Ontario’s top regulator was elected vice chairman of the International Organization of Securities Commissions (IOSCO), at the group’s latest board meeting in Sydney, Australia.
IOSCO said announced Monday that Howard Wetston, Ontario Securities Commission chairman, was elected as vice chairman of the umbrella group of global securities regulators. His appointment follows the retirement of U.S. Securities and Exchange Commission’s Ethiopis Tafara.
At the same time, Greg Medcraft, chairman of the Australian Securities and Investments Commission (ASIC), took over as IOSCO chairman.
“I am looking forward to working with Greg Medcraft to advance IOSCO’s standard-setting agenda, including new mandates on investor protection and education, cross-border regulation and deterrence,” Wetston said.
At the meeting, the board agreed to establish a task force on cross-border regulation and a new standing committee on investor education and protection, and agreed on the need for a project on better deterrents to securities law violators.
The new task force is to develop measures for regulating securities market activities that cross borders, and possibly principles to guide the coordinated use of these tools, such as substituted compliance, mutual recognition and supervisory co-operation.
The new Committee on Investor Education and Protection is to have a broad mandate to lead IOSCO’s work on retail investor education and protection. “Its aim will be to ensure IOSCO takes a consistent and comprehensive approach to retail investment products and services,” it says. “By focusing on investor education it will enable IOSCO members to share their experiences and build expertise globally in financial literacy.”
The board also examined a new mandate for the IOSCO committee on enforcement to identify the core elements of a credible deterrence framework for securities regulation, including strategies and good practices. It says this effort aims to respond to a public demand for tougher sanctions to deter market misconduct.
The board also considered additional measures to encourage members that have yet to sign onto its memorandum of understanding on cooperation and exchange of information, which is used by securities regulators around the world to combat cross-border fraud and misconduct. So far, 30 members have yet to become signatories. And, IOSCO notes that “as long as these jurisdictions remain outside the international enforcement regime, they offer potential safe havens for wrong doers and create gaps in IOSCO’s international enforcement network.”
In terms of policy, the board discussed the draft principles on financial benchmarks, and agreed to issue a second consultation paper focusing primarily on additional, more detailed principles. The paper is expected to be released for a four-week comment period in April, with a final report expected in June.
It also discussed progress in reform work mandated by the G20, including OTC derivatives reform initiatives, progress on margin requirements for non-centrally cleared derivatives, the need for further work on credit rating agencies and on credit default swaps. And, it discussed progress on IOSCO’s work in developing a methodology to identify systemically important financial institutions that aren’t banks, including market intermediaries, asset managers and hedge funds; and, resolution regimes for such firms.
Additionally, the board also pledged greater industry engagement to address emerging risks. It also discussed potential risks including the global imbalances caused by capital flows, weaknesses in financial market infrastructure, high-frequency trading, market fragmentation, and cyber-attacks. It also expressed concern over the potential risks of the current low interest rate environment, which could fuel the creation of new asset bubbles, particularly in emerging markets with largely undiversified economies.
Medcraft, who succeeds Masamichi Kono of the Japan FSA as IOSCO’s chair, said, “Under my stewardship, I want to build on Mr. Kono’s work and ensure IOSCO is proactive and forward-looking in delivering three objectives – working to ensure that globally investors are confident and informed, markets are fair and efficient and reducing systemic risk.”