The Fed, SEC Seek to Share Information

The Federal Reserve and the Securities and Exchange Commission are finalizing an information-sharing agreement that will begin to redraw how Wall Street is regulated. The efforts come in response to the near collapse of Bear Stearns. The SEC is also working toward possibly allowing more U.S. firms to switch to international financial reporting standards (IFRS), according to various reports.

Treasury Secretary Henry Paulson recently proposed that the Fed’s role be expanded to provide oversight of risk throughout the financial system, according to The Wall Street Journal. The Fed and SEC agreement is expected to fill gaps in regulatory oversight and increase cooperation and information-sharing between the central bank and SEC.

“The information-sharing accord is designed to facilitate our joint efforts to fulfill our respective regulatory functions in a post-Bear environment," SEC Chairman Christopher Cox told the WSJ. Both the Fed and SEC want to adopt new measures to avoid another Bear Stearns situation.

Since mid-March, the Fed has placed staff inside the four largest investment banks to assess their risk. While on-site presence has decreased from six to one or two examiners, the SEC continues to conduct its supervision over the phone and with visits. Paulson, Cox, and Federal Chairman Ben Bernanke have kept close contact during the negotiations.

Another concern of the SEC is whether to allow U.S. firms to phase into IFRS. Conrad Hewitt, the SEC chief accountant, noted that the SEC’s goals are for an eventual IFRS mandate, according to Financial Week.

Experts believe that private companies would be allowed a five- to 10-year period to transition to IFRS. Early adoption could serve as a test of how a full-scale transition could work. The full adoption could take place by 2013.

The Financial Accounting Standards Board and the International Accounting Standards Board plan to send out letters detailing further steps to converge IFRS with U.S. GAAP, according to FW.