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Highlights

The conference report accompanying the Consolidated Appropriations Act of 2010 directed GAO to assess the joint report of the (SEC) and the Commodity Futures Trading Commission (CFTC) on harmonization of their regulatory approaches. In October 2009, CFTC and SEC issued this report in response to the Department of the Treasury's recommendation that the two agencies assess conflicts in their rules and statutes with respect to similar financial instruments. GAO's objectives were to review (1) how CFTC and SEC identified and assessed harmonization opportunities, (2) the agencies' progress toward implementing the joint report's recommendations, and (3) additional steps the agencies could take to reduce inconsistencies and overlap in their oversight. To meet these objectives, GAO reviewed the joint report and related documentation, interviewed agency officials, and obtained and analyzed written comments on the report from market participants.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
United States Securities and Exchange Commission To help ensure that CFTC and SEC are strategically positioned to implement the joint report's recommendations and address remaining harmonization opportunities, as CFTC and SEC continue to develop the charter for the Joint Advisory Committee, the Chairmen of CFTC and SEC should take steps to establish, with associated time frames, clearer goals for future harmonization efforts and requirements for reporting and evaluating progress toward these goals. Specifically, the agencies could benefit from formalizing a plan to assess implementation of the joint report's recommendations and harmonization opportunities that may not have been fully addressed by the joint report, such as differences in market structure and investor definitions. Such a plan could include goals for future harmonization efforts, such as time frames for implementing the recommendations; assessment of whether remaining differences in statutes and regulations result in inconsistent regulation of similar products and entities that could lead to opportunities for regulatory arbitrage; and periodic reports to Congress on their progress, including the implementation and impact of the recommendations.
Closed - Implemented
On May 11, 2010, CFTC and SEC announced the formation of the Joint Advisory Committee and noted that the charter for the committee includes furtherance of the agencies' efforts on regulatory harmonization as one of the subjects to be addressed by the committee. In a Notice of Federal Advisory Committee Establishment published on May 10, 2010, CFTC and SEC stated that the committee will work to develop clear and specific goals toward identifying and addressing emerging regulatory risks, protecting investors and customers, and furthering regulatory harmonization, and to recommend processes and procedures for achieving and reporting on those goals. In June 2014, SEC officials provided documentary evidence that SEC had implemented this recommendation. Specifically, SEC provided copies of annual harmonization plans that staff developed to guide harmonization efforts for fiscal years 2010 through 2014. Each of these harmonization plans outlines SEC's goals, timeframes, and planned efforts to coordinate with CFTC for the year ahead.
Commodity Futures Trading Commission To help ensure that CFTC and SEC are strategically positioned to implement the joint report's recommendations and address remaining harmonization opportunities, as CFTC and SEC continue to develop the charter for the Joint Advisory Committee, the Chairmen of CFTC and SEC should take steps to establish, with associated time frames, clearer goals for future harmonization efforts and requirements for reporting and evaluating progress toward these goals. Specifically, the agencies could benefit from formalizing a plan to assess implementation of the joint report's recommendations and harmonization opportunities that may not have been fully addressed by the joint report, such as differences in market structure and investor definitions. Such a plan could include goals for future harmonization efforts, such as time frames for implementing the recommendations; assessment of whether remaining differences in statutes and regulations result in inconsistent regulation of similar products and entities that could lead to opportunities for regulatory arbitrage; and periodic reports to Congress on their progress, including the implementation and impact of the recommendations.
Open
In July 2018, the CFTC and SEC Chairmen signed an updated version of a Memorandum of Understanding (MOU) originally signed in 2008. The new MOU created an updated framework for information sharing to make it easier for the two agencies to share information. A CFTC official noted that the MOU underscored two agencies' commitment to addressing harmonization efforts. In addition, CFTC officials identified examples of harmonization areas where CFTC and SEC have made some additional progress. This recommendation remains open until CFTC identifies steps taken to create a plan for assessing progress on working with SEC on remaining harmonization opportunities.

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