Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, November 30, 2007

Do the U.S. Markets Need an Overhaul? Point and Counter-Point

In response to Treasury Secretary Paulson's requests for comments on overhauling the U.S. capital markets:

NASAA responds: “Our existing regulatory structure, particularly as it pertains to the securities markets, needs no fundamental restructuring.”  It cautioned against a significant overhaul in an effort to enhance the competitiveness of U.S. capital markets.

“The millions of investors in this country – for the most part hardworking, middle class citizens, not Wall Street CEO’s – deserve a much better justification for a regulatory overhaul if their financial futures are to be placed at risk,” NASAA President and North Dakota Securities Commissioner Karen Tyler wrote in a comment letter to the U.S. Department of the Treasury regarding its Review of the Regulatory Structure Associated with Financial Institutions.

NASAA noted that recent calls for regulatory reform share a universal set of “improvements” designed to ease perceived industry burdens.  “Each reform package offers industry less bureaucracy, fewer constraints, and wide latitude in matters of conduct,” Tyler wrote. “We are troubled, however, by the lack of discussion about the effects of these reforms on the retail investor. We observe a lack of principle within “principled regulation” models that have nothing to say about investor protection.”

SIFMA, in turn, responds that the U.S. Regulatory Structure Needs Reform. “One of the great challenges facing the financial services industry is the need for regulatory reform in the U.S.,” said Marc Lackritz, SIFMA president and CEO.  “This process, initiated by Secretary Paulson, provides an excellent opportunity to reform an antiquated system and simultaneously move financial services regulation in the U.S. into the 21st century.  With a regulatory landscape plagued by duplication and conflicting standards, the need to improve regulation couldn’t be greater.  Doing nothing is not an option.”

“Our businesses and our markets are increasingly converging and driven by technology.  It’s time for regulation to catch up,” Lackritz added.  “The U.S. regulatory regime is in need of both substantive and structural reform.  We need reform to move to principles-based regulation, coupled with prudential supervision and liability reform, to ensure that regulation becomes flexible, encourages innovation and competition, protects against systemic risk, and protects investors.”

Whom do you think Treasury Secretary Paulson will pay more attention to?

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