Two ways regulatory agencies can effectuate the recent White House Executive Order requiring them to find ways to reduce burdens to jumpstart economic growth: 1) think creatively; and 2) consider permanent relief.

The COVID-19 pandemic has placed a spotlight on a number of inefficiencies of the current financial regulatory framework. Regulations imposed on the financial marketplace – despite efforts to reduce the red tape – remain in the tens of thousands, with overly burdensome, complex and fragmented requirements. Compounding the regulatory miasma is the jockeying for jurisdiction among federal and state regulators.

With the Trump Administration and Congress looking for ways to jumpstart a U.S. economy placed in stasis due to the pandemic, the White House issued on May 19 an Executive Order requesting agencies to reduce the impact of regulations that may impair the economic recovery.

The Executive Order requires agencies to, among other things, issue proposed rules as necessary, to “temporarily or permanently rescind, modify, waive, or exempt persons or entities from [regulatory requirements] … that may inhibit economic recovery,” and “to consider exercising appropriate temporary enforcement discretion or appropriate temporary extensions of time as provided for in enforceable agreements with respect to [regulatory requirements].” The Executive Order also mandates that any regulatory actions taken must be “consistent with applicable law and with protection of the public health and safety, with national and homeland security, and with budgetary priorities and operational feasibility.”

The agencies affect the economic lives of their regulated communities in ways other than direct rulemaking, however. The SEC has the authority to issue exemptions to rules and governing statutes, which authority is often delegated to its staff. In considering applications for these orders, the SEC and its staff should prioritize and think creatively about means to accommodate requests that could benefit the economy. For example, investment products that can efficiently provide capital, such as by co-investing with other entities, to smaller and mid-sized companies should be high on the SEC’s agenda for expedited consideration.

In addition, the heads of the agencies are required conduct a review to determine whether it would be in the interest of promoting economic recovery to make permanent any of the regulatory actions taken in response to the Executive Order. Agencies should bear in mind that instituting relief under the Executive Order that requires systems changes or significant implementation cost is unlikely to be used in the absence of permanence. Companies likely will not make costly investments if they do not believe that the relief will support them until full recovery and beyond. For this reason, agencies would do well to communicate clearly their expectations for the permanence of any measures they adopt under the Executive Order.

Patomak Global Partners continues to monitor the regulatory process, particularly among those agencies affecting the financial services marketplace. Should you have questions, please connect with your usual Patomak contact or call us at 202-862-3920.