New York Panel Rethinks Securities Oversight

A commission assembled to revise New York State’s financial regulations recommended on Friday having one regulator to oversee the securities industry, instead of the current four overseers.

The group of state officials and financial executives, which was brought together by Governor Eliot L. Spitzer, also suggested proposals for principles-based regulation. That system, modeled after a similar one in Britain, would require firms to abide by a code of conduct, like not defrauding customers, instead of producing a litany of specific rules.

Both proposals are aimed at keeping New York competitive. Since the financial industry is the biggest revenue generator for the state and for New York City, officials for have fretted over the potential loss of business to rivals like London.

“We want to maintain New York City and New York State as the financial capital of the world,” Mr. Spitzer said at a news conference Friday, flanked by financial executives. “We have to continue to attract capital.”

The commission was formed in May, but its work has taken on new prominence in light of the turmoil in the subprime mortgage market. Wall Street brokerage firms have announced more than $100 billion in write-downs, and firms ranging from mortgage lenders to bond insurers have lost billions of dollars in capital.

Mr. Spitzer said he did not know whether a principles-based system would have prevented some of the turmoil in the subprime crisis But the current system failed to protect consumers, he said, adding that regulators needed to “restore credibility.”

He also argued that now was a time to reconsider financial regulations in an effort to prevent another such meltdown. Among the chief ways to do that were to potentially combine the oversight responsibilities of New York’s four financial authorities: the insurance department, the department of state, the banking department and the attorney general’s office.

At Friday’s news conference several financial executives and panel members — including Herbert M. Allison Jr. of TIAA-CREF, Laurence D. Fink of BlackRock and Martin J. Sullivan of the American International Group — said in prepared remarks that the state’s regulatory system needed to catch up with the market place.

Principles-based regulation, they said, would help in that effort.

John J. Mack, the chief executive of Morgan Stanley — which last month reported a $3.6 billion loss for its fourth quarter — was also at the news conference, which was held after the first meeting of the group.

Critics of the regulation argue that it would lead to more lax oversight. But Eric R. Dinallo, the New York State insurance superintendent and the commission’s chairman, said that a principles-based system would promote more dialogue between regulators and the industry.

Mr. Dinallo also said that the panel’s recommendations might serve as a template for regulatory change at the federal level.

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