Global securities regulators are getting ready to release a consultation paper aimed at improving coordination and cooperation in cross-border rule making, reports Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC).
In his latest letter to the industry, Russell reports on a recent meeting of global regulators and industry players, which took place in Madrid last month. Coming out of that meeting, he notes that the group of global regulators, the International Organization of Securities Commissions (IOSCO) has established a task force that will issue a consultative paper, likely in September, on the cross-border model for cooperative rule-making and regulatory recognition. It expects to have a final report on the issue ready for the next round of G20 meetings in Brisbane in November.
The consultation aims to improve the process of making rules for global markets in a world policed by national, or in Canada’s case provincial, authorities. In the wake of the financial crisis, the process of coordinating reforms to the rules for global over-the-counter (OTC) derivatives markets, for example, has proven troublesome.
“IOSCO concludes the status quo approach leaving it to individual jurisdictions to develop and coordinate rule-making for global market activity is ineffective,” Russell says. “Moreover, IOSCO recognizes it will never have the binding authority to impose and enforce a global rule framework.”
Instead, he says that IOSCO aims to design a formal framework for: regulatory consultation and coordination among governments and regulators; guidelines to assess equivalence in rules; supervisory oversight and enforcement standards; an agreement on timelines for rule implementation; and, a mechanism to recognize regulatory standards. It also aims to create a dispute resolution mechanism to resolve jurisdictional differences on regulatory comparability.
“On balance, IOSCO is optimistic about the prospects of forging ahead with this agenda,” Russell says, adding that, “It has already facilitated 13 [memorandums of understanding] among jurisdictions on comparable standards for regulatory supervision.”
And, he says that this isn’t just expected to facilitate reform in OTC derivatives markets, but to help build “an efficient cross-border regulatory framework” for the so-called shadow banking system; and, it “may even move the regulatory community closer to a global repository for OTC derivatives data, he suggests.