Securities and Exchange Commission Chairman Christopher Cox and Board of Governors of the Federal Reserve System Chairman Ben Bernanke have signed a memorandum of understanding (MoU) between the two agencies that will deepen their information sharing and cooperation.
Under the MoU between the two agencies, the SEC and the Board would share information and cooperate across a number of important areas of common interest including anti-money laundering, bank brokerage activities under the Gramm-Leach-Bliley Act, clearance and settlement in the banking and securities industries, and the regulation of transfer agents. The MoU specifically covers bank holding companies and so-called Consolidated Supervised Entities that own securities firms. It builds on and formalizes the long-standing cooperative arrangements between the SEC and the Board, as well as the more recent cooperation on matters including banking and investment banking capital and liquidity following the Board’s emergency opening of credit facilities to primary dealers.
“It is my hope that the MoU will result in improved supervision of investment banks and bank holding companies, and strengthen our financial markets for investors and our nation’s economy,” says Sen. Chris Dodd, chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. “It is important to note that the MoU does not grant any new authority to either agency, nor does it affect the ability of the Congress and the Senate Banking Committee to oversee regulated institutions and markets.”
“This agreement represents a valuable coordination of the roles of the SEC and the Fed in our capital markets,” Cox says. “Years ago, when the dividing lines between commercial and investment banking were bright, the high level of coordination we are establishing today was not a priority for the U.S. government. But today, the interconnectedness of mortgage and lending markets, credit derivatives, securitizations, and counterparty relationships requires the U.S. government to adopt a more coherent and coordinated approach. Just as with our similar arrangement with the CFTC, this agreement will permit the expanded sharing of information on a confidential basis, and help ensure that regulated entities receive a coherent message from Uncle Sam.”
The MoU will improve the ability of the SEC to perform its role as primary supervisor of Consolidated Supervised Entities and Primary Dealers, and improve the ability of the Federal Reserve to perform its role in overseeing the stability of the financial system, the Fed and SEC say.
“The MoU finalized between the SEC and the Federal Reserve is consistent with the long-term vision of Treasury’s Blueprint for a Modernized Regulatory Structure and should help inform future decisions as our Congress considers how to modernize and improve our regulatory structure,” says Henry Paulson, U.S. Treasury Secretary.
The SEC recently entered into a similar MoU with the Commodity Futures Trading Commission. An agreement between the SEC and the Department of Labor is anticipated later this summer.