SEC Has Plan to Recognize Foreign Market Rules

The SEC as well as the EU’s top market regulator have been exploring how to build a barrier-free transatlantic securities market that could ultimately give investors more choice.

“The steps we are announcing today are designed to better coordinate SEC regulation of the U.S. capital markets with our counterparts’ regulation in the larger global marketplace,” SEC Chairman Christopher Cox said in a statement.

The SEC’s plan includes exploring initial agreements with the agency’s foreign counterparts and potentially reforming rules to make it easier for U.S. investors to access foreign broker dealers. The Securities Industry and Financial Markets Association (SIFMA), a Wall Street trade group, urged the SEC to reform broker dealer rules immediately. “Firms are forced to meet Byzantine requirements written at a time when fax machines were the leading telecommunications tool,” the group said.

Rules need “to be rewritten to reflect the cross-border capabilities of the industry, and the global product demands of its customers,” it said.The concept of allowing foreign banks, brokers and exchanges to operate under their home country’s rules is also known as “mutual recognition”.”If regulators are able reach a “mutual recognition” agreement, it would mark a radical shift in how markets are overseen.

The SEC currently requires foreign trading firms to comply with its rules even though they are fully supervised in their home market. The plan includes adopting a formal process for discussing “mutual recognition” with other regulators. “By beginning to build a sturdy basis for cooperation among securities regulators who share the same concerns, we can greatly improve investor protection and market efficiency worldwide,” Cox added.