SEC streamlines rules for self-regulation

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WASHINGTON, DC – US regulator the Securities and Exchange Commission (SEC) has announced a rule change and new guidance for self-regulatory organisations (SROs) operating under SEC oversight. In a separate release, the SEC also published a proposal to streamline the regulation of foreign broker-dealers in the US.

The time taken by the SEC to approve an SRO’s rule change application has been reduced to 15 days, from the previous 35 days (with a possible 90-day extension). New guidance has also been released for “non-controversial” rule changes, which may be filed immediately.

The regulator says SROs will now benefit from improved market competition, faster speeds for new products and services to be made available to investors, and more effective investor protection measures.

SEC chairman Christopher Cox says: “Exchanges are competing with one another to provide more products to more investors more efficiently than ever before. But exchanges today also need to be able to change their rules quickly to respond to investors’ needs in this competitive environment. These changes in the SEC’s internal procedures should help strengthen the protection of investors who reap the benefits of healthier and more competitive markets.”

For foreign broker dealers, the proposed changes would expand and streamline the range of services they are allowed to offer without requiring registration, and remove the requirement that contact by a foreign dealer with a US institution must be chaperoned by a person registered with a US dealer.

“In practice, this chaperoning requirement has proven unwieldy as investors face significant inconvenience caused by differences in time zones and limitations on when investors can be contacted. Further difficulties for US investors arise because US-registered personnel have to be available for communications with foreign broker-dealers. Taken together, these limitations seriously hamper the service of US investors, while making them pay for brokerage services twice. They also effectively limit US investors' access to certain foreign investments,” says Cox.

Erik Sirri, director of the SEC's trading and markets division, adds: “While the Commission has provided a useful framework for US investors to access foreign broker-dealers for almost two decades, ever-increasing market globalisation suggests that it is time to revisit that framework to consider whether it could be made more workable.”

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