The regulators have issued an MOU intended to usher in an era of harmony between them.
A while back, I wrote about Timothy G. Massad, a former CFTC chairman, who asked via an op-ed piece for the Brookings Institution if it was time to merge the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It looks as if the two regulators have answered that question by promising to enter an era of new harmony, end regulatory turf wars, and lay the groundwork for a Golden Age of American finance.
Grygo is the chief content officer for FTF & FTF News.
The regulators recently unveiled a Memorandum of Understanding (MOU) “to guide coordination and collaboration between the two agencies to support lawful innovation, uphold market integrity, and ensure investor and customer protection,” according to the announcement. “The MOU reflects both agencies’ commitment to provide fair notice to market participants, respect individual liberty, and foster lawful innovation with the minimum effective dose of regulation to enhance U.S. competitiveness in finance.”
In his prepared statement, SEC Chairman Paul S. Atkins acknowledges that decades of “regulatory turf wars, duplicative agency registrations, and different sets of regulations between the SEC and CFTC have stifled innovation and pushed market participants to other jurisdictions.”
Atkins says the updated MOU “will serve as a roadmap for a new era of harmonization between the agencies – one that is critical to support U.S. leadership in this next chapter of financial innovation. By aligning regulatory definitions, coordinating oversight, and facilitating seamless, secure data sharing between agencies, we will ensure our rules and regulations deliver the clarity market participants deserve.”
The regulators have also created a Joint Harmonization Initiative that will be led by Robert Teply, harmonization lead for the SEC Chairman’s Office and Crypto Task Force Senior Advisor at the SEC, and Meghan Tente, acting deputy director for the CFTC.
The initiative’s mandate is “to advance coordinated oversight and promote regulatory clarity in areas of common regulatory interest,” officials note. “The initiative will support coordination across the policymaking, examination, and enforcement functions of each agency, particularly for joint applications and shared policy efforts, including:
- Clarifying product definitions through joint interpretations and rulemakings;
- Modernizing clearing, margin, and collateral frameworks;
- Reducing frictions for dually registered exchanges, trading venues, and intermediaries;
- Providing a fit-for-purpose regulatory framework for crypto assets and other emerging technologies;
- Streamlining regulatory reporting for trade data, funds, and intermediaries;” and
- Coordinating cross-market examinations, economic analyses, risk monitoring, surveillance, and enforcement.
The agreement also outlines specific procedures for coordination between the two agencies:
- Regular meetings: Agency representatives will meet regularly and as needed to identify early on issues of regulatory interest and their regulatory implications.
- Sharing data: Both agencies will share data, “upon request, regarding issues of common regulatory interest related to a specific incident, event, activity, or other matter deemed appropriate.”
- Ongoing notifications: To the extent practicable and appropriate, both agencies will endeavor to inform the other agency in advance of issues that may affect the regulatory interests of the other agency and/or entities, products, or markets under common jurisdiction.
- Cross training: Appropriate staff will be cross-trained “to enhance each agency’s understanding of the other’s mission and jurisdiction so that both agencies can effectively protect the public.”
“By working together, we’ll eliminate duplicative, burdensome rules and close gaps in regulation for the benefit of all Americans and usher in a Golden Age of American finance,” says CFTC Chairman Michael S. Selig, in a prepared statement.
The regulators encourage public input, which may be submitted through written input forms on their websites or through a meeting request, officials add.
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