SEC Praises Ireland's Regulatory System

by Jason Gorringe, for LawAndTax-News.com, London

30 March 2007

US Securities and Exchange Commissioner responsible for external relations, Paul Atkins, has praised Ireland's regulatory system, describing the Irish Government's 2004 white paper on better regulation as an "exemplary document."

Atkins was speaking along with EU Commissioner for the Internal Market, Charlie McCreevy at the Finance Dublin annual conference in Dublin Castle earlier this week.

Atkins told the conference: "It is encouraging that people are discussing ways to deepen the transatlantic relationship because it rejects the notion that the economies of the two continents are inherently at odds with one another. Instead, it reflects a realization that people everywhere benefit from greater transatlantic economic integration. We have seen this clearly in recent years as our increasingly integrated transatlantic financial services markets have opened up new opportunities for both Europeans and Americans and created deep and sustained economic growth on both sides of the Atlantic."

Commissioner Atkins' words follow the visit in early March by the Chairman and Chief Executive of the Irish Financial Regulator to the United States which involved a series of high level meetings with financial regulators and Federal Reserve chief Governor Bernanke.

Also top of the agenda at the forthcoming conference was the regulation of hedge funds, which surfaced at the G7 Summit last month, highlighting the importance attached to the sector by the ruling powers on both sides of the Atlantic.

In a statement on the conference's hedge funds agenda, McCreevy noted:

"Within an EU context there is already in existence a regulatory framework for financial services markets that impacts on hedge funds and that imposes obligations on those who manage such funds, intermediaries who provide investment advice on them, and on banks and prime brokers who take exposure to them.

"This framework includes the Transparency Directive, the Markets Abuse Directive, the Markets in Financial Instruments Directive, and the Capital Requirements Directive. In addition to this Member States play a vital role in supervision and oversight. Unfocused further intervention runs the risk of causing more problems than might be resolved.

"However I believe strongly that there is a need for supervisors to focus closely on banks' and prime brokers' collateralization practices and margin calls. In particular they need to focus on whether the collateralization safeguards and margin calls that banks and prime brokers employ to reduce the risk of loss in the event of hedge fund default are sufficiently robust to cope with a disorderly liquidation on markets.

"I welcome the work that the UK and US authorities have been doing together to push for improvement of settlement procedures for credit-derivative contracts."

Atkins also noted that a proposal by German Chancellor Angela Merkel to create a transatlantic capital market by 2010 - a move which could boost per capita GDP in the EU by 2% to 3.5% and in the United States by 1% to 3% - reflects a "realisation that people everywhere benefit from greater transatlantic economic integration."

"We have seen this clearly in recent years as our increasingly integrated transatlantic financial services markets have opened up new opportunities for both Europeans and Americans and created deep and sustained economic growth on both sides of the Atlantic," he observed.

McCreevy, also expressed support for the initiative:

"Europe is not an island. As I said, we must strive to lead the emerging global financial market - commercially, politically, and in regulatory terms.

"In one sense, I am encouraged today that it is the US that is nervously appraising its own regulatory system - post Sarbanes-Oxley. Their recent reports indicate that the EU is powering ahead. There is an alternative pool of capital outside the US today. What I want with the US is to work towards friction free transatlantic markets - 80% of the global total. We have no interest in a difficult US market. On the contrary."

"Now, subtly the debate is beginning to change. We see in the G7 10 days ago - fresh requests to work towards a securities free trade area. Green shoots from the SEC as well. That's new."

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