Editor’s Note REGULATION How the Rules Developed T’S PRETTY HARD to imagine a topic more important these days than the future of finance (except, perhaps, By Suzanne Barlyn Securities Exchange Act of 1934 the present of finance). Creates the Securities and Ex- I change Commission and grants it The nation’s financial regulatory structure has been developing It’s also hard to imagine a group of people more quali- broad authority over the nation’s fied to talk about the topic than those who gathered last in several different and largely distinct strands for more than 140 securities markets, brokerage firms, week at ’s Future of Finance Initia- transfer agents, clearing agencies years. Here are some of the key developments in four industries and self-regulatory organizations. tive. Just take a look at the list of participants below. that have left us with this “stovepipe” approach to regulation. Enough said. Investment CompanyAct of 1940 BANKING Gramm-Leach-BlileyAct of 1999 For mutual-fund companies and The purpose of the meeting, though, was more than to Repeals the Glass-Steagall Act’s some other investment firms, act es- simply get smart people in a room. It was to come up with National Bank Act of 1863 wall between banks and securities tablishes requirements for disclo- a blueprint for change, a game plan to help policy makers Creates a national bank system firms, allowing some institutions sure of investment practices, capital and establishes the Office of the to engage in commercial banking, structure and financial condition. It figure out ways to make sure that the mess we’re in Comptroller of Currency, which securities underwriting and deal- requires SEC registration and also doesn’t happen again. What, the group asked, should bank- charters, regulates and examines ing, and insurance underwriting. creates exemptions. ing look like as we move forward? What about nonbank fi- all national banks. COMMODITIES Investment Advisers Act of 1940 nancial institutions? How do we change our credit markets Act of 1913 Imposes registration and other re- so they don’t collapse again? And what’s the role of credit- Establishes the Federal Reserve CommodityExchange Act of 1936 quirements on investment advisers default swaps and other derivatives? System, the nation’s , Broadens the types of agricultural and firms that provide investment which sets . commodities that can trade advice for compensation and re- Not everybody, of course, agreed on everything. (Smart through futures contracts on an or- quires that advisers maintain cer- people rarely do.) But there was much agreement on one Federal Home Loan Bank Act of 1932 ganized exchange. tain books and records. thing—that the need for change is real and pressing. Creates Federal Home Loan Bank System to provide a stable source CommodityFutures Trading Sarbanes-OxleyAct of 2002 The future of finance depends on it. of funds for residential mortgages Commission Act of 1974 Creates a new regulator for the au- —Lawrence Rout during the Depression. Transfers authority over futures diting profession, the Public Com- markets from the secretary of agri- pany Accounting Oversight Board; Banking Act of 1933 culture to the new Commodity Fu- requires greater disclosure; height- The Journal Report welcomes your comments—by mail, fax or electronic This measure creates the Federal tures Trading Commission. Also ens standards for auditor indepen- mail. Letters should be addressed to Lawrence Rout, The Wall Street Deposit Insurance Corp. to insure gives the CFTC jurisdiction over dence; and increases penalties for certain white-collar crimes. Journal, 4300 Rt. 1 North, South Brunswick, N.J. 08852. The fax number deposits of member banks. Other nonagricultural futures and op- is 609-520-7767, and the email address is [email protected]. sections, known as the Glass- tions on those contracts. Credit Rating AgencyReform Steagall Act, bar national banks Act of 2006 from most . Futures Trading Practices Act of 1992 Empowers SEC to register nation- Authorizes the CFTC to exempt cer- ally recognized statistical rating or- Bank Holding CompanyAct of 1956 tain over-the-counter transactions Next Monday’s Journal Report REPRINTS AVAILABLE ganizations and impose disclosure Prohibits bank holding companies from most of the Commodity Ex- and record-keeping requirements. FULL PAPER: The entire Wall Street Journal issue from engaging in most nonbanking change Act. The CFTC would use that includes the Future of Finance Journal Report activities and making most inter- its new authority to exempt some INVESTING is now available and can be obtained for $5 per INSURANCE copy. 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PARTICIPANTS IN THE FUTURE OF FINANCE INITIATIVE These leaders from the worlds of business, academia and public policy took part in the Future of Finance conference

Russell Abrams, President, Dean Curnutt, President, Macro Bill Hartnett, Director, U.S. Bill Miller, Chairman and Chief Robert J. Shiller, Professor of Titan Capital Group Risk Advisors Financial Services Group, Investment Officer, Legg Mason Economics, Edward Albert III, Managing vvv Microsoft Corp. Capital Management Inc. Eraj Shirvani, Chairman, Inter- Director, Fortress Investment Bal G. Das, Partner and General Sean M. Healey, President and Paul Miller, Partner, national Swaps and Derivatives Group Counsel, InsCap Management CEO, Affiliated Managers Group FBR Capital Markets Association Roger Altman, Chairman and Eric F. Di Benedetto, Founder, Kenneth A. Hersh, CEO, NGP Ira M. Millstein, Senior Partner, Barry Silbert, Chief Executive Chief Executive Officer, Evercore Active Starts Energy Capital Management Weil, Gotshal & Manges Officer, SecondMarket Inc. Partners Donald F. Donahue, Chairman Les Hinton, Chief Executive Eric Mindich, Founder and CEO, Damon A. Silvers, Associate Dwight W. Anderson, Principal, and CEO, Depository Trust & Officer, Dow Jones & Co.; Eton Park Capital Management General Counsel, AFL-CIO Ospraie Management Clearing Corp. Publisher, The Wall Street Journal vvv George Soros, Chairman, Soros Tom W. Anderson Craig S. Donohue Lee S. Hobson , Chief Execu- , Chief Execu- , Managing Scott Nathan, Managing Direc- Fund Management tive Officer and Founder, Pensco tive Officer, CME Group Inc. Partner, Highside Capital Manage- tor, Baupost Group Robert K. Steel, Former Chief Trust Co. Jody Drulard ment , Managing Sandra Navidi, Director of Executive Officer and President, Cliff Asness Glenn Hutchins , Managing and Director, Dealogic , Co-Founder Research Strategies, Roubini Corp. Founding Principal, AQR Capital vvv and Co-CEO, Silver Lake Global Economics vvv Management Nabil N. El-Hage, Professor of vvv vvv Nassim Nicholas Taleb, Author, Bruce Aust Management Practice, Harvard , Executive Vice Richard D. Jones, Partner and Joseph D. O’Brien “The Black Swan” Business School , Chief President, Global Corporate Co-Chairman, Finance and Real Ramu Thiagarajan, Managing Client Group, Nasdaq OMX Group Robert B. Engel Operating Officer, Highside , President and Estate Group, Dechert LLP Capital Management Director and Head of Quantitative Inc. Chief Executive Officer, CoBank vvv vvv Strategies Research Center, Alan K. Austin, Managing Robert Engle , Nobel Laureate K.G. Karmakar, Managing Deutsche Bank Director and Executive Vice David Patterson, CEO, and Professor of Finance, NYU Director, National Bank for Larry E. Thompson, Managing President, Silver Lake Northwater Capital Management Stern School of Business Agriculture, Director and General Counsel, vvv vvv Gideon Pell, Senior Vice Presi- Arun Kaul, Portfolio Manager, Depository Trust & Clearing Corp. Gary Barnett, Partner and dent and Chief Risk Officer, New Roger W. Ferguson Jr., Chief Operating Officer and Richard E. Thornburgh, Co-Head, U.S. Structured Finance York Life Insurance Co. President and Chief Executive Partner, Hillsdale Investment Vice Chairman, Corsair Capital and Derivatives, Linklaters Mark Pinsky, President and CEO, Officer, TIAA-CREF Management Leo M. Tilman, President, Evan Bayh, U.S. Senator (Demo- Opportunity Finance Network Mark B. Fisher, President,MBF Harry Kellogg, Vice Chairman, L.M. Tilman & Co.; Adjunct Fac- crat, ) Clearing Corp. Silicon Valley Bank Thierry Porte, Operating ulty, Columbia University Alfred R. Berkeley, Chairman, Partner, J.C. Flowers & Co. Peter R. Fisher, Managing Robert M. Kimmitt, Former James S. Turley, Chairman and Pipeline Trading Systems Director and Co-Head of Fixed Deputy U.S. Secretary of the Brian Posner, President, CEO, Ernst & Young Alan S. Blinder , Professor of Income, BlackRock Inc. Treasury Point Rider Group Laura Tyson, S.K. and Angela Economics and Public Affairs, Gregory J. Fleming, Senior Ed Knight, General Counsel, Ronald R. Pressman, President Chan Professor, Haas School of Princeton University Research Scholar, Yale Law Nasdaq OMX Group Inc. and Chief Executive Officer, Business, University of California Alan L. Boyce, President, School vvv GE Real Estate at Berkeley Absalon vvv Thomas C. Freyman, Chief Robb LaKritz vvv Nicholas Bratsafolis , Managing Mem- , Senior Financial Officer, Abbott ber, LaKritz Adler Investments Leslie Rahl, President, Capital Paul A. Volcker, Chairman, Managing Director, Lend America Laboratories Market Risk Advisors Economic Recovery Advisory Arthur Levitt, Former Chair- William J. Brodsky James L. Frischling Board; Former Chairman, , Chairman , President man, Securities and Exchange Denise L. Ramos, Senior Vice Federal Reserve and Chief Executive Officer, Chi- and Co-Founder, NewOak Capital Commission President and Chief Financial cago Board Options Exchange vvv Officer, ITT Corp. vvv James B. Lockhart, Director, vvv Timothy Geithner, Federal Housing Finance Agency Ryan Randall, Analyst, Passport Jeffrey Wecker, CEO and Paul Calello President, Lime Brokerage , CEO, Investment U.S. Secretary of the Treasury Sam Luft, CEO, Banque Safdié Capital Banking, Martin D. Weiss Larry A. Goldstone, President vvv John Rogers, President and , President, James S. Chanos, Founder and and CEO, Thornburg Mortgage Chief Executive Officer,CFA Weiss Research Inc. Raj Mahajan, President, President, Kynikos Associates Inc. Institute Meredith Whitney, CEO and SunGard H. Rodgin Cohen, Partner, Philip Goodeve, Chief Financial David M. Rubenstein, Founder, Meredith Whitney Carolyn B. Maloney, U.S. Repre- Sullivan & Cromwell Officer, Finca International Inc. Co-Founder and Managing Direc- Advisory Group sentative (Democrat, ); Gary D. Cohn Mark N. Greene tor, Carlyle Group Virginia M. Wilson, Executive , President and Co- , CEO, Fair Isaac Chair, Joint Economic Committee Chief Operating Officer, Goldman Corp. Robert E. Rubin, Former U.S. Vice President and Chief Financial Stephen R. Malphrus, Staff Sachs Group Inc. Robert Greifeld Secretary of the Treasury Officer, Wyndham Worldwide , CEO, Nasdaq Director for Management, William S. Cook Kevin Rudd Corp. , Senior Portfo- OMX Group Inc. Board of Governors of the Federal , Prime Minister of Patrick Wolff, Managing Direc- lio Manager, Prisma Capital Alan G. Grigoletto, Senior Vice Reserve System Australia Partners vvv tor, Clarium Capital Management President, Business Development, Barbara C. Matthews, Nancy E. Cooper Thomas M. Woodard, Partner, , Executive Vice Options Exchange Managing Director, BCM Interna- Myron S. Scholes, Nobel Laure- Tapestry Networks President and Chief Financial Todd Groome, Chairman and tional Regulatory Analytics ate and Professor Emeritus of Officer, CA Inc. vvv Managing Director, Alternative Bob McCooey, Senior Vice Finance, Stanford University Sherry Cooper Durmus Yilmaz , Chief Economist, Investment Management President, New Listings and Rodd M. Schreiber, Partner, , Governor, BMO Capital Markets Association Capital Markets, Nasdaq OMX Skadden, Arps, Slate, Meagher & Central Bank of Turkey Peter Cotton, Chief Executive vvv Group Inc. Flom vvv Officer, Julius Finance Michael Hanson, President and Kate McDonough, Board Mem- Stephen A. Schwarzman, Chair- Ellen Zimiles, Chief Executive Anthony Crawford, President, CEO, Credit Union ber, Municipal Securities Rule- man, CEO and Co-Founder, Black- Officer, Daylight Forensic & Anthony Crawford & Associates Share Insurance Corp. making Board stone Group Advisory