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U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
Keynote Address at the Eurofi Financial Forum 2010


Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Brussels, Belgium
September 29, 2010

Good evening. It is a delight to be here and an honor to join Minister Reynders and President Trichet in addressing this talented and dedicated group. It's a pleasure to meet with and speak to so many men and women, representing so many countries and ministries, who are united in the important pursuit of fair and stable financial markets and a growing global economy.

Chairman Schapiro sends her sincere apologies, being forced to stay on our side of the pond due to pressing business. I had planned to say that her loss is my gain, but given my 20-hour journey from Washington — through strikes and demonstrations — I am now wavering in that belief.

Before I begin my remarks this evening, please let me take a moment to remind you that they represent my own views, and not necessarily those of the Commission, my fellow Commissioners, or members of the staff.1

We are here tonight at a moment of particular importance to you and to me — and to all who strive to ensure that our financial markets possess the integrity that allows investors and entrepreneurs, families, and businesses, to pursue their dreams.

The financial crisis that erupted across the globe has vividly illuminated the importance of effective financial regulation to economic stability and growth. Indeed, there has been a broad re-affirmation of the idea that a balanced and dynamic regulatory structure guides the energy of a vibrant financial sector in the way that an automobile's engine channels explosive combustion into smooth, efficient acceleration.

With this has come not only the obligation to take rapid and effective action, but also the opportunity to do so, as public opinion and political will have come together in support of needed progress. In the United States, that will found expression in the Dodd-Frank Wall Street Reform and Consumer Protection Act — known as Dodd-Frank.

Meanwhile, on this side of the Atlantic individual nations and the EU as a whole are moving forward on a number of similar fronts. You are acting to limit dangerous excesses and unnecessary risks, and to ensure that markets fulfill their role as sources of long-term capital and drivers of growth on which investors can rely.

In addition to establishing more effective regulatory regimes in our own nations and regions, I believe that we all have another, more global opportunity. That is, to build procedures, traditions, and relationships that will make one positive legacy of the financial crisis a better and closer relationship among us that will remain strong both as we learn from the financial crisis, and as we steer clear of other potential crises in the years ahead. In essence, we have a chance to build a more seamless regulatory structure that better protects our citizens and our economies in a global economic age.

Now is the time to set our course toward achieving a regulatory structure that can succeed globally, as well as nationally. In moving forward, we will be able to build on a solid, established record of consultation. For example, the U.S. has long cooperated with European regulators on enforcement matters. Bilateral, regional, and multi-national memoranda of understanding ensure confidential sharing of information and one-on-one discussions between regulators, without excessive legal or bureaucratic hurdles. This allows quick action when fraud is suspected or detected. Regulators work together frequently, developing professional bonds and common strategies that help deny wrongdoers a place to hide.

And, earlier this year, the Technical Committee of the International Organization of Securities Commissions, or IOSCO, co-chaired by France's Jean-Pierre Jouyet and my fellow SEC Commissioner, Kathleen Casey, released a set of principles for cross-border supervisory cooperation in line with recommendations made by the G-20.

These types of efforts remain absolutely critical, and I am convinced there will always be a need for bold, broad, multi-lateral agreements, with IOSCO at the center.

I believe, however, that we should also focus on pursuing the more targeted efforts at coordination suggested by the regulatory reform initiatives now being unveiled on both sides of the Atlantic.

These important, discrete collaborations are often less complicated to bring to fruition than broader agreements. And, make no mistake: when these individual threads are woven together, they create an impressive and important banner, one which can guide efforts for many years after initial agreements are reached.

The United States and the Securities and Exchange Commission are more prepared than ever to pursue this course. For a number of years now, the SEC has had fruitful ongoing dialogues with our European counterparts, including the European Commission and the Committee of European Securities Regulators, or CESR. In these dialogues, senior staff and leadership of the SEC, European Commission, and CESR have been able to discuss thorny regulatory issues, such as conflicts of law, and address them in a way that benefits investors and market participants alike. This past practice of collaboration means that we already have the critical reflex of conferring with one another — a practice that we intend to maintain and intensify in the current environment of regulatory reform.

Dodd-Frank recognizes that the time when lawmakers could focus narrowly on one issue, in one economy, has passed, encouraging consultation and collaboration with our overseas counterparts as we work to implement our mandates at home.

I remember well a time decades ago, as a staffer at the SEC, when only few of us were assigned to bilateral and multilateral efforts and another small number dabbled in global issues on a sporadic basis. Times have truly changed. Today, many of us work solely on international matters, and it generally seems that every issue coming before the SEC has global ramifications.

To address the international issues associated with Dodd-Frank, we have established a cross-divisional task force. Chaired by our Office of International Affairs, the Task Force is analyzing the Act for areas in which it intersects with foreign laws or has an impact on foreign market participants in the United States. Once we identify these issues, the Commission and its staff will discuss them with our colleagues around the world.

As the regulator charged with overseeing the U.S. securities markets, the SEC will be implementing, among other aspects of the bill, three portions of Dodd-Frank that have particular resonance for us here: the provisions concerned with over-the-counter derivatives, hedge funds, and rating agencies.

Regarding over-the-counter derivatives, Dodd-Frank brings needed transparency to this market, and it will be a primary focus of SEC attention over the next 12 months.

Briefly, the Act requires central clearing and exchange trading for derivatives that can be cleared. It also provides a role for both clearing houses and the regulators — the SEC and CFTC — to determine which contracts should be cleared. It also subjects swap dealers and major swap participants to comprehensive regulatory oversight, including capital and margin requirements, and requires "real-time public reporting."

As for hedge funds, a primary goal for regulation in this area is to reduce the potential for fraud and manipulation by powerful but unsupervised, opaque, and largely unregulated firms. We will also be gathering systemic risk information from them to assist the Financial Stability Oversight Council, created under Dodd-Frank to monitor and minimize system-wide risks presented by the largest financial institutions.

Finally, the Act will permit us to further advance our efforts to improve the quality of the information investors receive from credit rating agencies. Dodd-Frank gives the SEC broad authority to address rating agencies' internal controls and procedures. And it imposes rulemaking mandates in areas including disclosure, conflicts of interest, and analyst training.

So, as you can see, there is a great deal of work for us ahead. But we are fortunate, and very pleased, that the calendar created by Congress overlaps substantially with European initiatives in many of the same areas. I look forward to continuing our cooperation as we execute against the requirements of Dodd-Frank and work to eliminate the opportunity for international regulatory arbitrage.

To illustrate, Dodd-Frank directs the SEC and the CFTC to jointly conduct a study of swap and clearing agency regulation in Asia and the EU, identifying similarities as well as areas that have harmonization potential.

And, the European Commission's announcement last week that certain swaps would now be cleared publicly underscores the degree to which we share the same concerns and objectives in reforming this important area of the global financial system. We are watching with interest the debate in the EU regarding the EC's Alternative Investment Manager Directive, which would apply new regulations to hedge funds and their managers. In the meantime, the SEC is working with other national authorities through IOSCO to create a common systemic risk form to collect data from hedge funds.

All of these efforts, taken together, have the potential to become far more than individual accomplishments. Instead, each can become a brush-stroke in a larger picture of a collaborative, efficient, international regulatory structure that protects investors across borders and promotes stable economic growth.

The months and years ahead offer us this tremendous opportunity. We look forward to working with you both to address the challenges before us and to set a course for long-term prosperity.

Thank you.



Modified: 10/08/2010