SEC Commissioner Troy Paredes has emerged as Paul Atkin's successor as the voice of reason on the SEC. His recent speech on hedge fund regulation hit so many nails on the head one eventually stopped counting.
His central thesis?
We must avoid constructing a financial regulatory regime that unduly burdens and constricts the U.S. financial system at the expense of our country’s economic growth and the competitiveness and dynamism of our financial markets. If we overregulate our financial markets, we run the risk that companies will find it more costly to access the capital they need to grow and to hire new employees; that businesses and individuals will find it more difficult to manage their risks effectively; that consumers will find it more challenging to get the credit they rely on to buy the goods and services they need; that investors will enjoy fewer opportunities to accumulate wealth and earn income and to transact efficiently and at low cost; and that important new ideas and technologies will not be commercialized.
Go rerad the whole thing. Along those lines, I also recommend my essay Corporate Governance and U.S. Capital Market Competitiveness (October 22, 2010):
During the first half of the last decade, evidence accumulated that the U.S. capital markets were becoming less competitive relative to their major competitors. The evidence reviewed herein confirms that it was not corporate governance as such that was the problem, but rather corporate governance regulation. In particular, attention focused on such issues as the massive growth in corporate and securities litigation risk and the increasing complexity and cost of the U.S. regulatory scheme.
Tentative efforts towards deregulation largely fell by the wayside in the wake of the financial crisis of 2007-2008. Instead, massive new regulations came into being, especially in the Dodd Frank Act. The competitive position of U.S. capital markets, however, continues to decline.
This essay argues that litigation and regulatory reform remain essential if U.S. capital markets are to retain their leadership position. Unfortunately, the article concludes that federal corporate governance regulation follows a ratchet effect, in which the regulatory scheme becomes more complex with each financial crisis. If so, significant reform may be difficult to achieve.
