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Review procedures need enhancing according to GAO’s Regulatory Flexibility Act compliance report
On January 30, the Government Accountability Office (GAO) released its annual report on federal financial regulators’ compliance with the Regulatory Flexibility Act (RFA). Specifically, the report assessed whether certain regulators adhered to the RFA when drafting and implementing regulations that may affect small entities. Such regulators include the Federal Reserve, Commodity Futures Trading Commission, CFPB, FDIC, OCC, and SEC (collectively, the "agencies"). Under the RFA, the agencies must either (i) certify that a rule would not have a significant economic impact on a substantial number of small entities, or (ii) perform a regulatory flexibility analysis to assess the rule’s impact on small entities and “consider alternatives that may minimize any significant economic impact of the rule.” The report disclosed issues related to certifications. Examples included (i) providing incomplete disclosures of data sources or methodologies of economic analysis and impact; (ii) failing to provide definitions for criteria used to determine a “substantial number” or a “significant economic impact”; and (iii) relying on alternative and potentially outdated definitions of small entities. Additionally, GAO noted that many regulators were unable to provide supporting documentation for their analyses. GAO presented 10 recommendations for enhancing compliance procedures, and stressed that regulators should “develop and implement specific policies and procedures for consistently complying with RFA requirements and related guidance for conducting RFA analyses.” Specific recommendations for each agency are located here.