SEC Chairman Mary Jo White Delivers Speech on Regulation in a Global Financial System (with Lofchie Comments)

In a speech before the Investment Company Institute (ICI) General Membership, SEC Chair Mary Jo White echoed her fellow Commissioners' remarks from this past week, stating that the U.S. financial system requires the SEC to be global, and that the SEC must continue to match "regulatory and enforcement priorities with those of scores of jurisdictions around the world." Her speech addressed a good number of the topics, including the following:

• Cross-Border,
• The Mutual Fund Industry,
• Money Market Fund Regulation,
• Benefits of International Reach and Cooperation on Enforcement Actions,
• Fraud and Insider Trading,
• Cross-Border Working Group,
• FCPA,
• Accounting Standards, and
• International Oversight.

Chairman White went on to assert that as "investors, entrepreneurs, and other market participants" depend upon the SEC, the agency must work to find common ground with counterparts abroad, and collaborate on everyday matters like enforcement and accounting in order to "knit together a regulatory network that offers protection, consistency, and stability to market participants – especially in the United States but abroad as well." While Chairman White admitted that "weaving international concerns" into a domestic rulemaking or policy takes time and effort, she urged that a domestically-focused regulatory approach is "no longer acceptable or effective."

Lofchie Comment: While the physical audience for the speech was registered investment companies, the larger audience were those non-U.S. regulators and both U.S. and non-U.S. market participants observing the different regulatory approaches taken by the SEC and the CFTC, and wondering (i) whether the two Commissions will work to resolve their differences or (ii) the CFTC will go forward on its own and emphasize its authority to regulate non-U.S. entities; and whether (a) the SEC will continue to emphasize co-operation with non-U.S. regulators and (b) the CFTC will continue to emphasize "getting it done"; i.e., adopting a full set of derivatives rules and letting the rest of the world catch up.The administrative agencies are sometimes referred to as the "fourth branch of government," and this is a perfect illustration of why. Here, we have a very significant policy dispute between two regulatory agencies, both led by Presidential appointees, and both charged with governing essentially identical transactions.It is in everyone’s interest that the Commissions will agree on a unified approach to cross-border. While the view has been expressed that market participants want the CFTC to adopt rules quickly and thus achieve regulatory certainty, most market participants and most global regulators would prefer a unified set of well-considered rules, rather than two sets of U.S. rules that neither work together nor take account of non-U.S. regulations. (For documentation of the extent of non-U.S. regulators' discomfort with the approach taken by the CFTC, see footnotes 4-7 on pages 3-4 of the SIFMA letter attached to the next news item.) The fact is that the CFTC's speech has not served the purpose of regulatory certainty. While it has moved ahead of the SEC in adopting rules, many of those rules have been the subject of repeated delays. Worse still, because the rules are not being adopted in consideration of each other, they do not fit well together. In short, regulatory lawyers prefer harmony, consistency and co-operation to speed.

Related News: "SEC Proposal on Cross-Border Security-Based Swaps (with Commissioners' Comments) (with Lofchie Comment)" (May 1, 2013).