SEC Examines System of Self-Regulation in Securities Markets

Washington, DC, January 28, 2005 - The SEC has issued a concept release relating to the role and operation of the self-regulatory system of the securities industry, and is seeking the public’s comment on self-regulatory organizations (SROs) in today’s markets.

Background
The SEC periodically reviews the self-regulatory system and has noted that, in recent years, changes in the markets and in the ownership structure of SROs have generated questions about the fairness and efficiency of the current SRO structure.

In its release, the SEC examines a number of issues concerning securities industry self-regulation, including:

• the inherent conflicts of interest between an SRO’s regulatory obligations and the interests of its members, market operations, listed issuers, and, in the case of a demutualized SRO, its shareholders;
• the costs and inefficiencies of the multiple SRO model;
• the challenges of surveillance across markets by multiple SROs; and
• the manner in which SROs generate revenue and how SROs fund regulatory operations.

The release also discusses a variety of regulatory approaches or legislative initiatives that could be considered by the SEC to address concerns with the current SRO model.

Comments on the SRO system are due to the SEC by March 8, 2005.

ICI Position
The Institute strongly supports efforts to improve the quality of the U.S. securities markets, including provisions of Regulation National Market System (NMS), which is intended to enhance and modernize the regulatory structure of those markets.

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