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Corporate & Securities Law

: OverRegd - Securities Regulation and Litigation Blog

SIFMA General Session -- Day One

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Today is the opening day of the annual SIFMA conference, held this year in Orlando. This morning's general session, moderated by Gary Lynch, executive vice president and chief legal officer of Morgan Stanley, included panelists James Brigagliano of the SEC; Richard Ketchum of NYSE Regulation, Inc.; John Moloney of Moloney Securities Company Inc.; and Mary Schapiro, Chief Executive Officer of FINRA. SIFMA's kick-off topic was "NYSE and NASD Merger -- How is it Working?"

Mary Schapiro (FINRA) commented that the merger has gone well and has met her expectations at this stage, noting:

The governance board is in place;
The business processes used by NYSE and NASD are largely consolidated;
A mid-2009 date is anticipated for the completion of combining the technologies from NYSE and NASD, having already retired 14 systems; and
The completion of a consolidated rule book will take time, and is made more complex by a rapidly changing environment, both on the regulatory side and in the market place. It is likely that there will be rules coming out for comment by Spring.

Although it has not yet been a year since the merger, Richard Ketchum (NYSE Regulation) believes that the industry has already benefitted by a more efficient and effective single examination program, and through the interpretation of the rules through one body. He also noted that the ability to create a consolidated set of rules constitutes a one-in-a-lifetime opportunity to step back and look at the rules fresh.

John Moloney (Moloney Securities) noted that from a small firm perspective, there are varied opinions on the effectiveness of the merger, but many small firms do view the examinations to be more poignant and drill-down as to what is important.

The Panel also discussed whether principle-based regulation or rule-based regulation should control. Mary Schapiro commented that while principles are very valuable, she did not view them as replacing the rule book. Mr. Ketchum agreed, noting that principles can bring a level of confidence, guidance, and framework for the rules themselves.

Gary Lynch (Morgan Stanley) questioned whether a two-tier system of regulation makes sense for institutional and retail markets. In terms of any "carve-out" from the rules for institutional clients, James Brigagliano (SEC) agreed with Mary Schapiro that a broad institutional carve-out would be extremely hard, that there is a need to look at regulation on a rule-by-rule basis, and that the most challenging aspect to any carve-out is determining sophistication (i.e., just because the investor is large with a lot of assets to invest doesn't necessarily mean it is sophisticated).

In terms of enforcement, Mr. Ketchum and Ms. Schapiro noted that taking a more risk-based focus on examinations makes sense, so that regulator's resources are focused on those firms with the highest risk to the public. With that, the hundreds of conference participants packed in the auditorium-style room disbursed to the various break-out sessions.

Stay tuned for an update about tomorrow's general session which focuses on current SEC issues.

Full post as published by OverRegd - Securities Regulation and Litigation Blog on March 31, 2008 (boomark / email).