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October 06, 2017

The U.S. Department of the Treasury released a report detailing how to streamline and reform the U.S. regulatory system for the capital markets. The Treasury’s evaluation of current capital market regulations found that significant reforms can be undertaken to promote growth and vibrant financial markets while maintaining strong investor protection. This report is issued in response to the Executive Order 13772 issued by President Trump on February 03, which calls on Treasury to identify laws and regulations that are inconsistent with a set of Core Principles of financial regulation. This is the second report on the administration’s review of the core principles of financial regulation.

In the report, the Treasury identifies numerous ways to reduce the burden on companies that are looking to go public or stay public, while maintaining strong investor protections; these include streamlining disclosure requirements to reduce costs for companies while providing investors the information they need to make investment decisions and tailoring the disclosure and other requirements for companies going public based on their size. Additionally, the Treasury found that the federal financial regulatory framework and processes could be improved by evaluating the regulatory overlaps and opportunities for harmonization of SEC and CFTC regulation and by limiting imposing new regulations through informal guidance, no-action letters, or interpretation, instead of through notice and comment rulemaking. It also found that regulatory processes could be improved by reviewing the roles, responsibilities, and capabilities of self-regulatory organizations (SROs) and making recommendations for improvements.

The Treasury’s review of the derivatives market found the need for greater harmonization between the SEC and CFTC, more appropriate capital and margin treatment for derivatives, and resolution of cross-border frictions that fragment global markets. Additional recommendations in the report include:

  • Improving the oversight of financial market utilities (FMUs), such as by FSOC continuing to study the role FMUs play in the financial system and regulators considering appropriate risk management for FMUs to avoid taxpayer-funded bailouts
  • Repealing Sections 1502, 1503, 1504, and 953(b) of the Dodd-Frank Act
  • Investigating how to reduce costs of securities litigation for issuers with the goal of protecting all investors’ rights and interests
  • Increasing the amount that can be raised in a crowdfunding offering from USD 1 million to USD 5 million
  • Examining the impact of Basel III capital standards on secondary market activity in securitized products
  • Advancing U.S. interests and promoting a level playing field in the international financial regulatory structure


Related Links (PDFs)

Keywords: Americas, US, Securities, Capital Markets, Proportionality, Dodd Frank Act, FMU, US Treasury

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