While many players in the U.S. securities industry have responded positively to Treasury Secretary Henry Paulson’s plan to reform financial industry regulation, the initiative has plenty of critics, too. That makes its implementation a very uncertain, and distant, prospect.

Paulson’s plan, which was announced on Monday, would see industry regulation restructured in a number of areas, new regulatory bodies created, and others merged. So far, the securities industry has indicated that it’s fairly pleased with the plan, which had its origin before the current market crisis took hold. That, not surprisingly, has other factions worried about the overall impact of the plan.

State securities regulators are indicating that they oppose the so-called blueprint for reform. Karen Tyler, president of the North American Securities Administrators Association and North Dakota Securities Commissioner, said, “The Treasury Department’s blueprint is designed to boost Wall Street’s competitiveness, not Main Street investor protection.

“Let’s not lose sight of the blueprint’s heritage. It was born in the wake of a trilogy of capital market competitiveness reports that, published alongside record earnings and bonuses on Wall Street, essentially fell flat,” she added. “In our response to Treasury’s request for comments on regulatory restructuring last year, NASAA’s position was, and continues to be, unambiguous: the existing regulatory system, as it pertains to the securities markets, needs no fundamental restructuring. The focus of state securities regulators is clear and singular: investor protection must remain the centerpiece of the securities regulatory system.”

Tyler added, “A macro-level solution to the current self-inflicted capital market duress, must not result in a compromise of investor protection on Main Street. While clearly there are areas of the overall structure that should be altered or enhanced, our nation’s investors do not need a new regulatory structure to provide the protection they deserve. What they need is a willingness on the part of all regulators to carry out their investor protection mandate.”

The US securities industry self-regulatory organization, the Financial Industry Regulatory Authority, was more positive. FINRA CEO, Mary Schapiro, said, “This blueprint marks an important beginning to a debate that is critical to the future of investor protection.”

“Today’s increasingly complex financial services landscape and fragmented regulatory environment has made it nearly impossible for the average investor to navigate the marketplace and fully understand the risks they may be exposed to and the protections they are entitled to,” she added.”Investors shouldn’t be left exposed and confused. Retail investors should get the same basic regulatory safeguards and protections no matter which investment product they choose.

The proposed plan would spell changes in many other areas beyond securities markets. Comptroller of the Currency, John Dugan, said, “The plan Secretary Paulson outlined today offers a thoughtful approach to the realities of financial services regulation in the 21st century, and the OCC looks forward to playing a positive and constructive role as the Treasury blueprint is discussed in the coming months.”

The research firm, Global Insight Inc., says that, given the early reaction, the plan likely faces a long road ahead. “Paulson will not be surprised to see a backlash is already under way over his controversial plans. There are many orthodoxies challenged in the proposals and there will inevitably be resistance from officials in agencies that face closure or dramatic change,” it notes. “However, there is also a growing chorus of criticism from those outside government, and it seems a long and arduous debate is in prospect.”

Global Insight says that Paulson’s plan doesn’t fall simply into the camp of easing, or toughening, regulation. The former generally associated with Republicans, and the latter, with Democrats. But, “Whether or not the proposals make quick legislative progress depends, to a large degree, on the reaction of the Democrats, as they currently control Congress and could well win the presidency come November,” it suggests.

The firm points out that the Democratic chair of the House Financial Services Committee, Barney Frank, has already poured cold water on the idea of passing the reforms this year. “He argued yesterday that lawmakers need to prioritise the housing-market problems. [Presidential hopefuls, Senators Barack Obama and Hillary Clinton] have indicated that they are in favour of wide-ranging reform of the institutions, but the doubts they raised yesterday suggest they see this as a longer-term project,” it concludes. “The pace of progress will also depend to a large degree upon perceptions of the current crisis. If banking stability improves over the remainder of the year the sense of urgency will be lost.”