Minnesota Law Review

Note, Judicial Review of SEC Rules: Managing the Costs of Cost-Benefit Analysis

In the past seven years, the D.C. Circuit has vacated three Securities and Exchange Commission (SEC) rules for failing to conduct an adequate cost-benefit analysis. This string of cases culminated on July 11, 2011 when the D.C. Circuit overturned the SEC’s new proxy access rule. Strict judicial scrutiny of SEC cost-benefit analysis aggravates the strain on SEC resources, already stretched beyond capacity as a result of the influx of new rules required under recent legislation. Furthermore, the standard of judicial review imposed on SEC cost-benefit analysis is inconsistent, which introduces greater uncertainty to the SEC’s rulemaking process and causes the SEC to conduct extensive cost-benefit analyses for all of its rules in order to protect them from invalidation. In light of the massive resource burden associated with conducting a cost-benefit analysis that withstands the judiciary’s critical review, the cost of a comprehensive cost-benefit analysis may outweigh any corresponding efficiency benefits for some rules.

This Note argues that judicial review of SEC cost-benefit analysis must be clearly defined in a way that requires greater deference to the SEC’s empirical findings. A congressional statement establishing the appropriate standard and scope of judicial review of cost-benefit analysis is likely the most effective solution. Judicial constraint is necessary in order to prevent rendering cost-benefit analysis itself an inefficient and overly burdensome exercise.


:: View PDF

De Novo

  • Case Comment: Bhogaita v. Altamonte

    EVERY DOG CAN HAVE HIS DAY IN COURT: THE USE OF ANIMALS AS DEMONSTRATIVE EXHIBITS Kyle R. Kroll, Volume 100, Online Managing Editor In Bhogaita v. Altamonte, the Eleventh Circuit recently decided whether to allow a dog in the courtroom as a demonstrative exhibit.[1] Although the case presented many serious [...]

  • Revisiting Water Bankruptcy

    REVISITING WATER BANKRUPTCY IN CALIFORNIA’S FOURTH YEAR OF DROUGHT Olivia Moe, Volume 100, Managing Editor This spring, as “extreme” to “exceptional” drought stretched across most of California—indicating that a four-year streak of drought was not about to resolve itself[1]—Governor Jerry Brown issued an unprecedented order to reduce potable urban water [...]

  • Defying Auer Deference

    DEFYING AUER DEFERENCE: SKIDMORE AS A SOLUTION TO CONSERVATIVE CONCERNS IN PEREZ v. MORTGAGE BANKERS ASSOCIATION Nicholas R. Bednar, Volume 100, Lead Articles Editor* On March 9, 2015, the Supreme Court of the United States handed down its decision in Perez v. Mortgage Bankers Association.[1]F The Court overturned the D.C. [...]