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Treasury Department calls for capital market reforms

Streamlining can make capital markets a true source of economic growth, Treasury Secretary Steven Mnuchin says.

The Treasury Department answered President Donald Trump's call to revisit financial regulations in a report released Friday that calls for "significant reforms" to capital market rules to promote economic growth while still protecting investors.

The report also recommends ways to foster more public companies and to open private markets to investors.

"By streamlining the regulatory system, we can make the U.S. capital markets a true source of economic growth, which will harness American ingenuity and allow small businesses to grow," Treasury Secretary Steven Mnuchin said in a statement.

The number of publicly traded companies has declined nearly 50% over the last 20 years as capital markets have become more regulated, said the report, which offers ways to reduce the burden on companies looking to go public or remain so, including streamlined disclosure rules that are tailored to a firm's size, and revisiting the Jumpstart Our Business Startups Act. The report also calls for opening private markets to investors through pooled investments and other methods.

The 232-page report recommends assessing regulatory overlap between the Securities and Exchange Commission and the Commodity Futures Trading Commission, having more public input and economic analysis into rulemaking and revisiting the definition of an accredited investor. It would also limit regulators' ability to impose new rules through less formal steps such as no-action letters.

On derivatives, Treasury officials called for greater harmonization between the SEC and CFTC, new capital and margin treatment, and dealing with "cross-border frictions" affecting global markets.

Responding to the report, CFTC Commissioner Rostin Behnam noted that "unregulated, over-the-counter derivatives played a significant role in the financial crisis," and said that recent derivatives market reform was a critical first step to avoid a repeat of 2008.

Some of the recommendations in the report can be done administratively, while others will need legislative action by Congress.

David Hirschmann, president and CEO of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, called the report "a blueprint to unlock the resources needed to spur economic growth and job creation."