Agency personnel discovered potential obstacles to financial innovation caused by the Administrative Procedure Act ("APA") of 1946. Under the APA, federal agencies can issue rules and policies that establish requirements or expectations for industry behavior and compliance. This process is usually a time- and resource-intensive process because it requires agencies to publish proposals, solicit and review public comments on proposals, revise them as needed, and reissue rules in their final form. These arduous procedures may limit the agency’s willingness to re-examine existing rules and commit to promulgating new rules: APA’s procedural restrictions may prevent agencies from modifying outdated rules years or even decades ago, and the result is not conducive to regulatory innovation.

The APA stipulates the procedural requirements for the establishment of federal agencies’ rules, agency policy statements, permits, and their issuance. APA provides three rulemaking methods, namely:

1. Informal rulemaking. Informal rulemaking is the most commonly used method. Federal agencies must issue a Notice of Proposed Rulemaking ("NOPR") to the public to proceed. The NOPR must include: (1) a description of the time, place, and nature of the public rulemaking process; (2) a reference to the law on which the rule is based; (3) the terms or substance of the proposed rule, or a description of the subject and issue involved. Then, the agency must provide enough opportunities for the public to comment. Finally, the agency will publish its final rules in the “Federal Register”, and the rules will come into force 30 days after the date of publication.

2. Formal rulemaking. It is applicable in rare cases, requiring similar trial procedures. The agency and other parties must step up to the administrative law judge, present evidence and conduct cross-examination, while the proponents of the rule have the burden of proof. The informal rulemaking process is very time-consuming, and the formal rulemaking process requires a lot of resources. 3. Exemption from rulemaking. Certain "rules" are not restricted by APA's informal rulemaking requirements, including: (1) agency procedure rules; (2) interpretative rules; (3) general statements of policies.

Since the APA is a regulation passed by Congress, signed and issued by the president, any changes to its requirements will require new regulation. However, purely procedural regulations do not impose rights or obligations on any individual, so it may be difficult to make APA amendments a legislative focus. It may be more effective to simplify APA through other means (such as executive orders). Executive orders only need to be signed by the president to come into force. Many APA recommendations of institutional innovators can be completed through executive orders. In addition, leaders of various implementing agencies can commit to establishing a framework for retrospective review when formulating new regulations. To the extent that multiple agencies are committed to such reviews, these agencies can coordinate to share resources, reduce costs, and promote coherent cross-agency regulatory programs to encourage such reviews. For example, an agency can work with the Office of Management and Budget ("OMB") to establish a high-level organization responsible for facilitating and overseeing the review of these agencies.