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April 14, 2014

Appellate Court Victory Agrees with SEC Economic Analysis & Rejects Key Industry Weapon

Washington, D.C., April 14, 2014 –Dennis Kelleher, President and CEO of Better Markets, an independent nonprofit organization that promotes the public interest in the financial markets, made the following statement about today’s decision handed down by the D.C. Circuit Court of Appeals concerning cost-benefit analysis:

“The D.C. Circuit Court of Appeals decision today in NAM v. SEC is a victory for the Securities and Exchange Commission (SEC) and for financial reform.  The Court rejected industry arguments that the SEC must conduct onerous, rigorous, quantitative cost-benefit analysis, which has been a key industry weapon used to kill, gut or weaken financial reform.  Today’s ruling affirms the SEC’s approach to economic analysis.

“In rejecting the industry’s often-heard arguments, the Court first stated the obvious:  No agency is required to conduct a ‘rigorous, quantitative economic analysis’ unless a statute explicitly requires it to do so, and no such statute requires the SEC to do so.  Second, the Court stated what should have been obvious:  No agency has the authority to second-guess the judgments about costs and benefits that Congress has already made.  Here the Court found that Congress had already determined that the costs of the rule were necessary to further the goals of ‘peace and security in the Congo.’  Any attempt by the SEC to revisit or second-guess this judgment would have put the agency in an ‘impossible position.’

“Finally, the Court stated that, even if the SEC could somehow have calculated the number of lives saved as a direct result of the final rule, the result would have been pointless, since it would have created an ‘apples-to-bricks comparison.’

“All of these rulings highlight what Better Markets argued in its amicus brief in this case:  Congress never imposed a cost-benefit analysis obligation on the SEC (or the CFTC), and with good reason. Cost-benefit analysis challenges the judgments that Congress has already made, and it undervalues the many benefits of regulation, which often cannot be framed in dollars and cents.

“Although the Court also invalidated a narrow provision of the statute and the SEC’s rule on First Amendment grounds, the Court’s holdings on cost-benefit analysis are very important victories, which will help the financial regulatory agencies protect the American people from another financial crash and economic catastrophe like the one in 2008.”

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