Skip to main content

Remarks at the SRO Outreach Conference

Commissioner Daniel M. Gallagher

U.S. Securities and Exchange Commission

Washington, D.C.

Jan. 12, 2012

Thank you, John, for that kind introduction. I would first like to thank Robert Cook and Carlo di Florio for inviting me, and would like to thank them both for their leadership in conceiving of and planning this important event. And thank you to all of the members of the SRO community who are attending today. You are literally on the front line of the securities markets, and your wisdom and feedback are incredibly important to the Commission as we wrestle with issues impacting the markets.

And, as you would expect, I need to tell you that my remarks today are my own and do not necessarily reflect the views of the Commission or my fellow Commissioners.

The title of this Conference is “Collaboration, Cooperation, and Oversight,” and it has been described to me by my friend John Polise as designed to foster dialogue with the SROs in an environment where both the SROs and the SEC can discuss candidly their relationship. I was heartened to hear about this drive for collaboration. Simply put, we are at a crossroads with respect to the status of self regulation. Forums like this should produce concrete results that further the incredibly important relationship between the SEC and SROs. Do not waste this opportunity. The dialogue should be open and honest, and it needs to flow in both directions.

And given the dynamism in the markets, the continued changes in the SRO community, and the massive legislative and regulatory changes in recent years, it is critically important that this dialogue be nurtured and continued.

After all, our interests as regulators should be aligned, but to do so we also need to make sure that as our markets and the regulation of those markets continue to develop, we do not let habit, past practice and provincialism get in the way of sound, effective, and vigorous markets oversight. Importantly also, we need to insure that as much as possible the SEC speaks clearly, consistently, and with a single voice in dealing the SROs it oversees.

The SRO structure is a bedrock of the US scheme of securities regulation. It should be fostered, not eroded in an effort to make the SROs into “deputy SECs” — let’s not forget about the “S” in SRO. To be sure, the SEC must be able to vigorously carry out its duty to oversee the SROs. But, if this regulatory construct is to survive and flourish, SEC oversight must be conducted in a way that respects the unique missions and market structures of the various SROs. And if this is not possible, then we need to ask ourselves even deeper questions, such as:

  • Should we have exchanges with statutory self regulatory responsibilities when, in fact, the vast majority of those responsibilities have been outsourced to another SRO?
  • What limits, if any, should the Commission impose on the ability of SROs to contract with others?

Fortunately, the Commission had the prescience in 2004 to raise very similar questions in its SRO concept release. Although the issues discussed in that release require a substantial updating in light of the consolidations, demutualizations, and IPOs of various SROs in the last several years, the basic regulatory questions remain the same. Regardless of the answers to the questions I just posed, it may well be time for the Commission to dust off and reconsider many of the issues raised in the 2004 release.

In conclusion, I hope that today is the beginning of a new era of SEC/SRO relations. I am confident that under the stewardship of Carlo and Robert, this can be the case. I can tell you that I am very interested in these issues, and I look forward to working with the SEC staff and the SROs as the issues discussed today and other, bigger picture, issues are debated.

Return to Top