The Volcker Alliance, a non-profit organization founded by former Chairman of the Board of the Federal Reserve Paul A. Volcker to address the challenge of effective execution of public policies and to help rebuild public trust in government, has released a report — Reshaping the Financial Regulatory System: Long Delayed, Now Crucial — outlining recommendations for reform of the financial regulatory structure and emphasizing the urgency of implementing such reforms.

One key recommendation — combine the Securities and Exchange Commission (SEC) and the  Commodities Futures Trading Commission (CFTC).

The report finds that “failure to reorganize the regulatory structure will contribute to the buildup of systemic risk and make us more vulnerable to the next financial crisis.”

“Even as America continues its long climb back from the financial crisis, it is all too clear that the Federal financial regulatory system needs restructuring to deal effectively with the threats to financial stability,” Volcker said. “We urge Congress, the administration, existing regulatory agencies, and financial institutions themselves to step up to the needed debate and set out an agreed framework for reform suitable for the 21st century.”

The report found that “The system for regulating financial institutions in the

United States is highly fragmented, outdated, and ineffective.”

“A multitude of federal agencies, self-regulatory organizations, and state authorities share oversight of the financial system under a framework riddled with regulatory gaps, loopholes, and inefficiencies,” the report found.

To address these shortcomings, the report sets out a basic framework for a reformed financial regulatory system, clarifying the particular responsibilities of various agencies and arrangements for effective cooperation and decision-making.

In doing so, it recommends building upon initiatives in the Dodd-Frank Act to promote needed oversight and to provide a forum to protect against unchecked regulatory and supervisory authority by individual agencies.

The Alliance is also releasing a series of background papers, which delve into greater detail about prior proposals for reform, international regulatory systems, and specific aspects of the US regulatory system.

“The aim is a simpler, clearer, adaptive, and resilient regime that has a mandate to deal with the financial system as it exists now, and is capable of keeping pace with the evolving financial landscape,” Volcker said.

The report calls for more effective surveillance of financial markets as well as appropriate checks and balances:

The Financial Stability Oversight Council would establish a Systemic Issues

Committee (SIC) to vote on designations of systemically important financial institutions and risky activities and practices.

The Office of Financial Research would be moved out of the Treasury Department and become an independent entity, with its director continuing to be appointed by the president and subject to Senate confirmation.

Responsibility for regulation and supervision would be clarified by the establishment of a new Prudential Supervisory Authority (PSA) as an independent agency with a strong link to the Federal Reserve, which would maintain authority for rules and regulation.

The SEC and the CFTC would be merged to create a new, independent investor protection and capital market conduct regulator.