The Chamber has called for comprehensive reform of our capital markets regulatory structure since well before the current crisis.  Our regulatory structure is 75 years outdated, and in order to ensure the capital formation necessary to spur long term economic growth and job creation, we need a comprehensive and effective overhaul.     

With the Obama Administration announcing its proposal for regulatory reform, we’d like to provide the business community’s perspective and identify our key priorities.    

First – we need to get this right, and achieve comprehensive and forward-looking reform.  Partial solutions or sound-byte driven proposals will only exacerbate the problems of the current system and create more uncertainty.

Proposals by the Administration and Congress should be focused on resolving three fundamental problems with our regulatory system: ineffective regulation, regulators that aren’t well coordinated, and gaps and duplication in current regulation. 

What We Need

• We need an overhaul and transformation of existing regulators so that they have world class technology, expertise and market insight to effectively protect investors and consumers. 

• We need to ensure there is transparency in the system to provide regulators with the information they need to identify risks to the system, identify the appropriate actions to mitigate them, and to ensure someone is seeing the big picture. 

• We need to enhance consumer protection through effective regulation, disclosure that is understandable and concise, consumer education, and enforcement of the laws to deter and punish illegal and predatory activities.

• We need to ensure regulators are adequately coordinating with each other.  This cooperation is not only important at home among U.S. regulators, but should also extend to market regulators outside our borders. 

• We need to close certain regulatory gaps by improving the oversight of the derivatives markets, and by requiring registration of hedge fund advisers.

• Lastly, we need an exit strategy for programs established by the Congress, Treasury and Federal Reserve to address this crisis.  Government steps designed to reignite lending can only be fully effective if private market participants know the rules of the game and there is a clear, timely and predictable exit plan.

What We Don’t Need

• We don’t need a stand alone consumer protection agency that cannibalizes regulatory expertise, adding yet another regulatory layer and additional regulatory gaps.

• We don’t need a systemic risk authority that duplicates regulation by existing regulators or permanently designates specific financial institutions as systemically significant, thereby implying they are too big to fail.  There should be no explicit or implied expectation that losses at large firms will be socialized to the taxpayer.

• We don’t need proposals, such as proxy access, that advance the agenda of activist special interests at the expense of good governance and long-term returns for average shareholders.

• We don’t need rigid and inflexible regulation that stifles responsible innovation.  Regulated entities should be able to get timely answers to allow for responsible innovation within the regulated structure.  We cannot drive or force innovation into dark unregulated corners here or around the globe.

In short, the Chamber will strongly support proposals that will make the regulatory system more effective.  And we’ll put up a fight when it comes to regulations that will add to the layering, duplication, and gaps of the current system. 

Congress should pursue real reform that will spur the capital formation needed to secure real long-term economic growth and job creation.

We hope the Administration has not listened to those who only want to tinker at the edges. We believe it will be best for our long term recovery to emerge from the crisis with a comprehensive overhaul and modernization of the regulatory system.  If not now, when?