Release: 3870-95

For Release: October 31, 1995


Washington, D.C. -- The Commodity Futures Trading Commission (CFTC) and The Securities and Exchange Commission (SEC) welcome the announcement today by the Intermarket Financial Surveillance Group (IFSG) of an agreement to expand the cooperation among securities and futures SROs regarding the oversight of firms that are active in both the securities and futures markets. The agreement provides for joint or coordinated in-field examinations by securities and futures SROs on a voluntary basis, the sharing of information during any such joint examination, the informal discussion of interim findings, the opportunity to review each others' workpapers, the ability to share particular examination workpapers and the ability to exchange final examination reports.

In commenting on the IFSG announcement, CFTC Chairman Mary Schapiro said: "This is an excellent example of cooperative efforts between government and industry self-regulators to improve both efficiency and effectiveness. The CFTC has actively supported the coordination of financial surveillance and examination activities between various regulatory and self-regulatory agencies, both in the U.S. and abroad."

Arthur Levitt, Chairman of the SEC, said "I applaud the success of all of those who worked on this agreement. Representatives of SROs and government agencies have cooperated to reduce costs for firms that are registered as both futures commission merchants and securities broker-dealers by eliminating duplicate examination procedures."

The IFSG is an organization originally formed after the 1987 market break to share information between the SROs for financial compliance purposes. Its membership is comprised of self-regulatory organizations (SROs) of the U.S. securities and commodities exchanges. The newly broadened arrangements are applicable to brokerage firms that are registered as both futures commission merchants and securities broker- dealers.

Simultaneously with the IFSG announcement, the CFTC announced the issuance of a staff interpretation which will officially sanction implementation of the IFSG's cooperative arrangements. The interpretation will permit an SRO regulated by the CFTC to rely upon the in-field examination work conducted by a securities SRO regulated by the SEC. The interpretation provides that in relying upon the work of any other SROs an SRO will:

  1. exchange information regarding the form, content and application of its examination programs, including methods for determining the scope of the examination;
  2. exchange current financial surveillance information on related firms;
  3. provide the opportunity to the other SRO to review relevant workpapers; and
  4. document in its firm examination workpapers all matters relevant to reliance and scope-setting, including any information disclosed by the other SRO which had an impact upon the nature and extent of the SRO's examination.

The interpretation is issued by the CFTC as an amendment to Division of Trading and Markets Interpretation No. 4-1, which sets minimum requirements and standards for SRO programs. A copy of the interpretation may be obtained by contacting the CFTC's Office of Public Affairs.