Subject: File No. S7-36-11
From: Aleksandr Khachaturyan
Affiliation: Student at Boston University School of Law (Graduate Program in Banking and Financial Law)

October 6, 2011

Securities and Exchange Commission
100 F Street, NE,
Washington, DC 20549-1090
Re.: SEC File Number S7-36-11

October 5, 2011

Dear Sir/Madam,

This letter has been prepared by LL.M. students at Boston University School of Law (Graduate Program in Banking and Financial Law) to express views in relation to the announcement published by SEC.
Understanding the impact of rules and regulations is vital. There are many situations in which well-designed regulation ends up having unpredicted negative consequences. Every rule-maker should understand and think very carefully about what the beneficial impacts of regulation is going to be and also put himself in the shoes of either an individual or a firm thats facing the regulation.
We believe that to address the issue of reviewing existing regulations, the Commission should elaborate and apply a comprehensive methodology which would guide every rule making initiative.
While answering the questions posed in the request, we want to suggest certain elements that the above-mentioned rule-making methodology should consider. We believe that a procedure known as regulatory impact analysis (or regulatory impact assessment) should become a part of rule makers daily routine. The regulatory impact assessment is a tool used for the structured exploration of different options to address particular policy issues. It involves a detailed analysis to ascertain whether or not different options, including regulatory ones, would have the desired impact and helps identify any possible negative effects or costs associated with regulation. It also helps to clarify the costs of enforcement. It helps identifying the needs and modes of review of existing regulation. The reports summarizing the results of that assessment (Assessment Reports) allow to communicate these results to the public and interested parties.

Please, consider below our answers to SECs questionnaire.

1. What factors should the Commission consider in selecting and prioritizing rules for review?

We believe that the Commission could take the following factors into account in order to select rules for review:

i. Effectiveness. It is recommended to compare the positive and negative impacts of the rule in the specific matter, to see whether or not is an effective rule

ii. Costs and benefits. The Commission should compare if the benefits of the existing rule are higher that its costs and the possibility of reducing the costs in case the costs are higher than the benefits. Also, the Commission should focus on rules that require high compliance and enforcement costs

iii. Parties. It is important to identify the groups that are affected by the rule. Special Attention should be paid to the consumers and retail (not-institutional) investors ("vulnerable" groups)

iv. Nature of the rule. The approach to the rule should differ depending on the nature of the rule. Particularly, special attention should be devoted to the rules that have been adopted to provide temporary regulation (i.e. emergency rules, rules to cover specific risks with limited existence, sunset clauses etc.)

v. Market developments. Market developments should drive selection process, with special focus on interconnected markets and services (affecting different sectors of the market) and

vi. On-site experience of the SEC. Information collected during on-site and off-site inspections by SEC shouldnt be underestimated. It will guide the SEC in understanding market developments and thus identify areas of regulatory loopholes, unnecessary regulatory burdens and negative regulatory outcomes.

2. How often should the Commission review existing rules?
We consider that there are three main principles that Commission needs to consider:

i. Terms suggested by SEC. We believe that the Commission is the best suited to answer the question. In the light of this, we suggest that the Commission proposes the deadlines for review when drafting the regulation. Particularly, the Assessment report should specify the deadlines when the Commission shall address the impact and consequences of the regulation. However, that discretionary power could be limited by a general term i.e. not later than on the second anniversary of the regulation

ii. Signals from "public". The SEC should address specific regulation when it receives significant number of comments from the public. By saying public we mean industry participants, investor community, associations and other non-profit organization associated with the market, universities, think-tanks etc.

iii. Emergency. The Commission should review regulations in emergency situations i.e. when it reasonably believes that the existing regulation would harms the safety and soundness of the market etc.

3. Should different rules be reviewed at different intervals? If so, which categories of rules should be reviewed more or less frequently, and on what basis?

The Commission should review more frequently the following rules and regulations:

i. rules and regulations directly affecting rights of vulnerable groups

ii. rules and regulations that have a temporary nature (sunset clauses, intermediary measures etc.)

iii. rules and regulations associated with high compliance and enforcement costs

iv. rules and regulations that have been signaled by the "public" and

v. reporting requirements of reporting entities/institutions.

Also, the Commission should identify other principles that would affect the review process (i.e. regulations affecting "too big to fail" banks, directly associated with mitigating systemic risks etc.).

4. To what extent does relevant data exist that the Commission should consider in selecting and prioritizing rules for review and in reviewing rules, and how should the Commission assess such data in these processes? To what extent should these processes include reviewing financial economic literature or conducting empirical studies? How can our review processes obtain and consider data and analyses that address the benefits of our rules in preventing fraud or other harms to our financial markets and in otherwise protecting investors?

In addition to the information that the Commission collects itself (investigations, inspections, market studies etc.) it should consider the following data and information:

i. Post-implementation review the Commission should take into consideration the post-implementation reviews produced by relevant unit in accordance with the Assessment Report. That report should outline outcomes of the regulations (both positive and negative)

ii. Signals from the "public" the Commission should consider comments and suggestions from the public (especially when it receives significant amount of comments from the public)

iii. Other sources the Commission should consider the minutes and papers of the Financial Stability Oversight Council as well as the Reports of the Office of Financial Research.

5. What can the Commission do to modify, streamline, or expand its regulatory review processes? An on-going task force that reviews existing rules should be a permanent resource. Once the large project of reviewing current rules is completed, the task force would review rules on a regular, periodic basis, which would prevent having rules on the books that are significantly outdated and no longer pertinent.

As mentioned above, it is recommended to introduce a special policy that would address the rule-making process within the Commission. That policy should cover issues related to the regulatory initiatives, drafting, impact assessment and post-implementation review procedures, etc.

In addition, the Commission could set up a special group in charge of coordinating drafting, impact assessment and review process.

There is certainly need to ensure maximal involvement of the public in rule-making process.

6. How should the Commission improve public outreach and increase public participation in the rule-making process? The industry should welcome the ability to be part of the rule-making process. Working hand-in-hand with the SEC, industry professionals can help to achieve a regulatory environment that protects investor, is enforceable, and that works in the real world.

There are some measures that the Commission should take in addition to existing ones:

i. Setting up special section in its web-site which would contain information that could particularly interest the consumers (the language used in that sub-page should be as simple as possible)

ii. Setting up a special interactive communication tool between the Commission and the visitors of the Commissions web-page through which visitors will be assisted in looking for necessary information and

iii. other means aimed at improving financial literacy of the public (interactive trainings on how to use etc.).

If you have any questions or comments please do not hesitate to contact us at, and

Students of Graduate Program in Banking and Financial Law