The United States and Australia have begun formal discussions to develop a mutual recognition arrangement for the two nations’ securities markets.

Christopher Cox, chairman of the U.S. Securities and Exchange Commission, and Australian prime minister Kevin Rudd, announced that the SEC, the Australian Securities and Investment Commission, and the Australian Treasury Department have begun talks that are intended to enhance cross-border law enforcement cooperation, facilitate regulatory coordination, and increase investor access to well-regulated capital markets.

The discussions between the SEC and the Australian authorities represent the first step toward a possible bilateral arrangement and will cover potential recognition to allow securities exchanges and market participants to operate in each other’s markets.

The SEC and ASIC today agreed to undertake a formal assessment of each other’s regulatory systems to determine the extent to which each jurisdiction produces a comparable level of investor protection. The results of the comparability assessment would be published for public comment before being made final.

Once the comparability assessment is completed, this would provide the basis for further discussions between the SEC and ASIC regarding a formal mutual recognition arrangement, which would include specific discussion of the extent to which, and under what circumstances, U.S. and Australian securities exchanges and market participants could operate in each other’s markets and would articulate the additional cooperation arrangements that would be necessary and appropriate to ensure the integrity of financial markets and the protection of investors.

“As technology continues to reduce barriers to cross-border investing, securities regulators need to work together to keep our standards high. By beginning to build a sturdy basis for cooperation among securities regulators who share the same concerns, we can provide investors with more investment choices and greater investor protections. At the same time, we can strengthen the ability of our governments to cooperate in ways that will better help identify emerging international regulatory and supervisory issues,” Cox said.