Monday, November 9, 2009

Don’t Throw the Baby out with the Bath Water

Financial regulatory reform is poised to emerge in a form that risks being just more of the same, if clear segmentation of oversight duties is not set-out in bright line separation of duties. Says Pat O’Mara, CEO of New York’s Cardinal Compliance Services (, “Instead of more ambiguity there must be a clear road-map for industry professionals to follow, outlining all specific regulatory responsibilities.”

The broker-dealer and managed funds regulatory world should continue to follow an SEC rule making methodology that garners industry consensus (because the honest brokers and managers will always seek a level playing field), and self regulation is effective, as long as rules are rigorously applied and vigorously enforced. Congress should ensure that in its approach to hedge fund advisers, broker-dealers and money-managers, at all levels, they all fall under the SEC’s jurisdiction. From a regulatory standpoint, parsing the securities community based on size or product would only fragment a regulatory system that already suffers from a lack of communication among the existing departmental silos that have set-up, by mandate. SEC enforcement should, if anything, be given more range (i.e., of everything securities related, perhaps even more insurance products) along with a staff and a budget that would make all of the Madoff want-a-be’s cringe and cower at the thought. Few ever successfully challenge an SEC enforcement action. As for honest capital markets professionals, we should all be concerned with the morass of banking reform legislation, seek that it not pervert capital markets legislation, and welcome the leveling-of-the-field-of-play with a beefed-up SEC and FINRA.

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