Speaking to the International Organization of Securities Commissioners’ Technical Committee Conference in London, today, U.S. Securities and Exchange Commission chairman, Christopher Cox, said that national regulators must cooperate in increasingly global securities markets.

Cox said that, “in a world where companies and investors can easily choose where to buy and sell, every nation is going to face new challenges to its ability to impose and enforce securities regulations. After all, if companies and investors find the rules within a particular jurisdiction too restrictive, technology makes it easy for them to find another jurisdiction more to their liking.”

However, that doesn’t mean a race to the bottom. “In fact, just the opposite is true: National securities regulators are more relevant, and more needed, in the face of globalization than ever before,” Cox argued.

“First, along with the undisputed benefits of global markets, come greater risks – particularly to unsophisticated investors. Those risks from cross-border trading take the form of new opportunities for fraud, the greater exposure to unethical trading practices, and higher susceptibility to market manipulation. The second reason is obvious: there is no other national or international body that has both the legal mandate and the legal authority to protect investors and promote capital formation. National regulators have no choice but to wade into this fray.”

“So the challenge we face is figuring out how to protect investors and promote capital formation in an environment where capital, market actors, and fraudsters are all completely mobile,” he said.

Cooperation is necessary for quality investor protection, orderly markets, and healthy capital formation, Cox said. “Cooperation doesn’t mean that we should harmonize our regulations at levels that cost investors far more than they could hope to gain by way of better protection. Rather, we should seek the appropriate level of regulation that balances the costs to investors against the benefits they might receive,” he explained. “In some cases we’ll need to work with our counterpart regulators to heighten regulation on a multinational basis. In other cases we’ll need to tailor our approach where the experience of many nations has shown a more effective way to measured and workable solutions.”

“The way for each of us, as national regulators, to maintain robust investor protections while building healthy international markets is first, to adopt strong regulatory regimes at home that are cost-justified; and second, to cooperate with our fellow securities regulators abroad to implement agreed-upon regulatory objectives on a global level,” he said. “We’ve got to constantly re-examine our regulatory systems from top to bottom, and capitalize on every opportunity for mutual improvement. And we must also continually reassess the costs and benefits of our regulations as they are actually applied.”

“Regulators don’t have the luxury of trying to make things work in theory. We have to make things work in practice,” Cox noted. “I’m convinced that there is no better way of doing this than by working together.”

Also, Cox said that in the weeks ahead, the U.S. will unveil significant changes to the implementation of section 404 of Sarbanes-Oxley that are designed to make it more useful for investors. “Those changes will be aimed at ensuring that the internal control audit is top down, risk based, and focused on what truly matters to the integrity of a company’s financial statements. They will provide guidance for both companies and their auditors to permit common sense reliance on past work, and on the work of others,” he said. “The overarching objective of these significant changes will be to reduce the cost to investors while increasing the benefits in terms of investor protection.”