IOSCO

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The International Organization of Securities Commissions (IOSCO) is an international organization that brings together the regulators of the world’s securities and futures markets. It, along with its sister organizations, the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors, together make up the Joint Forum of international financial regulators. Currently, IOSCO members regulate more than 90 percent of the world's securities markets.

Originally formed in 1974 as the “Inter-American Conference of Securities Commissions," IOSCO's name was changed in 1983 as its membership expanded beyond North and South America. (One remnant of its early inter-American roots is that IOSCO's "official" languages are English, French, Spanish and Portuguese). IOSCO currently has 182 members, divided into three main categories (IOSCO has 109 ordinary members, 11 associate members, and 62 affiliate members.):

  • Ordinary members, which must be the primary regulators of securities and/or futures markets in a jurisdiction. A stock exchange or self-regulatory organization may be an ordinary member, but only if it is the jurisdiction’s primary securities regulator.
  • Affiliate members, which include stock exchanges, self-regulatory organizations, and various stock market industry associations.

Contents

Organization

Source: Structure of the Organization IOSCO

IOSCO’s ordinary and associate membership is divided into several committees. These include:

  • A Presidents’ Committee, composed of the Presidents, Chairman or senior-most representatives of all securities commissions belonging to IOSCO. It is in effect the organization’s general assembly;
  • An Executive Committee, which comprises 19 ordinary members acting under the authority of the Presidents’ Committee, and that acts as the organization’s executive decision-making body;
  • A Technical Committee, with 15 ordinary and associate members drawn primarily from the larger, more developed and more internationalized economies, whose role is to develop practical responses to major regulatory issues and study possible international standards and best practices for securities market regulation; and,
  • An Emerging Markets Committee, with 80 ordinary and associate members (plus one non-voting member, the U.S. SEC) from Latin America, Europe, Africa, the Middle East and Asia, whose role is to conduct studies on those markets and suggest ways these markets can be improved.

In addition, IOSCO has four regional committees (Europe, Inter-America, Asia-Pacific and Africa-Middle East) with members drawn from these regions, and an SRO Consultative Committee made up of stock exchanges and financial associations who offer input to the other IOSCO committees on issues of concern to the financial industry.

IOSCO (and its main committees) also have numerous specialized sub-committees (some permanent, some of limited duration) and task forces. IOSCO’s Technical Committee (arguably its most important sub-group, given the prominence of its members and its role as the organization’s “standard-setting” body) has five permanent sub-committees, each focused on a particular area of securities regulation. These sub-committees include:

  • Standing Committee 1, which focuses on accounting, auditing and corporate disclosures;
  • Standing Committee 2, which focuses on the regulation of stock exchanges;
  • Standing Committee 3, which focuses on the regulation of market intermediaries such as broker-dealers, investment banks, etc.;
  • Standing Committee 4, which focuses on cross-border securities law enforcement matters; and,
  • Standing Committee 5, which focuses on the regulation of mutual funds and other “collective investment schemes”.

IOSCO's main committees (Executive, Technical and Emerging Markets) typically meet three times per year, in different countries depending on which member has agreed to act as host. IOSCO also has an annual meeting which, in addition to side meetings of the Executive, Technical and Emerging Markets committees, also involves a meeting of the President's Committee and typically two days of panel discussions open to the public and featuring regulators and business leaders from around the world.

Starting in 2004, IOSCO's Technical Committee began hosting an invitation-only conference as a way to spark discussion and dialogue between the top leaders of regulatory, investor, university and business groups. These conferences are held in cities with major stock markets, in part to facilitate attendance by top business executives and investors. Technical Committee conferences typically have a series of panels made up of some of the most prominent names in the securities industry, including the heads of major stock exchanges, current and former SEC chairmen, and the finance ministers of the host country. The first of these conferences was held in New York, while the 2005 conference was held in Frankfurt am Main. The 2006 Technical Committee conference took place in London in November and the 2007 Technical Committee conference took place in Tokyo.

Leadership

Administratively, IOSCO is run by a General Secretariat based in Madrid, Spain. IOSCO’s current Secretary General is Mr. Greg Tanzer (a former Australian Securities and Investments Commission official) and he is assisted by a relatively small group of approximately 9 professional staff.

IOSCO Executive Committee is chaired by Mrs. Jane Diplock, chairwoman of the New Zealand Securities Commission.

The Technical Committee is chaired by Ms. Kathleen L. Casey, a commissioner of the U.S. Securities and Exchange Commission.

The current chairman of the Emerging Markets Committee is Mr. Guillermo Larrain (Chairman, Superintendencia de Valores y Seguros, Chile)[1]

IOSCO also has several regional committees of securities commissions from particular geographical areas. These include the African-Middle East Regional Committee (chaired by Mallam Musa Al-Faki of the Nigerian Securites and Exchange Commission), the Asia-Pacific Regional Committee (chaired by Jun Kwang-Woo of the Financial Services Commission (South Korea)), the European Regional Committee (chaired by Eddy Wymeersch of the Banking, Finance And Insurance Commission of Belgium) and the Interamerican Regional Committee (chaired by Narcisco Muñoz of the Comisión Nacional de Valores of Argentina).

History

IOSCO was born in 1983 from the transformation of its ancestor inter-American regional association (created in 1974) into a truly international cooperative body. Eleven securities regulatory agencies from North and South America gathered in Quito, Ecuador in April 1983 to take that important decision.

In 1984, securities regulators from France, Indonesia, Korea and the United Kingdom were the first agencies to join the membership from outside the Americas. The IOSCO July 1986 Paris Annual Conference was the first to take place outside of the American continents. On that occasion a decision was made to create a permanent General Secretariat for the Organization.

Today IOSCO is recognized as the international standard setter for securities markets. The Organization's wide membership regulates more than 90% of the world's securities markets and IOSCO is the world's most important international cooperative forum for securities regulatory agencies. IOSCO members regulate more than one hundred jurisdictions and the Organization's membership is steadily growing.

IOSCO adopted in 1998 a comprehensive set of Objectives and Principles of Securities Regulation (IOSCO Principles), which are today recognized as the international regulatory benchmarks for all securities markets. The Organization endorsed in 2003 a comprehensive methodology (IOSCO Principles Assessment Methodology) that enables an objective assessment of the level of implementation of the IOSCO Principles in the jurisdictions of its members and the development of practical action plans to correct identified deficiencies.

In 2002 IOSCO adopted a multilateral memorandum of understanding (IOSCO MOU) designed to facilitate cross-border enforcement and exchange of information among the international community of securities regulators.

In 2005 the Organization endorsed the IOSCO MOU as the benchmark for international cooperation among securities regulators and set-out clear strategic objectives to rapidly expand the network of IOSCO MOU signatories by 2010. It approved as an unambiguous operational priority the effective implementation - in particular within its wide membership - of the IOSCO Principles and of the IOSCO MOU, which are considered as primary instruments to facilitate cross-border cooperation, reduce global systemic risk, protect investors and ensure fair and efficient securities markets. IOSCO also adopted a comprehensive consultation policy designed to facilitate its continuous interaction with the international financial community and in particular with the industry.

Role

IOSCO’s main objective is to assist its members to:

  • Cooperate together to promote high standards of regulation in order to maintain just, efficient and sound markets;
  • Exchange information on their respective experiences in order to promote the development of domestic markets;
  • Unite their efforts to establish standards and an effective surveillance of international securities transactions;
  • Provide mutual assistance to promote the integrity of the markets by a rigorous application of the standards and by effective enforcement against offenses.

Significant recent work

In recent years, but particularly after September 11, 2001 (which underscored how interlinked world securities markets are) and the series of large, global financial scandals that started with Enron (and grew to include Worldcom, Parmalat, Vivendi, Royal Dutch Shell and others), IOSCO issued a series of significant principles and best practices that heralded its evolution from an international “talk shop” (where little of substance was accomplished) to a serious international organization with a real impact on the securities regulation in its constituent members. This recent work includes:

  • Regulatory principles designed to improve auditor independence [2] and auditor oversight [3];
  • Regulatory principles for corporate financial disclosure and transparency [4];
  • Regulatory principles regarding conflicts of interest for financial analysts [5];
  • A Code of Conduct [6] for credit rating agencies;
  • A set of “Core Principles” [7] for securities regulation designed to outline for IOSCO members what makes up “good” securities regulation; and, perhaps most significantly,
  • A Multilateral Memorandum of Understanding [8]on enforcement cooperation, through which IOSCO members pledge to provide each other with collecting information and witness statements in an enforcement investigation.

Cross-border coordination

"... Of course, none of these issues can be adequately addressed without significant cross-border coordination and cooperation.

Accordingly, this past June, IOSCO launched a new Supervisory Cooperation Task Force. The Task Force is designed to promote supervisory cooperation and develop principles for cooperation in the supervision and oversight of market participants whose operations cross international borders.

This work will prove particularly relevant to IOSCO’s ongoing work related to hedge funds, credit rating agencies, OTC derivatives markets and systemically important entities and actors. Even, at the earliest stages of the crisis – long before anyone could have forecast the severity of the financial storm that lay ahead – the IOSCO Technical Committee began to assess the role that credit rating agencies played in the lead up to the financial crises.

The result of this effort was identification and adoption of important changes to IOSCO’s Code of Conduct Fundamentals for Credit Rating Agencies and subsequent assessment of the degree to which rating agencies adopted the amended code of conduct.

This important work by IOSCO has been recognized by G20 leaders and the Financial Stability Board as setting the international benchmark for credit rating agency regulation as they now continue to look to IOSCO’s ongoing leadership in developing and facilitating a global regulatory framework for the regulation and oversight of credit rating agencies.

Pursuant to this, and to address the potential negative market impacts of differing national approaches to CRA regulation and supervision, in February, the Technical Committee decided to transform its CRA Task Force into a permanent Standing Committee.

This new Standing Committee will regularly discuss, evaluate and consider regulatory and policy initiatives related to rating agency activities and oversight.

In addition, the Standing Committee has undertaken to actively seek cross-border consensus on these issues, conduct a regular dialogue between securities regulators and the CRA industry regarding emerging issues and continue to establish international standards and best practices for credit rating agencies.

Another important area that IOSCO has been actively engaged in is the establishment of appropriate hedge fund regulation.

In June of this year, IOSCO took a significant step in promoting the oversight of hedge funds by agreeing to a set of high-level principles for hedge fund regulation..."

Joint Forum Review of the Scope of Financial Regulation

The Joint Forum today released its report, Review of the Differentiated Nature and Scope of Financial Regulation – Key Issues and Recommendations. This review was requested by the G20 through the Financial Stability Board. The report analyses key issues arising from the differentiated nature of financial regulation in the international banking, securities, and insurance sectors. It also addresses gaps arising from the scope of regulation as it relates to different financial activities, with a particular focus on certain unregulated or lightly regulated entities or activities. The objectives of the review were to identify potential areas where systemic risks may not be fully captured in the current regulatory framework and to make recommendations on needed improvements to strengthen regulation of the financial system.

The report’s recommendations address five specific areas:

  • Issues arising from regulatory differences across the three sectors, including with respect to similar financial products;
  • Supervision and regulation of financial groups, focusing on unregulated entities within those groups;
  • Residential mortgage origination, focusing on minimum underwriting standards consistently implemented by different types of mortgage providers;
  • Hedge funds, especially those that present systemic risk; and
  • Credit risk transfer, focusing on credit default swaps and [[bond insurance|financial guarantee insurance].

John C Dugan, Chair of the Joint Forum until the end of 2009 and Comptroller of the Currency in the United States, said today: “This paper takes a focused look at certain regulatory gaps that became apparent during the crisis. There are some key recommendations in this report that, once implemented, will reduce those gaps and strengthen regulation of the financial system. Consistency in regulation and similar supervision for similar activities are key principles for effective oversight of systemic risks. This report sets the stage for additional important work that will lead to greater convergence of the supervision of financial activities and firms.”

The paper is available on the websites of the Bank for International Settlements, IOSCO and the IAIS.

Self assessment for securities regulators

Source: Methodology for Assessing Implementation of the IOSCO Objectives and Principles of Securities Regulation IOSCO

The Methodology for Assessing Implementation of the IOSCO Objectives and Principles of Securities Regulation (October 2003, available in English, French, and Spanish), or Assessment Methodology. This internet-based document provides securities regulators with an interactive tool to assist them in completion of a self-assessment, preparation for an assisted self-assessment, preparation for a third-party assessment or related developmental work with respect to their securities regulatory regime. As with the original text of the Assessment Methodology:

This Methodology is intended to provide guidance on the conduct of a self-assessment or third party assessment of the level of implementation of the International Organization of Securities Commission's Objectives and Principles of Securities Regulation ("Principles"). IOSCO intends the Methodology to illustrate IOSCO's interpretation of its Principles. This Methodology does not alter or expand the Principles.

IOSCO and other international organizations

IOSCO is a member of, participates as an observer in, or coordinates with a number of other international organizations, including:

  • The Organisation for Economic Co-operation and Development
  • The Financial Action Task Force on Money Laundering
  • The Public Interest Oversight Board
  • The European Commission

Sovereign regulators collaborative efforts

References


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