Financial Regulatory Forum

US to give regulatory reforms details next week

July 3, 2009

   WASHINGTON, July 2 (Reuters) – The Obama administration is aiming to release detailed legislative language for its proposals on corporate governance, shareholder rights, and derivatives regulation next week, sources familiar with the plans said Thursday.
   The U.S. Securities and Exchange Commission is helping draft the legislative proposal for corporate governance and shareholder rights, which is expected to be released on July 9, said the sources, who asked for anonymity because they are not authorized to speak publicly about the plans.
   The SEC has already proposed measures to improve shareholder rights, but some proposals require congressional action.
   One of the sources also said the administration aims to release its legislative proposals on derivatives regulation on July 10. Those are expected to call for a division of oversight responsibilities between the SEC and Commodity Futures Trading Commission (CFTC).
   The proposals will fill in the gaps left by the administration’s sweeping regulatory reform plan, which was released in a summary form last month.
   The administration is sending explicit legislative proposals to Congress in a piecemeal fashion. Congress is aiming to pass the reform package in one bill by the end of the year, and will likely make changes to the administration’s proposed legislation.
   Earlier this week, the Treasury Department sent a 152-page document to lawmakers, fleshing out its proposal for a Consumer Financial Protection Agency that could write and enforce rules on a broad array of financial products.
   It is unclear what the administration’s language on corporate governance and shareholder rights will include, but it is expected to have a so-called “say-on-pay” provision.
   The provision could require publicly traded companies to give shareholders a nonbinding vote on compensation packages for executives and directors.
   The legislative proposal on derivatives is expected to clarify how government agencies would divide responsibility for the largely unregulated over-the-counter derivatives market.
   Treasury Secretary Timothy Geithner is scheduled to testify before a congressional panel on OTC derivatives on July 10.
   The OTC derivatives market, which has a global notional value of $450 trillion, includes credit default swaps, the exotic financial instruments involved in many of last year’s financial crisis, including American International Group <AIG.N>.
   The SEC and CFTC have been working to come up with an approach to regulate the market, and have largely reached a consensus, the agencies’ heads said late in June.
   SEC Chairman Mary Schapiro said her agency should police “securities-related” OTC derivatives, such as equity derivatives, and credit and other fixed-income derivatives.
   The CFTC would regulate derivatives related to interest rates, foreign exchange, commodities, energy and metals.
   CFTC Chairman Gary Gensler has been less forthcoming in how he sees the division of responsibilities. He has said that both derivatives dealers and derivatives markets must be regulated, and has called for more use of central clearing.

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