16 Jul 2009, David Benyon, Operational Risk & Regulation
WASHINGTON, DC - The US Investors' Working Group (IWG) has recommended bold industry reforms be introduced to restore investor trust in US financial markets.
The report urges some immediate financial regulatory fixes, and a more careful consideration of the long-term picture of systemic risk oversight and fundamental reform of the US regulatory landscape.
The IWG, an independent panel of former regulators and investor and consumer interest representatives, is sponsored by the CFA Institute Centre for Financial Market Integrity and the Council of Institutional Investors.
Reform proposals include strengthening existing federal agencies responsible for policing markets - notably the Securities and Exchange Commission (SEC) - as well as the creation of a systemic risk oversight body unaffiliated with existing regulators - differing from the regulatory panel proposed by Treasury secretary Timothy Geithner.
A shake-up of corporate governance standards to make risk-reckless boards accountable to investors is also recommended, as is the closing of gaps in oversight of "standardisable" over-the-counter derivatives markets, to be supervised by regulated exchange trading.
The panel consists of experts co-chaired by two former SEC chairmen, Arthur Levitt and William Donaldson, who headed the regulator from 1993 to 2001 and 2003 to 2005, respectively.
"Too often politics and special interests get in the way of doing what's right for investors," said Levitt. "The IWG's inclusive, pragmatic and balanced approach to understanding other proposals and what investors truly need has resulted in a series of actionable recommendations with a longer-term view towards more comprehensive regulatory structure, stronger oversight and better-governed companies."
"The task before policymakers is challenging, but it presents an opportunity to create a more stable, transparent and adaptable US financial market," said Donaldson. "The IWG strongly seeks more investor protections and a system of checks and balances for managing systemic risk. We look forward to advising members of Congress and the Obama administration on what steps are needed to ensure regulation serves the needs of investors, consumers and the broader financial system."
The report can be read here.
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