Under the Trump administration, the Securities and Exchange Commission is in the process of revamping its approach to the cost-benefit analysis it performs in support of its regulatory actions. These changes are being spurred in large part by presidential executive orders that have set the stage for regulatory relaxation and revision. These include, in particular, Executive Order 14192 (“Unleashing Prosperity Through Deregulation”) and Executive Order 14215 (“Ensuring Accountability for All Agencies”).
Executive Order 14192
Executive Order 14192 requires, among other things, that each federal agency — including the SEC — repeal 10 existing regulations for every new regulation it adopts. This applies to both formal and informal rules, i.e., any agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of the agency.
In addition, the total incremental cost of all of the agency’s new regulations finalized in fiscal year 2025 must be “significantly” less than zero. For subsequent fiscal years, Executive Order 14192 also provides that the agency head (e.g., the chair of the SEC) must provide the White House Office of Management and Budget (OMB) with an estimate of the costs imposed by the new regulations, alongside the cost of regulations slated for repeal. The OMB director must approve both the new regulations and the offsetting repeals and will provide the agency with “a total cost allowance” — i.e., a regulatory budget.
Importantly, this order also resulted in the revocation of the November 9, 2023, version of OMB Circular A-4, which provided certain guidance to agencies on how to evaluate the costs and benefits of their regulations. Accordingly, the SEC will now once again be subject to the previous version of OMB Circular A-4 (issued September 17, 2003). Among other things, this means that the SEC will now be assuming a substantially higher base rate of return on invested capital when estimating the “opportunity cost” to companies of amounts they must spend complying with SEC rules.
Executive Order 14215
To further ensure accountability, Executive Order 14215 mandates that traditionally independent regulatory agencies, like the SEC, submit drafts of all significant regulatory actions to centralized regulatory review led by the executive branch’s Office of Information and Regulatory Affairs (OIRA). In support of these drafts, the SEC will have to show that each regulatory action has been subject to rigorous cost-benefit analysis in compliance with all applicable guidance. Such guidance includes, but is not limited to, 2003 Circular A-4 (as discussed above) and OIRA Memorandum M-25-24 (issued April 17, 2025), which provides extensive additional applicable cost-benefit analysis guidance.
Implications for SEC Operations and Policy
The SEC has long performed cost-benefit analysis with respect to many of its regulatory actions. Among other things, such analysis helps the SEC (a) avoid allegations that it has acted unreasonably, arbitrarily, or capriciously and (b) satisfy a specific statutory requirement — applicable to most of its rulemakings — that the SEC consider “in addition to the protection of investors, whether the [rulemaking] action will promote efficiency, competition, and capital formation.” And these reasons for the SEC to perform cost-benefit analysis have not been diminished by any of the Trump administration executive orders.
High-quality cost-benefit analysis generally requires well-trained staff and adequate resources, both of which have been reduced at the SEC. These reductions stem partly from a Trump-era directive mandating agencies to “initiate large-scale reductions in force” and more recently from Executive Order 14170 (“Reforming the Federal Hiring Process and Restoring Merit to Government Service”), which tightened hiring rules and limited expedited recruitment. Reports are that the SEC workforce has decreased by at least 15% since the beginning of the current fiscal year and that some further decreases are likely. These dismissals, combined with additional cost-benefit analysis requirements (such as discussed above), theoretically could jeopardize analytic accuracy and leaden the regulatory process.
Nevertheless, the Trump administration’s general deregulatory agenda calls for both a deceleration of many types of new regulatory activity and a review of any unlawful or otherwise unjustifiable regulations. Trump-appointed SEC Chair Paul Atkins, in alignment with administration policy, has called for strict adherence to the use of cost-benefit analysis for all new regulations and a review of existing regulations that are seen to impose significant, unjustified costs and burdens on investors and other market participants with little to no corresponding benefits. Therefore, it seems most likely that, given the central role that cost-benefit analysis can play as a tool for identifying and winnowing rules and proposals that the SEC and administration deem undesirable, the SEC will find the staff and other resources needed to beef up the number, speed, and (hopefully) quality of such analyses.
Under its current leadership, the SEC has demonstrated its intent to pursue some regulatory initiatives more aggressively than it has in the past, with crypto assets being a prime example. Accordingly, even if cost-benefit analysis does not languish under the current administration and SEC leadership, some other areas of SEC activity will probably be accorded reduced priority.
This article was prepared with the assistance of Carlton Fields summer associate Katherine “Betsy” Neal.
