U.S. Treasury Dep't issues cap mkt recommendations; SEC sets mtg on disclosure rules

Following from an Executive Order issued by President Donald J. Trump earlier this year, outlining a set of core principles of financial regulation, and requiring the U.S. Treasury Department to issue a number of related studies and recommendations, the most recent in their series of reports was issued on October 6.

The latest report, entitled, A Financial System that Creates Economic Opportunities: Capital Markets, contains 15 pages of recommendations, summarized in Appendix B of the 220-page report. The recommendations pertain to the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, and the bank regulatory agencies.

An accompanying press release issued by the Treasury Department states that the report, "detail[s] how to streamline and reform the U.S. regulatory system for the capital markets," based on "Treasury’s evaluation of current capital market regulations [which] found that there are significant reforms that can be undertaken to promote growth and vibrant financial markets while maintaining strong investor protections."

Disclosure reform highlighted by Treasury

The very first bullet point included in a list of highlights of Treasury's report, as articulated in the related press release, pertains to the SEC, specifically, the need for:

• "Streamlining disclosure requirements to reduce costs for companies while providing investors the information they need to make investment decisions."

The recommendations pertaining to disclosure - generally (as opposed to specific disclosures) included in the report, reference the SEC, including interaction with disclosures required by the Financial Accounting Standards Board (FASB), as follows:

• "As required by the Fixing America’s Surface Transportation [FAST] Act, Treasury recommends that the SEC proceed with a proposal to amend Regulation S-K in a manner consistent with its staff’s recent recommendations."
• "Treasury recommends that the SEC move forward with finalizing its current proposal to remove SEC disclosure requirements that duplicate financial statement disclosures required under generally accepted accounting principles by the Financial Accounting Standards Board."

Other areas addressed in Treasury's report pertaining to the SEC include recommendations relating to conflict minerals and resource extraction disclosures (specifically, recommending that Congress pass the Financial Choice Reform Act of 2017, to repeal those provisions of Dodd-Frank; and in the absence of legislative action, that the SEC consider exempting Smaller Reporting Companies and Emerging Growth Companies from those requirements), as well as recommendations pertaining to the proxy process, crowdfunding, restrictions on unaccredited investors, and numerous other areas of SEC regulation.

Similarly, the report contains many recommendations aimed at the CFTC and the banking (financial services) agencies.

Ten areas in total, for financial regulators to address

The report and recommendations are organized according to 10 subject areas:

1. Access to Capital
2. Equity Market Structure
3. The Treasury Market
4. Corporate Bond Liquidity
5. Securitization
6. Derivatives
7. Financial Market Utilities
8. Regulatory Structure and Process
9. International Aspects of Capital Markets Regulation

Learn more in the Treasury Department's Fact Sheet about the capital markets report. See also U.S. Treasury outlines sweeping reform of capital markets (Reuters), and Treasury Plan Calls for Easing Dozens of Wall Street Rules (Bloomberg Markets).

SEC schedules meeting on disclosure simplification

Days ahead of the release of Treasury's Capital Markets report and recommendations, the SEC announced it will hold an open commission meeting on disclosure reform (more formally, disclosure modernization and simplification) on October 11. This will be the first open commission meeting led by SEC Chairman Jay Clayton.

The timing of the SEC taking up this action - a continuation of the Commission's disclosure effectiveness initiative and responsive to requests for SEC studies and rule-making contained in the FAST Act of 2015 - dovetails nicely with the release of the Treasury report. Read more in: SEC to meet on disclosure rules (MACPA blog).