Deal May Expand Fed’s Reach

WASHINGTON -- An agreement between the Federal Reserve and the Securities and Exchange Commission (SEC) says the agencies will "collaborate and cooperate" when setting capital and liquidity standards, potentially expanding the central bank's reach over brokerage firms, the Wall Street Journal reported.

Under the agreement, the agencies will share information and cooperate across a number of important areas of common interest, including efforts against money laundering, bank brokerage activities and the clearing and settling of financial transactions conducted by both banks and investment firms, the Associated Press reported.

The new agreement, if successful, could serve as a template for the legislation, the Journal reported, and appears to expand the Fed's authority in monitoring Wall Street firms. It also says the SEC, under the supervision of Chairman Christopher Cox, will coordinate with the Fed when "setting supervisory and regulatory expectations" including capital and liquidity standards, and changes to risk-management systems at brokerage firms.

The two agencies have been working together more closely, especially since March’s near-collapse of the investment firm Bear Stearns, according to the AP. JPMorgan Chase & Company took over Bear Stearns after a run brought the troubled firm to the brink of bankruptcy.

-- NYSSCPA.org News Staff

Posted on 7/8/08