The U.S. Securities and Exchange Commission and the Australian Securities and Investments Commission have signed a mutual recognition agreement that will allow them to consider exemptions for firms from each others’ jurisdictions.

Today’s arrangement between the SEC, the Australian government, and the ASIC provides a framework for the SEC, the Australian government, and ASIC to consider regulatory exemptions that would permit U.S. and eligible Australian stock exchanges and broker-dealers to operate in both jurisdictions, without the need for these entities to be separately regulated in both countries.

Once implemented, these exemptions could permit U.S. stock exchanges and broker-dealers regulated by the SEC to offer their services to Australian wholesale investors and financial firms without being subject to most ASIC regulation. Similarly, Australian stock exchanges and broker-dealers regulated by ASIC could offer their services to certain types of U.S. investors and firms without being subject to most SEC regulation.

The SEC has pledged to consider a similar arrangement with Canada, and earlier this year announced plans to establish a framework for discussions between the regulators of the two countries. However, it is first pursuing an arrangement with Australia.

As part of the arrangement between the US and Australia, the regulators adopted an enhanced enforcement memorandum of understanding and a new supervisory MOU that will allow for greater regulatory and enforcement cooperation and coordination between the SEC and ASIC. These MOUs will apply broadly to all U.S. and Australian market activity and not just those related to the mutual recognition arrangement. Under the arrangement, both the SEC and ASIC will retain jurisdiction to pursue violations of their respective anti-fraud laws and regulations.

The SEC and Australian authorities will begin considering regulatory exemptions under the arrangement as they are submitted to the two agencies. It is expected that the process of considering the initial applications for exemptions for approval by the authorities could be concluded in early 2009.

SEC chairman Christopher Cox said, “Today’s signing marks a significant milestone in our partnership with Australia to reduce the barriers that U.S. and Australian investors now face in investing in each other’s markets. The framework we are establishing is designed to ensure that the significant protections afforded to investors under each nation’s regulatory system are maintained and enhanced. An important part of this arrangement is strengthening the ability of the SEC and ASIC to cooperate with each other in our enforcement and supervisory efforts, thereby enhancing the integrity of both our markets.”

ASIC chairman Tony D’Aloisio noted, “This will give both Australian and U.S. investors easier and more competitive access to each other’s markets, and will offer Australian market participants and U.S. broker-dealers new ways of doing business with clients in each other’s markets.”