SEC to credit for compliance with foreign regulations?

Recent remarks by several commissioners of the Securities and Exchange Commission (SEC) indicate that the agency may adopt a new approach to its regulation of transactions, products and market activities that are subject to parallel regulatory requirements in multiple jurisdictions. Taken together, the commissioners’ comments suggest that the SEC now favours ‘substituted compliance’ as a solution to the problem of conflicting or overlapping rules – a break from past practice with respect to cross-border regulation. In short, substituted compliance would allow foreign issuers and other US market participants, whose transactions are otherwise subject to SEC rules and regulations, to comply instead with comparable regulatory requirements in their home jurisdictions.

The proposed solution recognises that the global marketplace is fraught with peril for financial services firms trying to comply with overlapping (and often incongruous) regulatory requirements in multiple jurisdictions. The commissioners believe substituted compliance strikes an appropriate balance between recognising differences in applicable regulatory regimes and accomplishing the commission’s goals of promoting market stability, transparency and investor protection. In order to make the substituted compliance approach a success, however, the SEC must address attendant implementation and enforcement issues…

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