Keynote Address:, by Commissioner Daniel M. Gallagher, on March 21, 2013

COMMISSIONER Daniel Gallagher of SEC gives insights on the new evolving financial market structures of the 21century. It would seem we CAN NOT rely on heavy regulations of trading and markets nor hastily crafted Frank-Dodd strictures. Here is Gallaghers conclusion on present status of HR and warning on excessive regulation of institutions, markets, transactions & keeping USA competitive edge. “And, I am very happy to report, a bipartisan bill introduced in the House of Representatives just two days ago strikes precisely the appropriate balance, requiring that the SEC and CFTC jointly issue rules on OTC derivatives that show deference to broadly equivalent foreign regulatory regimes. The House bill provides, in pertinent part, that the joint SEC-CFTC rules “shall provide that a non-U.S. person in compliance with the swaps regulatory requirements of a G20 member nation, or other foreign jurisdiction as jointly determined by the Commissions, shall be exempt from United States swaps requirements … unless the Commissions jointly determine that the regulatory requirements of the G20 member nation or other foreign jurisdiction are not broadly equivalent to United States swaps requirements.”20 * * * Returning to my larger point: Much of America’s post-war prosperity has been driven by our free market economy and vibrant capital markets. More recent experience in other parts of the world, Europe included, underscores that connection. We must not take the vitality of our capital markets for granted. We must instead foster them, and in the process protect investors, whether large or small, domestic or foreign. We must all regulate in a balanced manner — smartly. Smart regulation today requires, at a minimum, that we keep pace with the evolution of global markets, but that we do so without adding unnecessary costs — that we avoid imposing layers of complex, overlapping, and, to that extent, incoherent regulation. We must not look in isolation at the potential benefits of regulation, but also in each instance at whether they are sufficient to justify the costs that they entail. And we can, I submit, increasingly keep pace with developments in the industries and markets we regulate, while reducing the burdens we impose on those we regulate, by deferring to our peer regulators in appropriate situations. ” Link to entire address @

Remarks at “The SEC Speaks in 2013”, by Commissioner Daniel M. Gallagher, on February 22, 2013

Another non water reference nonetheless this brings us closer to understanding the struggles facing the Securities and Exchange Commission, Dodd-Frank, Congress and POTUS roles in regulating financial institutions. Here is Excerpt from Commissioner Daniel Gallaghers address: “….Although the Commission continues to stare down an overflowing plate of Dodd-Frank mandates in addition to its other responsibilities, as an expert, independent agency, the Commission must not allow itself to assume a secondary role in the regulation of matters squarely within its jurisdiction and core competencies. This, I’m afraid, is exactly the role that the Commission has taken thus far with respect to critical initiatives, including the Volcker Rule. Pursuant to Section 619 of Dodd-Frank, the three Federal banking agencies, the SEC, and the CFTC must together adopt regulations to implement the Volcker Rule’s two prohibitions on banking entities and their affiliates: its prohibition on engaging in proprietary trading and its prohibition on sponsoring or investing in “covered funds” such as hedge funds or private equity funds. Unfortunately, there is little doubt that notwithstanding the valiant efforts of the SEC staff, the Commission for too long has taken a back seat to the banking regulators in this rulemaking process. As I have said in the past, despite the Rule’s ostensible application to banking entities, the Rule is actually focused on the conduct to be regulated, not the entities that engage in this activity. There is no question that the specific trading, hedging, and investing activities to be regulated under the Rule fall firmly within the Commission’s core competencies, as they deal directly with SEC registrants and registration requirements. It makes little sense, therefore, for the Commission to defer to the banking regulators in this area when for decades it has regulated securities market-making in order to facilitate liquidity and promote the efficient allocation of capital. The implementing rulemaking for the Volcker Rule was proposed in October 2011. Almost a year and a half — and over 18,000 comment letters — later, the Volcker Rule remains at the proposal stage. Indeed, it appears that the proposal’s broad definitions of statutory terms have taken a bad situation and made it worse. Commission staff continue to engage in discussions with the bank regulators and the CFTC regarding the many concerns raised in those 18,000-plus comment letters. For this rule to get done and get done properly, the SEC must take a leadership role. In fact, I believe it is our duty as the independent financial regulator with primary authority over, and expertise in, the activities to be regulated to ensure that the final Rule meets the aims of Congress without destroying critically important market activity that the Rule explicitly intends not to eliminate. Moreover, in accordance with its core mission, it is the Commission’s responsibility to balance the bank regulators’ focus on safety and soundness and Dodd-Frank’s overarching focus on managing systemic risk with legitimate considerations of investor protection and the maintenance of vibrant markets. This brings me to the elephant in the room: FSOC. FSOC was created, in part, to respond to the realization during the financial crisis that regulatory balkanization had resulted in a lack of communication and information-sharing among financial services regulators, which undoubtedly led to poor policy decisions during the crisis. None of us who lived through the crisis on the ground floor would argue against improvements to the regulatory structure that would facilitate coordination and information-sharing among regulators. However, with FSOC the threats to the Commission’s independence move from the theoretical to the immediate, for already in its short existence, this new body has directly challenged the Commission’s regulatory independence. It is also where just one member of the Commission, the Chairman, can defend that independence. Pursuant to the provisions of Dodd-Frank establishing FSOC, the group is composed not of agencies, but the individual heads of agencies, acting ex officio.” See link for entire address.