Sen. Mike Crapo (R-Idaho), the ranking member of the Senate Committee on Banking, Housing and Urban Affairs, stressed last week the importance of collaboration between the SEC and CFTC in their regulatory approaches.
“True harmonization is not only getting on the same page, but it is working together to get on the right page,” Crapo said. ”The U.S. markets are the most liquid in the world and must remain so. Market participants must not be discouraged from entering a market that will allow them to allocate their risks, hedge their investments and grow their business. The cumulative regulatory burdens that will flow from a regime that is not truly harmonized will work against the free flow of capital in the U.S. and abroad.”
Crapo said the guidance issued by the CFTC last month on the cross-border implementation of Dodd-Frank’s Title VII “continues to raise questions, both as to its substance and the process surrounding its issuance.”
“In the hours leading up to the CFTC’s final guidance, the CFTC and European regulators issued a joint statement regarding how international coordination of rulemaking should proceed,” Crapo said. “This ‘Path Forward’ has been characterized as an agreement, when it appears to be a statement of future collaboration. While this development may prove to be constructive, a number of questions remain.”
Additionally, Crapo pointed to the SEC’s proposed cross-border rule, saying much work remains to ensure international harmonization of the rules.
“The public is now faced with two marginally similar regulatory plans from two agencies, issued through two very different processes,” Crapo said. “The CFTC, through interpretative guidance and exemptions. The SEC, through notice and comment rulemaking…For example, both cross-border schemes contemplate ‘substituted compliance,’ which is intended to provide foreign market participants the chance to continue to abide by their own country’s requirements if those requirements are deemed ‘comparable’ to U.S. requirements. The willingness of each agency to grant substituted compliance for foreign jurisdictions is questionable. The details matter.”