The Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), and the Consumer Financial Protection Bureau (CFPB), amongst other federal agencies, are charged with the responsibility of regulating and monitoring the financial markets and institutions in the United States. The United States Congress is the body that is responsible for authorizing these and other federal agencies, and it gives a large number of these agencies broad-ranging jurisdiction to enact rules relevant to their respective areas of expertise.

Despite the fact that it is not always clear how the rules are formed, these regulations are absolutely necessary to ensure that financial markets and institutions operate as intended. In the following, we will investigate the process that some of the most well-known federal financial agencies use to draught their regulations.

KEY TAKEAWAYS
 

• Congress has given various federal agencies, such as the Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), and the Consumer Financial Protection Bureau (CFPB), the authority to regulate and supervise various aspects of the financial space in the United States.
   
• Congress has delegated to these agencies the authority to create regulations that have the same weight and significance as laws.
   
• The Administrative Procedure Act lays forth a rigorous and involved process for rulemaking that must be followed by all government agencies.
   
• The process of creating regulations may also include additional processes, as implemented by some government agencies.
   
• An Overview of the Procedures Followed in the Making of Federal Regulations
   
• Federal agencies receive the authority to adopt a variety of rules that are related to statutory programs through a grant of authority from Congress. Agencies typically possess highly specialized and technical expertise that Congress does not have, despite the fact that Congress continues to maintain oversight and maintains the ability to overturn any regulations that may be in place. When finished, rules created by federal agencies have the same legal weight and significance as statutes.
   

In order to adopt a rule and make it legally binding, a federal agency must adhere to a specific procedure, even if Congress has delegated rulemaking authority to the agency in question. Before any regulatory change may go into force, this procedure must be followed so that a complete examination of the pending change can be performed. The Administrative Procedure Act is responsible for establishing and mandating the use of a significant number of these procedural components (APA). In addition to this, the process is subject to stringent scrutiny by the Office of Information and Regulatory Affairs within the Office of Management and Budget (OIRA). In 1981, under the leadership of Ronald Reagan, who was serving as President at the time, the Office of Information and Regulatory Affairs (OIRA) was founded.

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The following steps make up the general process of rulemaking once a federal agency has been given the authority to establish regulations by Congress:

The proposed regulation is drafted by the federal agency that is responsible for it.

• OIRA has concluded its examination of the proposed rule's draught version.
   
• The agency decides to make the proposed regulation public.
   
• The agency considers the feedback it receives and may revise the regulation.
   
• The OIRA has finished its examination of the draught version of the final regulation.
   
• The agency will publish a comprehensive review.
   
• A review of a rule may be conducted by either the judiciary or the legislature.
   
• 1 The Congressional Review Act (CRA), which gives Congress the ability to overturn rules, and the Judicial Review Act, which gives courts the authority to reject agency rules in certain instances, are both ways that rules can be overturned.
   
• 3 In addition, the procedure gives members of the public the opportunity to contribute comments during the writing and review process, which may have an effect on the rule that is ultimately established.
   

Making of Rules in the Financial Sector by Various Federal Agencies

 

Some of the federal agencies that are assigned with the regulation of the financial sphere implement extra or different procedures in addition to those listed above, even if the rulemaking process for federal agencies as a whole follows the procedures described above. In the following, we will discuss the process that several of these bodies use to create rules.

FINRA, the Financial Industry Regulatory Authority (SEC)
 

The operation of the securities markets in the United States is regulated by the Securities and Exchange Commission, also known as the SEC. In addition to this, it helps with the production of capital and strives to safeguard investors from fraudulent activities and behaviors that manipulate markets.
 

Generally speaking, the SEC's Market Regulation, Corporate Finance, or Investment Management departments are the ones that are responsible for developing new regulations for the agency. The Office of General Counsel (OGC) and the Office of Economic Analysis (OEA) of the SEC are typically involved in the process as well. Their roles are to ensure that the rules comply with the policies, statutes, and regulations that are currently in place, and their respective roles are to conduct a cost-benefit analysis regarding the economic impacts of the rules.
 

Either a rule proposal, as described in the more comprehensive rulemaking method described above, or a solicitation of public input on acceptable responses to a specific issue is what kicks off the rulemaking process at the SEC. In the latter scenario, the SEC will either issue a press release or convene public hearings to describe the subject matter as well as its concerns over the matter. The SEC then takes into consideration the feedback received from the public while developing the proposed regulation. The process of creating rules then continues in the same manner as the approach outlined earlier.

On its website, the Securities and Exchange Commission (SEC) has a chronological record of proposed rules dating all the way back to 1988.
 

Committee of the Federal Reserve (FRB)
 

The Federal Reserve Board (FRB), which is also known as the Board of Governors of the Federal Reserve System, is the governing body of the Federal Reserve, which is the United States central bank. The Federal Reserve Board is tasked with the responsibility of formulating monetary policy in line with a set of guiding principles that, among other objectives, prioritize employment and price stability.
 

Congress has delegated to the Federal Reserve Board (FRB) the responsibility of carrying out the Federal Reserve Act, which includes making a number of rules and regulations. The Federal Reserve Board adheres to a procedure that is analogous to that which is followed by the other agencies included on this list. Additionally, the FRB publishes pending proposed revisions on its website in order to collect comments from the general public. In addition, the agency offers compliance instructions for the regulations it has enacted.
 

Corporation for the Guarantee of Federal Deposits (FDIC)
 

In the event that a U.S. bank or thrift institution fails, the Federal Deposit Insurance Corporation (FDIC) will step in to protect customers' deposits. After the Great Depression, it was established as an organization with the purpose of restoring confidence in the financial sector and in the general population.
 

The Federal Deposit Insurance Corporation (FDIC) publishes proposed rules and information for public comment both in the Federal Register, which is the daily newspaper of the United States federal government and on its own website.

According to the agency's mission statement, its objective is to carry out the implementation of rules in the "least burdensome manner possible" and in a way that will ensure that regulations and policies will effectively accomplish their aims. In addition, the FDIC conducts regular evaluations of its regulations and policy statements to ensure that they continue to be effective and efficient in their respective roles. This review process has included conferences, internal reviews, public participation, and various other tools to lessen the load of this review and promote openness.
 

The Bureau for the Protection of Consumer Finances (CFPB)
 

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010, which resulted in the establishment of the Consumer Financial Protection Bureau (CFPB), one of the most recent federal agencies to be established in the field of finance. Its purpose is to provide customers in the financial sector with education and protection.
 

The Consumer Financial Protection Bureau (CFPB) has a comprehensive rulemaking process and offers regulations that apply to a wide variety of financial institutions. When an agency is in the process of developing a regulation that could potentially have a major effect on small firms, the Dodd-Frank Act mandates that the agency establish a Small Business Review Panel. Each panel has a representation from the Consumer Financial Protection Bureau (CFPB), the Office of Information and Regulatory Affairs (OIRA), the Chief Counsel for Advocacy at the Small Business Administration (SBA), and a group of small companies. The panel setting provides the chance for the representatives of small businesses to provide feedback once they have been provided with information regarding the possible rule. The Consumer Financial Protection Bureau (CFPB) compiles a report detailing the discussion that took place at the panel and then makes that report public along with the proposed regulation.
 

In some instances, but not all, the Consumer Financial Protection Bureau (CFPB) publishes what it calls a "advanced notice of proposed rulemaking" in order to get initial feedback from the public on proposed regulations. It also makes draught rules available to the general public, just like the other government agencies on this list, in order to solicit feedback, which may or may not be included into the rule's final form.

The Consumer Financial Protection Bureau (CFPB) will sometimes issue what it refers to as "interim final rules." These are regulations that are put into effect without first providing an opportunity for the public to comment on them. In the future, the governing body might ask for public feedback and revise some of these regulations.
 

The United States Court of Appeals for the Fifth Circuit issued its decision in October 2022 declaring the funding arrangement for the Consumer Financial Protection Bureau (CFPB) to be unconstitutional. The fate of this organization is currently unknown.

The United States Government's Office of the Comptroller of the Currency (OCC)
 

The Office of the Comptroller of the Currency (OCC) is responsible for the chartering, regulation, and supervision of all national banks and other savings institutions that are federally chartered. Among other things, this institution has the authority to take regulatory measures against banks, dismiss bank directors, and reject applications for new bank branches.
 

The Office of the Comptroller of the Currency (OCC) publishes a variety of documents, including office bulletins, interpretations, and actions, as well as publications on the types of activities that are acceptable for banks and associations that fall under its purview. Before settling on a decision for good, it follows the practice of other regulatory bodies and makes proposed rules available for public discussion. During the process of formulating new regulations, the Legislative and Regulatory Activities Division of the OCC's Law Department provides guidance to the organization.
 

Authority to Regulate the Financial Industry (FINRA)
 

The Financial Industry Regulatory Authority (FINRA), despite its name, is not a government entity but does have regulatory authority. It is the largest self-regulatory organization (SRO) in the securities sector within the United States, despite the fact that it is a nonprofit organization.

In the United States, registered brokers and broker-dealer businesses are subject to oversight by FINRA. Its purpose is to shield the general public from deception and unethical behavior on the part of these institutions.
 

FINRA has a complicated rulemaking process that consists of the following ten steps:

• There is talk of a new regulation (by FINRA firms, investors, interested parties, other regulatory bodies, etc.)
   
• A review conducted internally by FINRA
   
• FINRA committees will be given a presentation of the proposed rule.
   
• The proposed regulation was presented to the FINRA board.
   
• Notice required by regulation and request for feedback from the public
   
• The submission of a rule to the SEC
   
• The Securities and Exchange Commission has published a proposed rule in the Federal Register for comment.
   
• FINRA's reply to the comments that were received
   
• The proposed regulation was approved by the SEC.
   
• FINRA has issued a regulatory notice of the rule that will be finalized.
  
  Who Determines the Policies and Procedures Followed by the United States Federal Financial Agencies?
  The United States Congress has delegated rule-making authority to a variety of federal financial agencies, each of which is responsible for regulating a distinct aspect of the economy. Congress still maintains the right to abolish these restrictions in the future.

How Is It That a New Rule Is Created?
 

Each agency follows its own procedure, but they are all required to follow the federal rulemaking procedures, which include the following: the drafting of a proposed rule, the review of draughts, the solicitation of comments from the public, changes and further review, and the publishing of the final rule.

In what ways can these rules be enforced?
 

When they are finally put into effect, the regulations that are published by federal authorities have the same force and effect as laws.

The Crux of the Matter
 

Federal agencies such as the SEC, FDIC, and OCC are given the authority to develop rules governing their respective specialized fields by Congress. These government entities are required to go through rigorous and complicated rulemaking procedures, which include the creation of many draughts, periods during which the procedures are reviewed, and an opportunity for the general public to submit feedback. When they are finally ratified, these rules will have the same authority and weight as laws.

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