After towers fell, a new spirit of cooperation rose

In recent years, on a number of key issues, the financial services industry and its regulators have seemed to be entrenched in different camps. At times, our relationship with the Securities and Exchange Commission and other regulators has bordered on adversarial.

But on Sept. 11, we saw the real enemy. While we mourn our colleagues who lost their lives in the attacks on the World Trade Center, we can applaud the cooperative efforts of the industry and its regulators to maintain the soundness of our financial system and the stability of our financial markets.

While our system is built on the give and take between different interests, too often the debate has taken on an ugly tone. Inside the Beltway, Regulation FD and many other controversial rules – such as those governing analyst disclosure and merchant banking – have been sources of friction between the industry and its regulators.

But our interests and the interests of consumers may be better served when the dialogue takes on a more cooperative tone.

strong response

The response to the terrorist attacks has brought out the best that is possible when the industry and government work together. The SEC, stock exchanges, New York City officials and securities firms worked around the clock to do what was necessary to reopen the trading in our markets.

Staff worked steadily through the weekend to conduct testing on all systems. As a result, markets opened the Monday after the attacks.

The SEC for the first time used its emergency powers to ease a number of rules in response to the industry’s needs. For instance, public companies were permitted to purchase their own shares without regard to the usual volume and timing restrictions, and without any adverse accounting consequences.

The SEC also eased net capital rules and reserve computation rules to account for the off week of Sept. 11. To help businesses housed in and around and the World Trade Center, the SEC is permitting accounting firms to provide bookkeeping services without violating the auditor independence rules.

The Federal Reserve poured funds into the financial system to ensure liquidity. The Fed has also encouraged banks to be flexible with customers, especially to help make credit available. The Fed took the further step of lowering the federal funds rate, because the events of Sept. 11 threatened to hold down consumer spending.

Industry also has stepped up to the plate. Competitors are helping old rivals. Firms have been offering office space to those displaced by the attacks. Offers of staff and other administrative support also have been common.

helping

Many firms have set up generous funds to help the victims and their families. Beyond that, employees in the industry have been encouraged to, and are, donating blood.

While we are proud of those efforts, our work is far from complete. More coordination is needed to stop the flow of funds to terrorist organizations.

Although we are still in the very early stages of uncovering how those operations were funded, the president’s order requiring financial institutions to freeze the assets of those allegedly involved in terrorist acts is a good starting place.

The Securities Industry Association has always supported efforts to thwart money laundering and has emphasized that the best approach is for the industry and law enforcement to join forces. We stand ready to work with Congress and the regulators to fashion a response so we can address how our system was abused.

The past few months have seen the best that can be achieved when the industry and regulatory communities join forces. As we move forward to rebuild New York’s financial district and the firms affected by the disaster, the lesson here is simple – let’s commit ourselves to honor those we have lost by working together.

Mr. Sorcher is associate general counsel in Washington for the Securities Industry Association.