U.S. Treasury outlines sweeping blueprint to reform capital markets

WASHINGTON (Reuters) - The U.S. Treasury on Friday unveiled a blueprint for sweeping reforms of the U.S. capital markets as it looks to implement Republican President Donald Trump’s agenda to promote economic growth by slashing red tape.

The report recommends a raft of measures to encourage companies to seek public listings, to promote companies’ access to capital, and to give investors a wider array of investment opportunities, that could largely be implemented without legislative changes.

The Treasury also said the United States should put ‘America First’ as it engages in international regulatory forums, potentially putting the United States on a collision course with overseas regulators due to convene in Washington for the International Monetary Fund meeting next week.

“The U.S. has experienced slow economic growth for far too long,” said Treasury Secretary Steven T. Mnuchin. “By streamlining the regulatory system, we can make the U.S. capital markets a true source of economic growth which will harness American ingenuity and allow small businesses to grow.”

Friday’s 232-page report is the second of four expected from the Treasury as it completes a comprehensive review of existing financial rules, as mandated by an executive order President Donald Trump signed in February. 

The first, released in June, proposed loosening rules imposed on the banking sector in the wake of the 2007-2009 global financial crisis.

While the first report took aim at many major regulations required as part of the 2010 Dodd-Frank financial reform law, Friday's report instead lays out a wide range of narrower, more technical tweaks aimed at boosting stock, bond, and derivatives markets.

Although the Treasury does not directly regulate financial markets, the report's recommendations are likely to be promptly taken-up by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), the two key markets regulators in charge of the detailed rule changes.

Those agencies are currently headed by Trump appointees, who are likely to be sympathetic to the Treasury’s recommendations. All federal financial regulators were consulted in drafting the report, and the SEC and CFTC are in broad agreement with the recommendations, according to a senior Treasury official.

The recommendations are almost exclusively aimed at regulators currently controlled by Trump appointees as opposed to Congress, where attempts to roll back financial rules by statute have been met with fierce resistance from Democrats.

The effort to ease disclosure requirements and open the door to a wider range of potential investors for companies is likely to be met with concern from some liberal groups and investor advocates, who fear rolling back existing rules could make it more likely that investors are defrauded or the strength of the financial system is put at risk.

(Reporting By Michelle Price in Washington; Editing by Nick Zieminski)

10/06/2017 10:32

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