FINRA Issues Public Statement Regarding FINRA's Approach to Economic Impact Assessment for Proposed Rulemaking (with Lofchie Comment)

FINRA issued a public statement, authored by the Office of the Chief Economist, to provide a framework to help ensure FINRA's rules are better designed to protect the investing public and maintain market integrity while minimizing unnecessary burdens. The framework outlined in the statement applies to the prospective analysis of rules and rule changes, and describes how FINRA will evaluate significant new rule proposals and amendments to existing rules. The public statement highlights three "core principles" regarding economic assessment impact for rulemaking:

• consult with key stakeholders in the development of rules;
• provide clarity about the objectives and potential impacts of rule proposals and alternatives considered; and
• obtain supporting evidence where practicable.

Lofchie Comment: There should be specific measurements by which one can evaluate the performance of a rule. Those rules that fail in their objective or that prove too expensive - should be repealed. It would be great if all of the regulatory agencies would perform cost-benefit analyses of their rules. Unfortunately, the objective is often stated in such a broad or ambiguous fashion that it is impossible to assess whether the rule has succeeded or failed. If the purpose of a rule is to "protect" the public, for example, it will be impossible to assess the rule's performance or subject it to any relevant measure.

See: FINRA Public Statement: "Framework Regarding FINRA's Approach to Economic Impact Assessment for Proposed Rulemaking"; FINRA Press Release.