US fund group: Merge SEC, CFTC into markets regulator
WASHINGTON, March 3 (Reuters) - Congress should create a new capital markets regulator to protect investors by combining the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, a group representing U.S. mutual funds said on Tuesday.
The Investment Company Institute (ICI) said a capital markets regulator could set legal standards for investment advisers, broker-dealers and money market funds, as well as address gaps in the regulation of hedge funds, derivatives and municipal securities.
The ICI said it would release specific recommendations to improve the functioning of money market funds by the end of March.
Momentum is growing for U.S. financial services regulatory reforms. The White House has called for a set of principles outlining reforms by early April when world leaders from the Group of 20 meet. U.S. lawmakers are expected to initially propose legislation to make the Federal Reserve a systemic risk regulator, followed by a comprehensive bill by August.
The ICI said it endorsed creation of a systemic risk regulator and also urged Congress to create a separate capital markets regulator that combines the existing SEC and CFTC.
"It is important not to simply use the current structure of the SEC and/or the CFTC as a starting point," the mutual funds group said. "The objective should be to build an organization that not only is more reflective of today's markets, market participants and investment products, but also will be flexible enough to regulate the markets and products of tomorrow."
Merging the two agencies will be a complex process and Congress must set a specific timetable to keep the project on track, the ICI said.
To be effective in policing U.S. markets, a capital markets regulator should hire staff with "significant" industry experience and create an advisory committee with private sector representatives, the ICI said.
Wall Street group, the Securities Industry and Financial Markets Association, has also endorsed a merger between securities and futures regulators. As well, SEC commissioners Kathleen Casey and Elisse Walter support such a merger.
The ICI also endorsed the idea of creating a systemic risk regulator to broadly monitor financial markets and risk management. That concept is favored by some influential lawmakers, such as Barney Frank, the Democratic chairman of the House Financial Services Committee.
Other recommendations from the mutual fund group:
* Require hedge funds to submit nonpublic information about their investment positions.
* Increase the transparency of counterparty risk in over- the-counter derivatives trading.
* Consolidate the banking sector's regulatory structure.
* Authorize an optional federal charter for insurance companies.
* Modernize the President's Working Group on Financial Markets to improve inter-agency coordination. The working group's members are the heads of the Treasury Department, Federal Reserve, SEC and CFTC.
The ICI's recommendations were posted on the Web at www.ici.org/pdf/ppr_09_reg_reform.pdf .
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* FACTBOX-US financial agencies face reforms[ID:nN04335224]
* FACTBOX-EU steps up financial regulation [ID:nLR466273] (Reporting by Julie Vorman; Editing by Andre Grenon)
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