The SEC and the CFTC announced on August 20th that they will hold joint meetings in September to seek input from the public on the harmonization of market regulation.
In June President Obama called on the SEC and CFTC to make recommendations to Congress for changes to statutes and regulations that would harmonize regulation of futures and securities.
Specifically, in the Treasury Department’s white paper on Financial Regulatory Reform (released June 17, 2009), the White House recommended that
The CFTC and the SEC complete a report to Congress by September 30, 2009 that identifies all existing conflicts in statutes and regulations with respect to similar types of financial instruments and either explains why those differences are essential to achieve underlying policy objectives with respect to investor protection, market integrity, and price transparency or makes recommendations for changes to statutes and regulations that would eliminate the differences.
Applying a slightly obvious “carrot-and-stick” motivational approach, the report goes on to state:
If the two agencies cannot reach agreement on such explanations and recommendations by September 30, 2009, their differences should be referred to the new Financial Services Oversight Council. The Council should be required to address such differences and report its recommendations to Congress within six months of its formation.
At the moment, at least, the two agencies seem ready and willing to work together. When the joint meetings were announced, SEC Chairman Mary Schapiro stated:
These joint meetings will build on the progress the CFTC and SEC have made on designing a framework to regulate OTC derivatives. It will move us further down the road of harmonizing our regulations to increase transparency, reduce regulatory arbitrage and rebuild confidence in our markets.
Ms. Schapiro’s sentiments were echoed by CFTC Chairman Gary Gensler:
I look forward to working with Chairman Schapiro and hearing from market experts and participants on how to most effectively harmonize our regulatory systems. Harmonizing our regulatory policies will improve market integrity by applying consistent standards to market participants. There are three areas where this review will most benefit the American public: to address gaps between the two agencies’ financial regulatory authorities, to assess the effects of regulatory overlap and to bring appropriate consistency to the two agencies’ regulation over similar products, practices and markets.
Thus, as aptly noted by Eric Krell on the Big Fat Finance Blog:
So far, SEC Chair Mary Schapiro and CFTC Chair Gary Gensler sound as if their dating, first suggested by a high-profile matchmaker in the White House, is going well.
However, this is not the first time these two agencies have attempted to end their regulatory turf war, which seems to have been waging for as long as the CFTC has been in existence. In March 2008 then SEC Chairman Christopher Cox and acting CFTC Chairman Walter Lukken signed a broad-reaching memorandum of understanding designed to take a more unified approach to market regulation and to formalize closer cooperation between the two agencies. But in October 2008 the turf battle resumed as lawmakers investigated the role of credit default swaps in the financial crisis.
Details on the SEC/CFTC Joint Meetings
The meetings will consist of five panels. Topics to be discussed will include:
1. regulation of exchanges and markets;
2. regulation of intermediaries;
3. regulation of clearance and settlement;
4. enforcement; and
5. regulation of investment funds.
The meetings will be open to the public with seating on a first-come, first-served basis.
Feel like attending? The first meeting will be held on September 2, 2009, from 9:00 a.m. to 5:00 p.m, in Lobby Level Hearing Room (Room 1000) at the CFTC’s headquarters at Three Lafayette Centre, 1155 21st Street, N.W., Washington, DC 20581.
The second meeting will be held on September 3, 2009, from 9:00 a.m. to 12:30 p.m., in the auditorium at the SEC’s headquarters at 100 F Street, N.E., Washington, DC 20549.
The meetings also will be available via webcast on the SEC web site and on the CFTC web site. A transcript of the meetings will be made and entered into the agencies’ public comment files, which will remain open for the receipt of written comments until September 14, 2009.
