Letter to SEC Chairman Gensler on Regulatory Flexibility Act Compliance — House Committee on Small Business

Summary

A letter dated February 22, 2023 from House Committee on Small Business Chairman Roger Williams, Vice Chairman Blaine Luetkemeyer, Subcommittee Chairman Beth Van Duyne and other committee members to SEC Chairman Gary Gensler. The letter states that the committee is investigating the SEC's implementation of the Regulatory Flexibility Act, SBREFA and Executive Order 13272, and cites two SBA Office of Advocacy letters, including one of June 17, 2022, finding the SEC's initial regulatory flexibility analyses insufficient. It requests a staff level briefing by March 3, 2023 and ten categories of documents and information by March 10, 2023, including compliance guides and records on rules certified as having no significant impact on small entities from 2020 to present.

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Full text

                                           February 22, 2023

The Honorable Gary Gensler
Chairman
U.S. Securities and Exchange Commission
100 F Street N.E.
Washington, D.C. 20549

Dear Chairman Gensler:

       The Committee on Small Business is investigating the United States Securities and
Exchange Commission’s (SEC) implementation of the Regulatory Flexibility Act (RFA), the
Small Business Regulatory Enforcement Fairness Act (SBREFA), and Executive Order 13272
(EO13272).1 Republicans on this Committee wrote to you last Congress and you failed to
respond. We write today to request a staff level briefing and request additional documents and
information.

        As mentioned in our last letter, the RFA, SBREFA, and EO13272 were designed to
provide small businesses notice of proposed agency rules that affected their business and provide
them the opportunity to participate in the process.2 Despite this stated goal, it seems that some
agencies are failing to properly implement these measures to the detriment of small businesses
across the country. In fact, your agency has received two letters from the Office of Advocacy
(Advocacy) in the Small Business Administration (SBA) on May 6, 20223 and on June 17,
20224, noting that both Initial Regulatory Flexibility Analysis’ (IRFA) were insufficient. In the
June 17 letter, Advocacy also argued that you had an insufficient economic impact analysis and
that you failed to consider regulatory alternatives.5



1
  5 U.S.C.§§ 601-12; Pub. L. No. 104-121 (Mar. 29, 1996); Proper Consideration of Small Entities in Agency
Rulemaking, 67 Fed. Reg. 53,461 (Aug. 16, 2002).
2
  5 U.S.C.§§ 601-12.
3
  Letter from Major L. Clark, III, Deputy Chief Counsel, and Meagan Singer, Asst. Chief Counsel, Office of
Advocacy, U.S. Small Bus. Admin., to Vanessa A. Countryman, U.S. Securities and Exchange Commission (May.
6, 2022), available at https://cdn.advocacy.sba.gov/wp-content/uploads/2022/05/06141204/Comment-Letter-SEC-
Cybersecurity-Risk-Management-Disclosures_5-6-22.pdf.
4
  Letter from Major L. Clark, III, Deputy Chief Counsel, and Meagan Singer, Asst. Chief Counsel, Office of
Advocacy, U.S. Small Bus. Admin., to Vanessa A. Countryman, U.S. Securities & Exchange Commission (June 17,
2022), available at https://cdn.advocacy.sba.gov/wp-content/uploads/2022/06/17125158/Comment-Letter-SEC-
Climate-Disclosure-Rules-6-17-22.pdf.
5
  Id.
The Honorable Gary Gensler
February 22, 2023
Page 2 of 4

        As you are well aware, agencies across the federal government are provided discretion
when determining a regulation’s impact on the small businesses. Agencies are required to
produce an IRFA in proposed rules only after the agency determines the proposed rule is
expected to have a “significant impact” on a “substantial number of small entities.”6 If not, the
agency simply certifies the rule will not have a significant economic impact on a substantial
number of small entities and provides a “factual basis for such certification.”7 That certification
is published in the Federal Register and reported to the Chief Counsel for Advocacy at SBA at
the time the proposed or final rule is published for public comment.8

        If the agency determines that the proposed rule will have a significant impact on a
substantial number of small entities, section 212 of SBREFA requires agencies to publish one or
more small entity compliance guides for each rule, or group of rules.9 Additionally, in the final
rule, the agency needs to publish a Final Regulatory Flexibility Analysis (FRFA) that includes
but is not limited to “a description of and an estimate of the number of small entities to which the
rule will apply or an explanation of why no such estimate is available.”10

       Small businesses across America deserve to know how the SEC is working to consider
small businesses in their rulemaking process. We therefore request a staff level briefing on the
SEC’s compliance with the RFA, SBREFA, and EO13272, as soon as possible but no later than
March 3, 2023. In addition, we request the following documents and information, as soon as
possible but no later than March 10, 2023:

    1. Identify any central SEC position or office, if one exists, responsible for ensuring that
       SEC complies with the RFA, SBREFA, and EO13272.

    2. Identify any SEC positions or offices responsible for reducing the regulatory burden on
       small businesses.

    3. Provide all small entity compliance guides produced or in use at the agency within the
       last calendar year.

    4. Provide the agency’s definition of “significant impact” and “substantial number of small
       entities” from 2010 until present, including any and all changes over that time and the
       justifications for those changes.

    5. Provide the name, docket number, and citation of all rules, proposed and final, that that
       the agency certified as having no significant impact on a substantial number of small
       entities from 2020 to present.


6
  5 U.S.C. § 603(a).
7
  5 U.S.C. § 603(b).
8
  Id.
9
  Small Business Regulatory Enforcement Fairness Act, Pub. L. 104-121, § 212 (as amended by the Small Business
and Work Opportunity Act of 2007, Pub. L. 110-28 § 8302).
10
   5 U.S.C. § 604(a)(4).
The Honorable Gary Gensler
February 22, 2023
Page 3 of 4

   6. All documents and communications relating to the agency’s determination of whether
      there was a “significant impact” on a “substantial number of small entities” for all
      proposed and final rules from 2020 until present.

   7. All documents and communications detailing any and all factors the agency considers
      when determining whether the proposed rule will have a “significant impact” on a
      “substantial number of small entities” and the weight of each factor given in the
      determination.

   8. All documents and communications relating to consideration of alternate rule proposals
      when the agency has determined a proposed or final rule has a substantial impact on a
      substantial number of small entities from 2020 until present.

   9. All documents and communications relating to instances where input from mandated
      SBREFA panels compelled the agency to amend a proposed rule, with supporting
      documents, from 2020 to present.

   10. All documents and communications relating to the standards the agency uses to
       determine its “factual basis” to support a determination that a proposed rule would not
       have a significant impact on a substantial number of small businesses.

        To schedule the delivery of responsive documents or ask any related follow-up questions,
please contact Committee on Small Business Majority Staff at (202) 225-5821. The Committee
on Small Business has broad authority to investigate “problems of all types of small business”
under House Rule X. Thank you in advance for your cooperation with this inquiry.


                                            Sincerely,




_________________________                           _________________________
Roger Williams                                      Blaine Luetkemeyer
Chairman                                            Vice Chairman
Committee on Small Business                         Committee on Small Business



_________________________                           _________________________
Beth Van Duyne                                      Pete Stauber
Chairman                                            Member of Congress
Subcommittee on Oversight,                          Committee on Small Business
Investigations, and Regulations
The Honorable Gary Gensler
February 22, 2023
Page 4 of 4



_________________________                     _________________________
Dan Meuser                                    Jake Ellzey
Member of Congress                            Member of Congress
Committee on Small Business                   Committee on Small Business



_________________________                     _________________________
Marc Molinaro                                 Aaron Bean
Member of Congress                            Member of Congress
Committee on Small Business                   Committee on Small Business



_________________________
Nick LaLota
Member of Congress
Committee on Small Business



cc:   The Honorable Nydia M. Velasquez, Ranking Member
      Committee on Small Business

      The Honorable Dean Phillips, Vice Ranking Member
      Committee on Small Business


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