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Former CFTC Head Says Regulatory Streamlining Ahead: ‘Too Many Regulators’

Commodities and securities regulation under the Trump administration will be more open to market participants with less “gotcha stuff” to trip them up, speakers at a Houston conference heard last week.

Sharon Brown-Hruska, a former chairman of the Commodity Futures Trading Commission (CFTC) and currently a director at NERA Economic Consulting, was also a member of Trump’s landing team for the CFTC.

In the months before Trump’s inauguration Hruska was “running around” Washington emphasizing the key priorities of the incoming administration, she told attendees at the New Risk in Energy conference last week.

“First we wanted to embrace legislation and policies that promoted economic growth and capital formation and increased competition,” she said of her mandate. “You heard a lot about putting America first...It’s a natural message for us within the independent financial agencies to put a focus on these goals…”

Streamlining regulatory processes and relying upon fewer regulators is a Trump priority. “We do believe there are too many regulators,” Hruska said. “There’s substantial overlap between FERC and SEC [Securities and Exchange Commission] and the CFTC and the competition regulators.”

There’s no “game plan” yet, she said, but regulatory reform is coming, with an eye toward reducing regulatory overlap.

The potential merger of the CFTC and the SEC was talked about by Hruska and other speakers at the conference, with no indication whether the “perennial” idea will pick up traction.

“We want to sort of unify the approach and perhaps even look at a regulatory sort of reshuffling for change at the legislative level,” Hruska said.

“It’s  a perennial question; do we merge the SEC with the CFTC. [Acting CFTC Chairman Chris] Giancarlo and [SEC chief nominee Jay] Clayton, I think, are perfect leaders of the two most powerful, I think, administrative agencies to really look at that and give it an honest appraisal...I believe that the regulatory program of the CFTC is substantially different than the SEC. Even though they both regulate financial instruments, they have fundamentally different goals and purposes…”

Hruska said the Trump administration would only pursue merging SEC and CFTC “if it made sense, if there are real synergies there. And there really, I think, aren’t that many. I can’t say that they completely dropped the idea, but I know it’s kind of perennial; it’s ongoing.”

Speaking at the conference via telephone, Jim Newsome, former CFTC chairman and a partner with Delta Strategies, said there would be more discipline among regulators with regard to “gotcha stuff like record-keeping...It’s “a breath of fresh air.”

Commenting on the prospect of an SEC-CFTC merger, Giancarlo, in recorded comments to the conference, said a combination would have to enhance the mission of the agencies. “Synergies would have to be apparent,” he said, adding that the SEC is primarily concerned with regulating retail markets and the CFTC is geared toward the professional swaps market.

Another potential area of reform, Hruska said, would be to “put some teeth into the CFTC’s cost-benefit analysis requirement, and the same thing for” the Federal Energy Regulatory Commission. She said holding regulators to tougher economic standards would likely be a priority of the administration at independent agencies across the board. “We want to put some meat behind those bones...Stay tuned.”

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