November 23, 2007
Should the SEC and CFTC Merge?
SIFMA, in a letter in response to Treasury Secretary Paulson's request for comments on the regulatory structure for financial institutions, revives the idea of consolidating the SEC and the CFTC into one "principles-based" regulator. Certainly, the idea of consolidation has merit, as futures trading today is less involved in the traditional commodities and more focused on financial instruments. As a result, there are counter-productive turf wars over the jurisdiction of each agency. However, in an era of increasingly complicated financial products, I think there are good arguments for smaller specialized agencies. Mutual fund regulation over the years, for example, may not have been effective because the SEC had neither the expertise nor the interest in the area. Moreover, I suspect that a consolidated agency will not have the resources of two independent agencies, and the reduction will not result just from "efficiencies" of combining resources. SIFMA, in its letter, also proposes other, comprehensive reforms for the financial services industry.
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