Chairman Cox Announces End of Consolidated Supervised Entities Program
FOR IMMEDIATE RELEASE
2008-230
Washington, D.C., Sept. 26, 2008 — Securities and Exchange Commission Chairman
Christopher Cox today announced a decision by the Division of Trading and Markets to end
the Consolidated Supervised Entities (CSE) program, created in 2004 as a way for global
investment bank conglomerates that lack a supervisor under law to voluntarily submit to
regulation. Chairman Cox also described the agency's plans for enhancing SEC oversight of
the broker-dealer subsidiaries of bank holding companies regulated by the Federal Reserve,
based on the recent Memorandum of Understanding (MOU) between the SEC and the Fed.
Chairman Cox made the following statement:
The last six months have made it abundantly clear that voluntary regulation does not work.
When Congress passed the Gramm-Leach-Bliley Act, it created a significant regulatory gap
by failing to give to the SEC or any agency the authority to regulate large investment bank
holding companies, like Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers,
and Bear Stearns.
Because of the lack of explicit statutory authority for the Commission to require these
investment bank holding companies to report their capital, maintain liquidity, or submit to
leverage requirements, the Commission in 2004 created a voluntary program, the
Consolidated Supervised Entities program, in an effort to fill this regulatory gap.
As I have reported to the Congress multiple times in recent months, the CSE program was
fundamentally flawed from the beginning, because investment banks could opt in or out of
supervision voluntarily. The fact that investment bank holding companies could withdraw
from this voluntary supervision at their discretion diminished the perceived mandate of the
CSE program, and weakened its effectiveness.
The Inspector General of the SEC today released a report on the CSE program's supervision
of Bear Stearns, and that report validates and echoes the