Reps. Barney Frank (D-Mass.) and Rep. Mike Capuano (D-Mass.) introduced a bill last week that would merge the Securities and Exchange Commission and Commodity Futures Trading Commission to become the Securities and Derivatives Commission.
“The existence of a separate SEC and CFTC is the single largest structural defect in our regulatory system,” Frank, the ranking member of the House Financial Services Committee, said, according to Compliance Week. “Unfortunately, this is deeply rooted in major cultural, economic and political factors in America. Had we sought to merge those institutions in the overall financial reform bill, it would almost certainly have caused the defeat of that legislation.”
The bill, cited as the Markets and Trading Reorganization Act, would, if enacted, establish the independent Securities and Derivatives Commission after one year, which would be composed of five members appointed by the president with the consent of the Senate.
The president would also designate one of the commissioners as chairperson, and political partisanship would be limited, with no more than three commissioners from the same political party. Additionally, at least one commissioner would have to be knowledgeable in the agricultural commodities market.
“This is a common sense step in continuing to advance financial regulatory reform,” Capuano, the ranking member of the HFSC’s oversight subcommittee, said, according to Compliance Week. “Merging the SEC and the CFTC will consolidate the existing regulators to eliminate gaps that have put our financial system at risk.”
Each commissioner would have a five-year term limit, though he or she may continue to serve after the term expiration until a qualified successor is found and appointed.
The commission will also be composed of three divisions, including a markets and trading division to oversee market conduct and related examination functions, an issuers and financial disclosures department to oversee the issuance of securities, and an enforcement division, Compliance Week reports.
Additionally, the new commission would impose fees on transactions involving the sale of a commodity for future delivery in order to cover the costs of the commission’s regulatory activities for each fiscal year. If, by March 1 of each fiscal year, the commission finds it has failed to meet budget targets, it will have the opportunity to adjust the fees.
The proposal comes just after a similar proposal in an HFSC subcommittee report on the collapse of MF Global, in which the SEC and CFTC were criticized for their lack of communication with each other in the days leading up to the firm’s collapse, Compliance Week reports.