SEC Announces Next Steps For Implementation Of Mutual Recognition Concept

by Mike Godfrey, Tax-News.com, Washington

25 March 2008

The US Securities and Exchange Commission (SEC) on Monday announced a series of actions that it intends to take to further the implementation of the concept of mutual recognition for high-quality regulatory regimes in other countries.

The Commission revealed that it is contemplating taking the following actions:

• Exploring initial agreements with one or more foreign regulatory counterparts, which would be based upon a comparability assessment by the SEC and by the foreign authority of one another's regulatory regimes.
• Considering adoption of a formal process for engaging other national regulators on the subject of mutual recognition. This process could be accomplished through rulemaking or other appropriate mechanisms, possibly informed by one or more initial agreements with other regulators.
• Developing a framework for mutual recognition discussions with jurisdictions comprising multiple securities regulators tied together by a common legal framework, including Canada (which has no national securities regulator, but rather provincial regulators) and the European Union (whose national securities regulators are subject to supranational legislation and directives).
• Proposing reforms to Rule 15a-6 in order to improve the process by which US investors have access to foreign broker-dealers.

"The steps we are announcing today are designed to better coordinate SEC regulation of the US capital markets with our counterparts' regulation in the larger global marketplace," explained SEC Chairman Christopher Cox.

He continued: "Innovations in technology have eliminated many barriers to cross-border access between US and foreign markets, and that in turn has increased US investor demand for foreign investment opportunities. 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."

The Commission's engagement of other regulators in an effort of coordination and cooperation has spanned more than 20 years, according to the SEC.

These efforts have included the reaching of memoranda of understanding regarding enforcement cooperation, technical assistance, and investigatory collaboration with more than 30 foreign jurisdictions.

In the past decade, as global markets have become more interconnected, the SEC has been approached by market participants and foreign regulators regarding the possibility of reducing regulatory barriers between high-quality markets.

Recently, the Commission has engaged in an extensive exploration of the issues, including the holding of a Mutual Recognition roundtable on June 12th, 2007.

The Commission is also taking this opportunity to express again its interest in discussing market access with foreign counterparts, investors, and other interested parties, as well as other issues affecting international regulatory cooperation.

The Commission has also had the benefit of the extensive public discourse, including the publication of formal studies and recommendations by various private groups, it revealed.

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