The Securities and Exchange Commission’s plan to develop a proposal for mutual recognition is on temporary hold because the SEC is down to three commissioners, all Republicans. Mutual recognition efforts will recommence when the securities regulator gets at least one additional commissioner.
Erik Sirri, director of the SEC’s division of trading and markets, told Traders Magazine the SEC is taking a “brief pause from pushing this,” adding that “this isn’t something we want to do with three commissioners. If at all possible, we want to wait until with have one or two more commissioners on board.”
By law, no more than three commissioners can be from the same political party. The two Democratic commissioners who left the SEC are Roel Campos, whose term ended last September, and Annette Nazareth, who left at the end of last month.
Sirri observed that mutual recognition “is not a partisan issue. There is no reason to rush it through.”
SEC chairman Christopher Cox has been stumping for mutual recognition in his travels and speeches. Mutual recognition refers to the concept of enabling U.S. investors to gain more immediate and efficient access to foreign securities markets. The SEC’s stated intention is to institute a program of “substituted compliance” that would enable foreign exchanges and broker-dealers in certain regulatory jurisdictions to directly access U.S. investors. Currently, foreign exchanges and brokers must be registered with the SEC to have direct access U.S. investors.
The SEC’s mutual recognition efforts are part of a broader set of initiatives, primarily between the U.S. and Europe, to work toward integrating various enforcement, regulatory and supervisory systems across jurisdictions. Efforts are also afoot to develop a common accounting language and data standards for financial statements.
The SEC remains committed to moving forward with mutual recognition. “If the SEC and our like-minded counterparts can build the mechanisms to make our oversight and enforcement systems seamless,” Cox said earlier this month, “I believe that foreign financial service providers operating in the U.S. should be able to substitute compliance with their home jurisdiction’s regulations for compliance with our own through a system of regulatory mutual recognition.”
