U.S. Securities Industry Urges SEC, EU To Forge Framework To Achieve Regulatory 'Convergence' - Investors, Issuers, Capital Markets Would Benefit From Complementary Transatlantic Regulations

The Securities Industry Association strongly supports efforts by the United States and European Union regulatory bodies to establish a more formal framework for resolving cross-border regulatory issues so that investors and issuers can benefit from a truly transatlantic securities market, SIA's chairman today said. More intensive prospective and coordinated regulatory discussions should help to achieve convergence of U.S. and EU regulations.

Securities and Exchange Commission Chairman William H. Donaldson recently called on his agency and the Committee of European Securities Regulators to "explore a more formal framework for collaboration and cooperation" to create a "complementary linkage between U.S. and European securities regulators."

SIA Chairman Richard Thornburgh, the chief risk officer for Credit Suisse Group and a member of the Credit Suisse Group Executive Board, outlined five areas where the SEC and the CESR could begin to work together to converge regulations. These are:

public offering documents, beginning with mandatory non-financial disclosures (such as the management's discussion and analysis), which would contribute to reducing the cost of capital and increasing liquidity by both reducing review periods and enabling issuers to better time offerings;
broker-dealer registration to allow financial institutions to operate seamlessly between the EU and the United States;
credit-rating agencies rules to minimize confusion, with early discussions held to help ensure that any resulting initiatives are, from the outset, consistent, rather than conflicting;
anti-money laundering standards to improve the efficacy of regulators on both sides of the Atlantic to track down and eliminate this behavior; and,
corporate governance standards to enable public companies trading in both regions to resolve, for example, different U.S. and EU board composition requirements.

"Increasingly, the U.S. and EU capital markets are becoming one transatlantic market," said Thornburgh. "The two-way flow of trade, portfolio, and direct investment between our two regions exceeds $1 trillion annually. We want to ensure that regulatory dissimilarities between the EU and the United States do not curtail the potential growth and size of the transatlantic marketplace by limiting liquidity, narrowing access to capital, and creating transaction inefficiencies. The dialogue between EU and U.S. regulators must be broadened and strengthened to achieve regulatory convergence, as the SEC's chairman has sought.

"Common approaches will benefit firms and their customers in conducting business more efficiently by providing low-cost products and services to clients," said Thornburgh. "The list of areas where the SEC and CESR can work on convergence could be accomplished without in any way diminishing investor protections. SIA looks forward to working closely with the regulators on both sides of the Atlantic."

The ongoing "U.S./EU financial markets dialogue" between the U.S. Administration and the European Commission, which also includes meetings between U.S. and EU regulators, is part of the U.S./EU Positive Economic Agenda, which was announced at the May 2, 2002 U.S./EU Summit.