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SEC and CFTC Chairmen Issue Update on Harmonization Report


Washington, D.C., Sept. 30, 2009 — The chairmen of the Securities and Exchange Commission and the Commodity Futures Trading Commission announced today that they anticipate, in two weeks, the two agencies will issue a report that will address key areas in which their regulatory schemes are different. The chairmen also expect the report will recommend legislative and regulatory actions to address those differences where appropriate.

On June 17, 2009, the White House released a White Paper on Financial Regulatory Reform calling on the CFTC and SEC to "make recommendations to Congress for changes to statutes and regulations that would harmonize regulation of futures and securities."

Subject to consideration of the Commissions, a report is expected to be issued on October 15 to address harmonization of futures and securities regulation. It is anticipated that the report will include discussion of the following issues:

  • 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

In addition, the chairmen expect that the report will contain recommendations to Congress and the President designed to (1) strengthen their respective enforcement powers; (2) enhance and harmonize customer protection standards; and (3) establish an ongoing coordination and advisory process.

"We must continue to build upon the progress we are making to reduce regulatory arbitrage, avoid unnecessary duplication and close regulatory gaps," said SEC Chairman Mary Schapiro. "We are fully committed to continuing on the path toward reform."

"The CFTC and the SEC have been working very closely to best tailor our regulations in the best interest of the American public," CFTC Chairman Gary Gensler said. "I look forward to reporting to Congress and the President on identifying substantive changes that both agencies can make to close regulatory gaps, address inconsistencies and ensure that any overlap best serves the public."

In addition to extensive discussions between the agencies, the two regulatory bodies held their first ever joint public meetings earlier this month. The meetings sought to solicit views from industry participants, experts, and the public on the current regulatory scheme, harmonization of the agencies' rules and recommendations for changes to statutes and regulations. The agencies also solicited written comments to further assist their deliberations.

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Modified: 09/30/2009