Marc Lackritz, President of the Securities Industry Association (SIA), today testified on Consolidated Supervised Entities (CSE) before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit at a hearing entitled, “A Review of Regulatory Proposals on Basel Capital and Commercial Real Estate.” Lackritz called the SEC’s work to meet European Union (EU) requests for a regulatory framework on CSEs a success.
In 2002, (EU) financial regulators mandated that any financial firm with significant operations in the EU demonstrate that the firm is subject to consolidated supervision by its home regulator that is “equivalent” to that required of EU firms. Consequently, the SEC crafted a new regulatory framework for consolidated supervision of major independent investment banks not otherwise subject to such supervision. The CSE framework was finalized in June 2004.
In his prepared testimony, Lackritz discussed how the CSE structure operates. “Under the CSE framework, the SEC supervises certain broker-dealers, their holding companies, and affiliates on a consolidated basis, focusing on the financial and operational status of the entity as a whole. The goal is two-fold: first, to reduce the possibility that some problem within the holding company and/or an unregulated affiliate could endanger regulated entities; and second, to reduce any potential systemic threat to the capital markets as a whole.”
Lackritz went on to say, “Shortly after publication of the final CSE framework by the SEC in July 2004, the EU provided general guidance indicating that the framework is ‘equivalent’ to the form of consolidated supervision required…The EU decision on CSE equivalency is a clear statement that the framework is a solid success.”
Written testimony is available at: http://www.sia.com/testimony/2006/lackritz9-14-06.html
