Tuesday, March 27, 2007

Atkins Says SEC Must Be Responsive to Capital Markets Reports

By James Hamilton, J.D., LL.M.

In a speech in Dublin, Ireland, Commissioner Paul Atkins said the SEC cannot ignore the recommendations of three recent reports on the U.S. capital markets. He said the reports, the most recent of by the Chamber of Commerce, can inform the SEC of whether it has struck the right balance between investor protection and market competitiveness. Atkins also took aim at the “coalition of contrarians” who contend that the U.S. capital markets are fine and need no recalibration. He believes that the SEC is duty-bound to analyze, understand and respond, if warranted, to the recommendations that pertain to the Commission.

Atkins said regulators must examine the costs they impose on market participants through regulations and to make sure the costs do not exceed the benefits. Government actions cannot be viewed in isolation, he emphasized. In the increasingly interconnected global financial services sector, Atkins said governments need each other’s cooperation and assistance to fight fraud, manage risk and maintain low costs and efficiency.

While the findings of the policy groups in the U.S. were unique, Atkins noted that they had a common thread with respect to SEC-related issues. Each report recommended quick and substantial changes to section 404, he said, as well as streamlined regulatory processes based on meaningful cost-benefit analyses. The reports also called for the members of the President’s Working Group to work together to bring transparency and predictability to the enforcement process.

In my opinion, these are welcome remarks from the commissioner. I have previously blogged about the Chamber of Commerce report, officially known as the report of the Commission on the Regulation of US Capital Markets in the 21st Century. This is a thoughtful report replete with detailed recommendations, fully deserving of an official response. Similarly, the earlier Bloomberg-Schumer report on sustaining the US Global Financial Services Leadership is a very good effort, whose recommendations are worthy of full consideration.