U.S. Chamber Report Offers Fixes to Five Major Holes that Remain One Year After Dodd-Frank

‘By Exposing These Weaknesses and Offering Solutions, We Can Strengthen Our Regulatory System,’ Hirschmann Says

WASHINGTON, D.C.—To coincide with the one-year anniversary of the Dodd-Frank Act (DFA), the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC) today hosted the forum The Dodd-Frank Act One Year Later: Keeping our Markets Competitive Post Regulatory Reform and released a report examining five critical areas left unaddressed by the law and their impact on U.S. competitiveness.

“The implementation of Dodd-Frank has further exposed unaddressed weaknesses in our financial regulatory system,” said CCMC President and CEO David Hirschmann. “Rather than streamlining an already overly layered regulatory structure, modernizing and fixing existing regulators, and ensuring common regulatory approaches to global markets, this law missed the mark. It increased uncertainty for American businesses and hindered their ability to promote economic growth and create jobs. ”

The Chamber remains concerned with the implementation of critical areas within Dodd-Frank: systemic risk, derivatives, the Consumer Financial Protection Bureau (CFPB), the Volcker Rule, and the various corporate governance provisions. If the additional reforms are left unaddressed, American business of all sizes will not have access to the necessary entrepreneurial capital needed to fund expansion and create jobs.

The report released today – U.S. Capital Markets Competitiveness: The Unfinished Agenda – highlights five areas where our regulatory structure and processes are reducing the quality and efficiency of the U.S. capital markets. These include:

Rationalizing the Regulatory Structure – The current structure is a result of years of layering and Dodd-Frank only exacerbated the situation, increasing duplicative and conflicting regulators. The Financial Stability Oversight Council (FSOC) should address the most egregious conflicts and duplications among the plethora of existing and new regulators.

Reforming Regulatory Agencies – Without fundamental reform of individual regulators, the system will not improve. Agencies have not kept pace with markets and technology. Regulators need to be overhauled to ensure they have the right operational capability and technology infrastructure to regulate today’s markets.
Making Nongovernment Policymakers Accountable – The lack of transparency and accountability surrounding nongovernmental policymakers can undermine innovation, competition, and operation of the capital markets. Where nongovernmental policymakers receive extraordinary grants of authority from government explicitly (e.g., FINRA) or implicitly (e.g., ISS) they should also be required to adhere to the same basic due process and transparency rules the law requires from other regulators.

Restoring Integrity to Litigation and Enforcement – Strong, reliable capital markets depend on the ability to identify and stop wrong-doers from undermining confidence in the financial system. However, in many cases litigation and enforcement practices are used as an alternative to transparent and open rulemaking.

Improving U.S. Competitiveness and Engagement – The U.S. should seek to reach agreement in many areas where the markets operate globally. However, the United States should delay implementation and consider alternative approaches in areas where the rest of the world has already indicated it is unlikely to follow our approach, such as the Volcker Rule.

“The problem with our regulatory structure is not the quantity of regulations, but the quality,” Hirschmann said. “Even after the most expansive financial regulatory reform in our nation’s history, we still have the same old system, only more of it. By exposing these weaknesses and offering solutions, we can strengthen our regulatory system to ensure the competiveness of American markets for decades to come.”

Since its inception in 2007, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.