WASHINGTON — U.S. and Australian stock exchanges and brokers could be allowed to operate in each other's countries without being subject to most local regulation, under an agreement between regulators.

Wall Street interests praised the announcement of the agreement made Monday by the U.S. Securities and Exchange Commission and the Australian Securities and Investments Commission. But a U.S. investor advocate called it a "radical" deregulatory move.

The so-called mutual-recognition agreement allows the SEC and the Australian regulators to grant exemptions from regulations to exchanges and brokers in each other's countries.

Under the agreement, the first exemptions applied for could be approved by the two regulatory bodies early next year, the SEC said.

Sen. Jack Reed, D-R.I., chairman of the Senate Banking subcommittee on securities, this spring asked the SEC to closely examine the move toward mutual recognition and delay action until the effectiveness of foreign regulators can be assessed.

Barbara Roper, director of investor protection for the Consumer Federation of America, on Monday said the new agreement showed "a reckless disregard for the interests of American investors."

"The SEC has advanced this radical regulatory departure without first conducting a cost-benefit analysis...and without offering any evidence that this regulatory approach is in the public interest," Roper said in a statement.

SEC officials noted that the accord with Australia is a pilot program.

"The agreement is designed to increase investor protection," SEC spokesman John Nester said. "U.S. retail investors will still have to go through a U.S. registered (brokerage firm), so they will continue to enjoy every regulatory protection they already have. Institutional investors, meanwhile, who are already trading in foreign markets in record numbers and dollar amounts, will for the first time receive regulatory protections."

Proposed exemptions under the Australian agreement will be examined and debated by the SEC commissioners before they vote to approve them, agency officials say.