Academic

Dodd-Frank, like Sarbanes-Oxley (and numerous other legislative enactments in and outside securities regulation) before it, includes provisions mandating and permitting specified "studies" of matters not fully resolved by the provisions in the legislation.  I often have wondered about these types of provisions.  I have more questions than answers.

• Why are these study provisions included in legislation?  Is it just congressional guilt about matters not covered?  Is there a genuine interest in the outcomes for purposes of follow-on legislation, rule-making, or agency operational changes?  Is this a weak attempt at fostering extra-legislative change?  
• Are all of the studies concluded?  Legislative provisions requiring studies generally set deadlines.  Are these deadlines met?
• Who conducts these studies within the appointed agencies?  What is their training in empirical research?
• And what ever comes of these studies?  Are public reports always issued (since, under mandatory study provisions, reports typically are required)?  How often does legislation or rule-making or policy/process modification result?

There are reports on outcomes of SEC studies commissioned under Sarbanes-Oxley published on the SEC Web site.  The ones I have reviewed are principally data assembly documents, with no or little econometric analysis.  Some include reform proposals.  In general, the studies I have sampled don't offer me much comfort that helpful analyses are being performed and used in rule-making, enforcement, or related SEC operations.  But I invite folks who know more to disabuse me of that notion, at least in specific circumstances.

The Dodd-Frank legislation includes a general authority provision for SEC studies that particularly intrigues me.  The text is included in Section 912, which reads in relevant part as follows:

Section 19 of the Securities Act of 1933 (15 U.S.C. 77s) is amended by adding at the end the following:

(e) Evaluation of Rules or Programs- For the purpose of evaluating any rule or program of the Commission issued or carried out under any provision of the securities laws, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c), and the purposes of considering, proposing, adopting, or engaging in any such rule or program or developing new rules or programs, the Commission may--

(1) gather information from and communicate with investors or other members of the public;

(2) engage in such temporary investor testing programs as the Commission determines are in the public interest or would protect investors; and

(3) consult with academics and consultants, as necessary to carry out this subsection.

I am not sure why "clarification" is needed here.  Doesn't the SEC already (implicitly, if not explicitly) have broad authority to conduct activities related to its rule-making authority?  Will this provision be interpreted as narrowing that broad perceived authority?  I should hope not.

On a more positive note, it does look like some of us may get some action out of this (or at least the legislation suggests that possibility in referring to the potential involvement of "academics and consultants").  This may give us additional reasons to care about the Dodd-Frank bill on a going forward basis, as we work through our research agendas.  Some of the issues discussed in this forum, for example, could (and should) be fleshed out and potentially resolved with the assistance of law, economics, finance, and accounting experts if this provision is interpreted broadly and has real teeth.  I still wonder about all that. . . .