The joint report focuses  on differences in the agencies’ existing authorities and does not cover  issues related to gaps in the agencies’ authorities to oversee over-the- counter derivatives, which were the subject of congressional deliberation  at the time of their analysis. Most of the Joint Report’s Recommendations Have Yet to Be Enacted or Remain in the Planning Stages

The joint report’s recommendations for statutory changes have yet to be  enacted, and the recommendations for agency action remain in the  planning stages. One Requested Legislative Action Has Been Taken, and Proposed Legislation Includes Provisions That Would Address Some Recommended Statutory Changes

According to CFTC and SEC staff, since issuing the joint report in October  2009, the agencies have been focused on working with Congress on  drafting legislation to address statutory changes recommended in the joint  report. Agency staff said they expect to have the Joint Advisory  Committee functioning by late spring or early summer 2010 but have not  set firm time frames for implementing the joint report’s other  recommendations requiring agency action. Additional Harmonization Opportunities Exist, and the Agencies’ Future Harmonization Efforts Could Benefit from Clearer Goals and Accountability Requirements

While the joint report’s recommendations would reduce or eliminate  certain inconsistencies in the two agencies’ regulatory approaches,  additional harmonization opportunities exist and the agencies’ future  harmonization efforts could benefit from clearer goals and accountability  requirements. In their written  comments, respondents identified areas they believe could benefit from  additional harmonization efforts. Although agency staff told us that they plan to use the Joint Advisory  Committee to coordinate future harmonization efforts, CFTC and SEC  have not yet established goals with respect to harmonization or developed  requirements to report and evaluate their progress toward these goals. GAO staff who made major contributions to this  report are listed in Appendix V.

Appendix I: Scope and Methodology

To describe how the Commodity Futures Trading Commission (CFTC) and  the Securities and Exchange Commission (SEC) identified and assessed  significant differences in their statutes and rules, we reviewed and  analyzed the joint report of CFTC and SEC on harmonization (joint  report); transcripts of the panel discussions held at the joint public  meetings hosted by the agencies on September 2 and 3, 2009; statements  submitted to CFTC and SEC in response to the agencies’ request for public  comment on opportunities for harmonization; CFTC and SEC analyses of  relevant differences in their statutes and regulations; and other agency  documentation related to the joint report. We reviewed the provision of the  Consolidated Appropriations Act, 2010, that authorized funding for the  Joint Advisory Committee as well as the agencies’ draft charter for this  committee. Scope and Methodology

		To accomplish our objectives, we

reviewed and analyzed the SEC/CFTC harmonization report,  documentation of public input obtained by CFTC and SEC through  joint public meetings and a public comment period, and preliminary  analyses conducted by CFTC and SEC on relevant differences in  their statutes and regulations; interviewed CFTC and SEC officials about how they identified and assessed harmonization opportunities and developed  recommendations; progress made on the report’s recommendations;  and additional harmonization opportunities that may exist; reviewed provisions in proposed legislation that may address  SEC/CFTC recommendations for statutory changes; obtained the views of market participants and other experts on the  report’s recommendations and additional opportunities for  harmonization; and  reviewed prior GAO work and other relevant studies. Background (continued)

		In October 2009, CFTC and SEC responded to this request

with a joint report on harmonization of their regulatory  approaches. In drafting the joint report, the agencies grouped issues into eight potential  areas for harmonization and made at least one recommendation in all but  one of these areas. The agencies also made several recommendations to enhance   Create a Joint Advisory Committee to be tasked with considering  and developing solutions to emerging and ongoing issues of  common interest in the futures and securities markets;  Create a Joint Agency Enforcement Task Force;  Establish a cross-agency training program;  Develop a program for sharing staff through detail assignments;   Create a Joint Information Technology Task Force. Recommendation

		To ensure that CFTC and SEC are strategically positioned to

implement the joint report’s recommendations and address  remaining harmonization opportunities, we recommend that as  CFTC and SEC continue to develop the charter for the Joint  Advisory Committee, they take steps to establish clearer goals for  future harmonization efforts and requirements for reporting and  evaluating progress towards these goals.
Why GAO Did This Study

The conference report accompanying the Consolidated Appropriations Act of 2010 directed GAO to assess the joint report of the (SEC) and the Commodity Futures Trading Commission (CFTC) on harmonization of their regulatory approaches. In October 2009, CFTC and SEC issued this report in response to the Department of the Treasury's recommendation that the two agencies assess conflicts in their rules and statutes with respect to similar financial instruments. GAO's objectives were to review (1) how CFTC and SEC identified and assessed harmonization opportunities, (2) the agencies' progress toward implementing the joint report's recommendations, and (3) additional steps the agencies could take to reduce inconsistencies and overlap in their oversight. To meet these objectives, GAO reviewed the joint report and related documentation, interviewed agency officials, and obtained and analyzed written comments on the report from market participants.

What GAO Found

CFTC and SEC conducted joint analyses and sought public input to inform their efforts to identify and assess significant differences in their rules and statutes and develop recommendations to address such differences. The agencies obtained public input through joint public meetings and a public comment period and worked together to analyze this input. In drafting the joint report on harmonization of their regulatory approaches, CFTC and SEC focused their analysis on eight potential areas for harmonization and made at least one recommendation in all but one of these areas. The joint report also includes several recommendations to enhance coordination between the agencies. For example, the report recommended the creation of a Joint Advisory Committee to be tasked with considering and developing solutions to issues of common interest in the futures and securities markets. The joint report did not cover gaps in the agencies' authorities to oversee over-the-counter derivatives, which were the subject of congressional deliberation at the time of their study. The joint report's recommendations for statutory changes have yet to be enacted, and the recommendations for agency action remain in the planning stages. According to agency staff, since issuing the joint report in October 2009, the agencies have been focused on working with Congress on drafting legislation to address recommended statutory changes. Congress authorized CFTC and SEC to fund the Joint Advisory Committee, as requested in the joint report, and proposed legislation includes provisions that would partially address recommended statutory changes in areas including oversight of exchange rules and enforcement. CFTC and SEC have drafted a charter for the Joint Advisory Committee and expect to have this committee functioning by early summer 2010. Agency staff said the agencies have not set firm timelines for the implementation of the other recommendations for agency action. Additional harmonization opportunities exist beyond those addressed by the joint report's recommendations, and future efforts by CFTC and SEC to assess these opportunities could benefit from clearer goals and accountability requirements. With only a few months to complete their report, agency staff said the agencies could not address all differences in their rules and statutes through the joint report's recommendations. Market participants identified several areas they believe could benefit from additional harmonization efforts, including portfolio margining and investor definitions and categories. The agencies plan to coordinate future harmonization efforts through the Joint Advisory Committee, but they have not yet developed clear goals for harmonization or developed requirements for the agencies to evaluate and report their progress toward meeting such goals. Without a clearer vision to guide future harmonization efforts and mechanisms to ensure accountability for these efforts, CFTC and SEC may not be strategically positioned to implement the joint report's recommendations and address remaining harmonization opportunities.