The U.S. Department of the Treasury (“Treasury Department” or “Treasury”) issued its second report (of four reports), titled “A Financial System that Creates Economic Opportunities, Capital Markets” (the “Report”). The Report was issued in response to Presidential Order 137772 setting forth the Core Principles that should guide regulation of the U.S. financial system. The Report addresses various elements of the capital markets, from the equity and debt markets, to the U.S. Treasury securities market, and to derivatives and securitization. The Report also addresses the role and regulation of financial market utilities and clearinghouses. Like many movie sequels, which are somehow less compelling than the original, this second installment is less cohesive than the first Treasury report, which focused on the regulation of depositary institutions. The Report notes that certain aspects of the capital markets regulatory framework are working well, but other elements would benefit from better “calibration.” To that end, the Report recommends various measures, most of which would not require legislation, that would promote capital formation. There are few novel recommendations included in the Report. Below, we discuss many of the recommendations in the principal areas of interest to our clients.

Capital formation -

The Report reviews now-familiar ground, lamenting the decline in the number of U.S. public companies and initial public offerings in the United States in recent years. While noting that it is difficult to isolate the cause for the decline in the number of IPOs, the Report attributes the decline at least in part to increased regulatory burdens facing U.S. public companies. The Report’s recommendations are largely consistent with provisions of various standalone bills introduced in Congress this session, many of which have been subsumed into the Financial CHOICE Act. Below, we highlight key recommendations...