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Possibility of a SEC, CFTC merger

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Barney Frank, who is scheduled to retire from Congress soon, has proven to be a vastly influential financial services policy maker.

He seems bent on providing a parting gift to the compliance and regulatory affairs industry and has sponsored legislation that would merge the SEC and the CFTC. The idea is not new, as it has been percolating for years.

"The existence of a separate SEC and CFTC is the single largest structural defect in our regulatory system," he said in a statement.

A Thomson Reuters News & Insight article notes that, "unfortunately, this is deeply rooted in major cultural, economic and political factors in America."

Indeed, the idea was originally part of the landmark Dodd-Frank reform bill. The provision was taken out largely because lawmakers "could not agree on was a proposed merger of the CFTC and SEC, in large part because of jurisdictional disagreements between committees overseeing financial services and those responsible for agriculture, the latter having a long history of overseeing the CFTC," the article notes.

In an era where critical securities markets were once separated, distinct regulatory entities made sense. But the markets are now so interrelated that a common regulator is an idea that might be coming of age. Consider the MFGlobal fiasco and the Flash Crash of 2010, two examples of how the issues were so intertwined.

But, politically speaking, can this merger happen? My sense is that the SEC is still back on its heels right now, especially without a long-term chairman. The only this will work is for proponents to pitch the idea as more of breakup of the SEC. The idea would have to carve out specific functions and take it off the plate for the new agency, along the lines of previous proposals to break up the SEC.

All in all, I doubt the merger concept will gain traction, and quite a few would agree with me. But you have to applaud Frank for trying up until the very end of his career as a Congressman.

For more:
- here's the article

 

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