-Frank Act to comply with the CRA. The CRA conundrum can be readily solved. The CRA’s choice of the imprecise word “substantially” invites the SEC to reconcile both statutes. The agency can do so by ensuring that those features of a new regulation that remain in the SEC’s discretion are not substantially the same as in the old rule. After all, a statute such as the CRA can only impose an obligation on an agency over matters over which it has a choice. The SEC just needs to make sure that any re-issued rule is no longer substantially the same in terms of portions of the rule over which the agency can exercise its discretion.

Even with detailed statutory provisions, such as the one in the Dodd-Frank Act, an agency nevertheless will still have some discretion available to it. It can exercise that discretion in a substantially different way even if by making available opportunities for waivers or by extending deadlines for compliance. The disapproval of a rule under the CRA simply does not relieve an agency from its obligation to produce a regulation that complies with other statutory obligations.

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