“The system of self-regulation combined with SEC oversight
has well served investors and the industry for the past seven decades,” SIA
General Counsel Ira Hammerman said.
“The self-regulatory model allows industry professionals to bring their
expertise to bear on complex problems, applies standards of just and equitable
principles of trade, and effectively supplements SEC oversight and
enforcement. On the down side, the
system is hindered by duplicative regulation and examination by multiple SROs,
and instances of conflicts of interest.
The goal for reform, therefore, should be to maximize the benefits of
the self-regulatory structure, while minimizing, and where possible,
eliminating, its shortcomings. We
should make necessary improvements, but we should also make sure we keep the
‘self’ in self-regulation.”
In its comment letter, SIA wrote, “issues of SRO governance
reform and the future structure of self-regulation are not separate topics, but
are in fact inextricable from each other.”
The association offered its vision of a system of self-regulation that
is optimal for both investors and the markets:
- The
hybrid model described in the SEC concept release offers the best
structure for minimizing regulatory duplication, addressing conflicts of
interest, and maintaining the prominence of U.S. capital markets. Under this model, there should be two
types of organizations, divided by function. Each marketplace would have its own SRO to regulate and
enforce trading, markets, and listing requirements. In addition, there would be a
single-member SRO to handle regulations relating to the operations of
broker-dealers;
- To
prevent gaps in regulation, each of the two types of SRO would be more
directly accountable to the SEC.
Each SRO would have strict SEC reporting requirements as proposed
in the SRO rulemaking release; and,
- To
ensure adequate funding, the “marketplace” SRO would assess trading and
listing fees, while the single-member SRO would collect membership and
regulatory fees. Market-data fees
would no longer be used to fund regulation.
“A new system, based on the model SIA describes in its
comment letter, would preserve the benefits, while correcting the inherent
problems of the self-regulatory model,” Hammerman said. “We look forward to continuing to work with
the SEC to modernize and improve self-regulation.”
SIA’s comment letter is available at http://www.sia.com/2005_comment_letters/5218.pdf
