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SEC Commissioner Advises International Regulators to Stop "Trying to Do Too Much"

Steven.Lofchie@cwt.com's picture
Commentary by Steven Lofchie

SEC Commissioner Hester M. Peirce urged European and U.S. international organizations to take a more holistic approach when attempting to collaborate on and coordinate regulatory policies.

In remarks at the 2018 Symposium on Building the Financial System of the Twenty-First Century, Ms. Peirce praised the work of various international regulatory organizations. She called IOSCO a "vital forum," noted its work on initial coin offerings and offered praise to the Financial Stability Board for its "deep thinking on the risks posed by central counterparties." However, Ms. Peirce also criticized international organizations for (i) focusing on issues that are unrelated to the previous or potential financial crises, and (ii) attempting to implement unnecessary global standards. As an example, Ms. Peirce examined the IOSCO report on "Senior Investor Vulnerability." She agreed that senior investor protections should be created to assist the aging global population. She argued, however, that such protections should be implemented at a local or national level. Ms. Peirce also said that regulators should avoid attempting to come to a global consensus in areas where there may be less agreement, "such as corporate governance, corporate social responsibility, or executive compensation."

Ms. Peirce advised the international organizations to harmonize regulatory policies that are critically important. In particular, she noted, work can be done as to security-based swap regulation before U.S. rules are finalized to address the new data protection framework created by the European Union's General Data Protection Regulations. Ms. Peirce also urged implementing long-term solutions to address the research conflicts between European and American regulatory regimes under MiFID II.

Ms. Peirce acknowledged that U.S. regulation can step into other regulators' purview in "inappropriate ways." She noted that SEC rules should balance protecting U.S. markets and investors with respecting the interest of other jurisdictions in doing the same.

Commentary

To the sound advice from Commissioner Pierce, one might add that regulators should not attempt coordination where (i) there is no significant benefit and (ii) otherwise divergent rules and legal systems would make harmonization irrelevant. Protection of seniors is a good example: firms can certainly tailor the way in which they market to seniors so as to meet different types of expectations in the United States vs. the European Union (although fifty different state regimes present substantial challenges).

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