Monday, March 6, 2017

Four Disruptive Elements Drive Regulatory Activity

“Undercurrents of Disruption to Our Markets and Societies: How We Can Respond”

Author: David Schwartz J.D. CPA

In her keynote address at the 2017 Brodsky Family Northwestern JD-MBA Lecture Series, CFTC Commissioner Sharon Y. Bowen described her thinking on the key trends driving regulatory activity. Commissioner Bowen identified “four disruptive elements” she believes are substantially responsible for changes that have been seen recently in financial markets. In turn, these disruptive elements are prompting questions about what they mean for markets and society, and what actions we should ask from regulators.


  1. Economics. Commissioner Bowen urged market regulators both in the U.S. and abroad to be more aware of "how the overall economy is functioning and what effect market regulations are having on the economy.” According to Bowen, "we can and should think about how our rules affect the ordinary investor and consumer, and that must mean wrestling with those questions in more than just a cursory or passing way. Instead, we should really be considering in each rule whether we are democratizing our markets and making them more accessible and fair to consumers and investors." She highlighted the CFTC’s position limits rulemaking as an example of a way that regulation can be used to democratize markets and make them more accessible and fair to consumers and investors.
  2. Technology. Commissioner Bowen identified rapid advances in technology and cybersecurity concerns as key marketplace disruptors. She expressed optimism that the CFTC will complete its work on Regulation Automated Trading, and noted that the CFTC adopted enhanced cybersecurity safeguard requirements. She called upon her fellow regulators to be "mindful of the human dimension of these changes and watch for ways to encourage technology while also supporting the people displaced by it.”
  3. Institutions. According to Commissioner Bowen, the United States is in the midst of a "crisis in our institutions, and that is a crisis for our markets, for our government, and for our society.” She went on to say that regulators like the CFTC must increase trust in institutions by being "willing to be more aggressive in enforcing our rules fairly, including being willing to take individuals and institutions to court rather than just settle with them.” Bowden asserted that “we can first rebuild faith in institutions by having our institutions do what they can to show that they are trying to be worthy of Americans’ trust, and that starts by improving internal governance.” She also believes the CFTC should push ahead and fulfill the Dodd Frank Act requirement to "promulgate a regulation to improve governance,” and that regulated companies should pursue “a culture of communication, and a culture of following the rules.”
  4. Demographics. Commissioner Bowen observed that both finance and the legal profession are the beneficiaries of increased diversity.  Bowen said that diversity is important "because it’s a means of ensuring that many different points of view will be aired prior to a decision and that all good arguments are seriously considered. . .  Organizations, communities, and even governments are stronger and deliver better outcomes when their participants have differing views and different backgrounds." She urged regulators to respond to demographic considerations and encourage companies, nonprofits, and the government to increase diversity.

The full text of Commissioner Bowen's address is available via: