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CFTC, SEC to Share 'Differences' With Congress This Month

The heads of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) said last week they are prepared to issue a joint report to Congress in two weeks that will address key areas in which their regulatory schemes are different. The government agencies will also recommend legislative and regulatory actions to address those differences.

The report will come in response to a June 17 white paper released by the White House on financial regulatory reform (see NGI, June 22). The paper called on the CFTC and SEC to "make recommendations to Congress for changes to statutes and regulations that would harmonize regulation of futures and securities." While the report was originally supposed to be delivered by on Sept. 30, the CFTC and SEC said that it is expected to be issued on Oct. 15 (see NGI, July 27).

At least one expert has said Congress should address the role of "primary regulator" in its financial reform legislation, identifying the products and markets over which the CFTC should have primary jurisdiction and the ones over which the SEC should be the primary regulator, to avoid the kind of jurisdictional head-butting that the CFTC and the Federal Energy Regulatory Commission engaged in following the implosion of hedge fund Amaranth Advisors LLC.

"The CFTC and the SEC have been working very closely to tailor our regulations in the best interest of the American public," CFTC Chairman Gary Gensler said. "I look forward to reporting to Congress and the president on identifying substantive changes that both agencies can make to close regulatory gaps, address inconsistencies and ensure that any overlap best serves the public."

It is anticipated that the report will address the following issues:

In addition, both agency heads expect that the report will contain recommendations to Congress and President Obama designed to:

"We must continue to build upon the progress we are making to reduce regulatory arbitrage, avoid unnecessary duplication and close regulatory gaps," said SEC Chair Mary Schapiro. "We are fully committed to continuing on the path toward reform."

In addition to extensive discussions between the agencies, the two regulatory bodies held their first-ever joint public meetings earlier this month (see NGI, Sept. 7). The meetings sought to solicit views from industry participants, experts and the public on the current regulatory scheme, harmonization of the agencies' rules and recommendations for changes to statutes and regulations.

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