Risk & Compliance

A New Top Cop for Corporate Finance?

Treasury Secretary Paulson mulls over an idea for a new and improved replacement for the SEC.
David KatzMay 1, 2008

Tucked away among the five new regulators called for in U.S. Treasury Secretary Henry Paulson’s blue-sky blueprint for reforming the financial-services industry is an authority of special interest to CFOs: a corporate finance regulator.

Under the long-range provisions of the U.S. Treasury’s Blueprint for Financial Regulatory Reform, announced by Paulson in March, corporate-finance executives in most industry sectors would deal with a regulator very similar to the Securities and Exchange Commission that CFOs deal with today. In the regulatory structure Paulson envisions over the long term, a corporate finance regulator would hold sway over “the SEC’s current responsibilities over corporate disclosures, corporate governance, accounting and auditing oversight, and other similar issues,” according to the blueprint.

But that regulator would be less than simply a rebranded SEC. Paulson proposes splitting off the SEC’s current functions as a regulator of secondary securities markets, broker dealers, exchanges, and the like. In an “intermediate-term recommendation,” he suggests those functions be merged with those of the Commodity Futures Trading Commission.

The Fed would also see its role revised, but in the other direction: it would reign at the top of Paulson’s hierarchy, as a market stability regulator. Besides the Fed’s familiar roles of installing monetary policy and supplying liquidity to banks, the Treasury Secretary wants it to take on “a different, yet critically important regulatory role with broad powers focusing on the overall financial system.… The Fed would have the authority to go wherever in the system it thinks it needs to go for a deeper look to preserve stability.”

Whether any of this comes to pass remains to be seen, of course, and given that this is an election year, there’s no telling exactly how lawmakers will act to address the current economic situation.

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