Wall Street’s self-regulator announced today that it has hired a chief economist who will for the first time shape a formal process for measuring the costs and benefits of new regulations.
The Financial Industry Regulatory Authority said Jonathan S. Sokobin, 51, currently an economist at the Treasury Department, would perform cost-benefit analysis of new rules. Finra and other Wall Street regulators, including the U.S. Securities and Exchange Commission, have faced pressure to apply sharper economic analysis to rule making.
Sokobin’s “expertise will be invaluable in ensuring that Finra’s regulations are intelligently fashioned to protect investors and maintain market integrity without imposing needless costs and burdens on investors and the industry,” Richard Ketchum, Finra’s chief executive officer, said in a statement.
President Barack Obama issued an executive order in January 2011 requiring executive agencies to consider costs and benefits when writing new rules. The SEC and Finra -- an independent, industry-funded self-regulator -- aren’t bound by that order, although the SEC has approved new guidelines for measuring costs and benefits after losing legal battles over its regulations.
The U.S. Court of Appeals for the District of Columbia Circuit cited inadequate economic analysis when it invalidated an SEC rule in July 2011 that sought to make it easier for shareholders to oust board members. Business groups have challenged other SEC regulations on similar grounds.
In the past, Finra hasn’t required a formal cost-benefit analysis for new rules, Robert Colby, Finra’s chief legal officer, said in a phone interview today. Its process sought comments from industry representatives about the results of new regulations and how companies might be affected.
“It was done implicitly but not in a well organized, explicit way of saying these are the impacts that we intend and these are the ones that we think may result,” Colby said. “It was more of a shorthand approach.”
At Finra, Sokobin will be involved in applying cost-benefit analysis to a Finra proposal that targets conflicts of interest stemming from bond market research, Colby said. Sokobin currently works as chief of analytical strategy in Treasury’s Office of Financial Research.
Sokobin earned his Ph.D. and MBA from the University of Chicago, according to Finra. He worked at the SEC from 2000 to 2011.