Proposed Securities and Derivatives Commission would merge two regulatory agencies in attempt to improve co-operation
Barney Frank, the Congressman who co-sponsored the Dodd-Frank Act to overhaul US financial sector regulation, has proposed merging the SEC and the Commodity Futures Trading Commission (CFTC) to remove what he calls the ‘single largest structural defect’ in the US regulatory system.
Frank, who is serving out the last few weeks of his term before retiring, introduced the legislation to merge the two regulatory bodies through the House Financial Services Committee in association with Mike Capuano, a fellow Democrat member of Congress.
Frank says he excluded the measure from the Dodd-Frank Act, which imposed sweeping reform on the US financial sector, because inclusion would have guaranteed failure of the whole act. ‘I file this bill now because I believe it is time for this to be on the agenda of the next Congress,’ he says in a press statement.
‘The existence of a separate SEC and CFTC is the single largest structural defect in our regulatory system. Unfortunately, this is deeply rooted in major cultural, economic and political factors in America. Now that the basic policies have been adopted to cover security and derivatives regulation, we can focus on the structural issue.’
Recently, the SEC and CFTC have come under criticism in a congressional report for the ‘apparent inability of these agencies to co-ordinate their regulatory oversight efforts or to share vital information with one another.’
The issue of merging the bodies has been discussed repeatedly in the past, both in Congress and elsewhere, but has proven politically tricky, partly because the CFTC comes under the purview of the Agricultural Committee and the SEC is under the Financial Services Committee. Already, several Republican members of Congress have spoken against the latest Frank attempt to merge the two regulatory agencies.
The bill, called the Markets and Trading Reorganization Act, seeks to create a Securities and Derivatives Commission as ‘a single Federal regulatory body with jurisdiction over securities, derivatives, options, futures and related markets and instruments.’
The commission would comprise five commissioners appointed by the US president with Senate approval, with a maximum of three commissioners from a single political party. It would be divided into three divisions: markets & trading, issuers & financial disclosures, and enforcement.
