(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

Atkins Urges Bond Market to Prepare Now for "Baby Boomer" Retirements

In remarks before the Bond Market Association's recent legal and compliance conference, Commissioner Paul Atkins urged the industry to begin now to prepare for the additional scrutiny that may come with the retirement of 76 million so-called "baby boomers." As these people retire, Mr. Atkins said they may shift their investments from the equity markets to bonds to meet their changing needs. This increased investment will bring with it more attention from the public and the regulators, he said, so the industry may want to consider regulatory risks and solutions now to avoid potential regulatory overreactions later.

Mr. Atkins said he is worried about the form of oversight the Sarbanes-Oxley Act provisions might lead regulators to take with respect to gatekeepers. He is concerned that regulators may devise overly-technical prescriptions in response to a few instances of misconduct. Technical prescriptions may discourage talented professionals from serving as gatekeepers for public corporations, he said.

Mr. Atkins said that broker-dealers pose one of the greatest concerns since they must comply with both federal and self-regulatory organization rules. He pointed to the SEC's recent approval of NASD rules requiring CEO certifications and designations of chief compliance officers. The U.S. economy must not be unduly encumbered by a web of regulations, Commissioner Atkins said, since the result may be a loss of its appeal as an investment destination.

The SEC can provide balance by reviewing its regulatory approach, according to Commissioner Atkins. He said the SEC should "take a deep breath, survey the landscape and focus its energies in a coordinated and effective manner" to ensure sound regulatory policies. Mr. Atkins pointed to the SEC's consolidated supervised entity and supervised investment bank holding company rules as the first steps toward a prudential regulatory approach and urged the industry to provide feedback on its experience with this initiative. The SEC is still working it out internally, he said, so comments are welcome.

Mr. Atkins cautioned against imposing new standards of conduct after the fact through enforcement proceedings. Regulators must tackle complex and controversial issues and provide clear standards before problems arise, he said. Mr. Atkins believes that regulators must obtain information about changing business practices to keep up with evolving markets and to do so, they must interact with regulated entities and respond to their questions. Certain red flag topics reemerge like clockwork, Mr. Atkins said, and these issues should be resolved by regulators and the industry working together.

Mr. Atkins said the SEC must conduct effective examinations for compliance, which requires proactive regulatory guidance to prevent scattershot regulation by examination staff. Rulemaking and examination staff should work together to ensure an agreed-upon plan of oversight, in his view. Further, he said that regulatory holes should be addressed through formal interpretive guidance or through the statutory due process, notice and comment procedures of formal rulemaking. Mr. Atkins also called on the SEC to take the lead in cooperating with other regulators involved in duplicative investigations.

In preparing for the increased focus on the bond market, Mr. Atkins suggested that the industry examine transaction pricing, since it may pose regulatory risk. He referred to the SEC's hedge fund registration rule where he said three of his colleagues relied on anecdotal information about the "retailization" of the industry in voting to adopt the requirement, and suggested that the bond industry also could find itself on the "wrong side of a misguided regulatory initiative." Claims of excessive markups, manipulation or unfair pricing in the bond market could lead to a regulatory reaction, especially where a fiduciary duty is involved, he explained.

Mr. Atkins also distanced himself from the direction the SEC's proposed Regulation NMS is taking and said he cannot support government intrusion into the marketplace, particularly with respect to the pricing of securities. The proposed trade-through rule is not a disclosure rule or a transparent form of regulation, he said. He urged the industry to speak out on this issue and others that affect its regulatory obligations.