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Washington Wrap — SEC official wants agency back in the antitrust game

The Washington Wrap is a weekly look at regulation, news and chatter from the Capitol. Send tips and ideas to polo.rocha@spglobal.com and declan.harty@spglobal.com.

At the SEC

SEC Commissioner Robert Jackson Jr. called on his agency to turn its attention toward a "forgotten" mandate to promote competition in U.S. markets.

Speaking at a Washington, D.C., conference Oct. 11, Jackson, a Democrat, said that the SEC needs to revive its mandate to promote competition among companies in the U.S. financial markets. While investors have fewer and fewer choices on Wall Street, Jackson said the SEC has exclusively relied on the Federal Trade Commission and the Department of Justice to shoulder the burden of tackling antitrust matters.

To do so, Jackson called for the creation of what he referred to as an "Office of Anti-Trust Economics," which would be placed within the SEC's Division of Economic and Risk Analysis.


The head of Wall Street's chief regulator does not believe quarterly earnings reporting requirements will change for larger companies in the immediate future.

"I don't think quarterly reporting is going to change for our top names any time soon," SEC Chairman Jay Clayton said during an Oct. 11 event hosted by the Bipartisan Policy Center.

Publicly traded companies in the U.S. are currently required to provide financial metrics about their operations four times a year. But that model has been thrust into the spotlight in 2018 after President Donald Trump tweeted in August that the quarterly reporting model should be changed to a six-month system. By doing so, companies could see "greater flexibility & save money," Trump tweeted, adding that he had asked the SEC to study the potential switch.

Whether the SEC ends up making a change to the practice of quarterly reporting as a whole remains to be seen, though. During the event, Clayton hinted that the quarterly earnings model may be more likely to change for smaller publicly traded companies.

"Rarely does one size fit all, across the marketplace," Clayton said. "There may be a size of companies, particularly smaller, emerging companies, where quarterly reporting is not what the market would expect."

Scrutiny has also arisen around the practice of providing quarterly earnings guidance, which CEOs including JPMorgan Chase & Co.'s Jamie Dimon and Berkshire Hathaway Inc.'s Warren Buffett say facilitates short-termism among investors and other market participants.

At the Fed

The Federal Reserve "has gone crazy," according to Trump, who criticized the U.S. central bank's monetary policy throughout the week.

On Oct. 10, Trump said the Fed is "making a mistake" by tightening monetary policy through raising interest rates, according to a video posted by CNBC. He told Fox News later in the day that the Fed was "going wild" and "going loco." The next day, Trump said the recent drop in equity markets are a "correction that I think is caused by the Fed and interest rates."

The comments are some of Trump's most pointed critiques of the U.S. central bank. But the commentary is not expected to have a "practical impact" on the central bank's normalization trajectory, Compass Point Research & Trading analyst Isaac Boltansky wrote in an Oct. 10 research report. During the week of Oct. 8, several Fed officials backed the central bank's current plan to continue raising interest rates.

The Fed is projected to raise its benchmark federal funds rate in December, which would be the central bank's fourth rate hike of 2018. Over the coming years, inflation is expected to remain around the Fed's 2% goal, and the central bank's projections do not currently anticipate a sizable jump in inflation after that.

Other news

The top U.S. financial regulators will weigh next week to what extent a disruptive Brexit could impact financial stability.

The U.K. is still months away from a March 2019 deadline to negotiate an exit from the European Union, but some have worried that both sides will fail to agree to a deal, bringing about uncertainty for financial firms and others who would need to figure out how to respond. The topic is on the agenda for an Oct. 16 meeting of the U.S. Financial Stability Oversight Council, or FSOC, which includes the Fed's Jerome Powell, the SEC's Clayton, Treasury Secretary Steven Mnuchin and other top federal regulators.

The FSOC will also discuss its guidance for how it designates nonbank financial firms for additional regulatory scrutiny. The Treasury Department has pushed for a shift away from deeming individual companies as systemically risky, calling for the FSOC to migrate toward an approach that considers the riskiness of those institutions' activities.

In September, the FSOC removed the systemically important tag from Zions Bancorp NA when the company no longer operates under a holding-company structure.

The panel is considering whether it should scrap that designation for Prudential Financial Inc., the last nonbank company that the FSOC currently deems systemically important.

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