The split in enforcement can sometimes mean duplicative actions, such as the SEC and CFTC levying fines on Wall Street firms in recent years. Photo by ANGELA WEISS/AFP via Getty Images

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The Securities and Exchange Commission and the Commodity Futures Trading Commission plan to coordinate examinations and enforcement for businesses that fall under both agencies’ turf, the latest sign of cooperation between Wall Street’s top regulators.

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“With regards to enforcement, let me be clear: the regrettable era of duplicative enforcement actions and conflicting remedial obligations for the same conduct is over,” SEC Chairman Paul Atkins said at a Futures Industry Association conference in Boca Raton, Florida on Tuesday. “Fragmented, redundant enforcement does not increase deterrence — it only increases confusion.”

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Unlike many countries that have one central financial markets regulator, the United States has two: the SEC, which oversees stock and bond markets, and the CFTC, which regulates derivatives trading.

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That split can sometimes mean duplicative enforcement actions, such as the SEC and CFTC levying fines on Wall Street firms in recent years for alleged misuse of off-channel communication devices.

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Atkins said the SEC and CFTC would also need to coordinate examinations with self-regulatory organizations including the National Futures Association and the Financial Industry Regulatory Authority.

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Coordinated exam planning for these entities should be “standard practice,” Atkins said, as should shared supervisory findings, subject to assurances of confidentiality.

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The SEC and CFTC said last year they would work together to better align U.S. rules across the two agencies, although officials have repeatedly said they have no plans to formally merge.

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The two agencies are discussing plans to move into the same building complex, Bloomberg reported last week. Those conversations to relocate the CFTC headquarters into the same complex as the SEC are still under way.

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Harmonization Efforts

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Atkins also highlighted a series of other ways the two agencies would be aligning their oversight, including coordinating rules for national securities exchanges that want to start listing prediction market-type contracts, which are generally treated as derivatives contracts overseen by the CFTC.

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In instances where contracts are tied to a specific equity, though, they may be deemed securities under the SEC’s oversight, Atkins said.

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The agencies will also explore ways to provide regulatory relief to allow for greater cross margining between cash and futures products, Atkins said.

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The concept allows a trader to transfer excess margin from one trading account to another account in order to satisfy collateral requirements. Such transactions can increase liquidity for a bank, broker, or other trading firm, which can be important during times of market stress.

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