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SEC-CFTC Joint Report on Regulatory Harmonization

As previously announced, the SEC and CFTC have issued a report, called for by the White Paper on Financial and Regulatory Reform, making “recommendations to Congress for changes to statutes and regulations that would harmonize regulation of futures and securities.”  The report makes 20 recommendations “addressing key areas in which their regulatory schemes are different,” and "legislative and regulatory actions to address those differences where appropriate.”    As expected, the report's recommendations focus on the harmonziation of:

 

    • Product listing and approval

 

    • Exchange/clearinghouse rule approval under rules- versus principles-based approaches

 

    • Risk-based portfolio margining and bankruptcy/insolvency regimes

 

    • Linked national market and common clearing versus separate markets and exchange-directed clearing

 

    • Market manipulation and insider trading rules

 

    • Customer protection standards applicable to broker-dealers, investment advisors and commodity trading advisors

 

    • Cross-border regulatory matters

 


The agencies' recommendations are summarized in the report on pages 11 - 15, and are broken into categories of:  (1) Markets, (2) Financial (3) Intermediaries, (4) Enforcement, and (5) Operational Coordination.

Of particular note, under "Enforcement," the report requests that Congress pass legislation granting the SEC specific authority to bring actions for aiding and abetting violations of the Securities Act and the Investment Company Act.  The SEC currently only has specific authority to bring such actions under the Securities Act of 1933, and the CFTC currently has this authority under the Commodities Exchange Act.

The full text of the "Joint Report of the SEC and the CFTC on Harmonization of Regulation" is available at:  http://www.sec.gov/news/press/2009/cftcjointreport101609.pdf

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