New Regulatory Reforms between the SEC and CESR Likely to Affect Financial Firms between Continents

The United States and European Union regulatory reform efforts were discussed in a high-level meeting between the top honchos of the Committee of European Securities Regulators (CESR) and the Securities and Exchange Commission (SEC). Mary L. Schapiro, the SEC Chairman, Carlos Tavares, the CESR Chairman, and 29 CESR member regulators participated in the dialogue.

 

The EU and the US securities regulators are in the process of forming new, comprehensive rules to deal with the regulatory issues that cropped up in the latest financial crisis. Over-the-counter derivatives regulation and credit rating agencies, hedge funds and private equity funds managers’ oversight were some of the topics of discussion. These issues emerged during the financial crisis, making it imperative as key issues for regulators to tackle.

 

Additionally, the chairmen of both regulatory bodies spoke about their insight on systemic risk, market structure concerns, and matters regarding the convergence of the U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

 

There are a large number of financial firms operating globally in both continents. This leads to the necessity of communication and cooperation between both regulatory bodies to discuss the cross-border implications of their joint efforts. They will be discussed in subsequent meetings considering the global operations of the firms. The effectiveness of their regulatory efforts will need to be aligned while curtailing the possibility of avoidable law conflicts and regulatory arbitrage. This will solidify their commitment to a coordinated effort.

 

The SEC-CESR Dialogue officially established in 2004 had two primary objectives:

Besides the 2004 dialogue, the regulators of the US and the EU published a work plan in 2006, a direct output from the 2005 December meeting between SEC and CESR chairmen, where they discussed a concrete and practical approach to building a dialogue between them. In addition to synchronizing GAAP and IFRS, the intention was to forge a closer dialogue on the modernization of financial reporting and disclosure information technology, and regulatory platforms for risk management.

 

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