The International Organisation of Securities Commissions (IOSCO) has published its revised ‘Objectives and Principles of Securities Regulation’ to incorporate eight new principles, based on the lessons learned from the recent financial crisis and subsequent changes in the regulatory environment, which are designed to strengthen the global regulatory system against future crises.
The eight new principles cover specific policy areas such as hedge funds, credit rating agencies and auditor independence and oversight, in addition to broader areas including: monitoring, mitigating and managing systemic risk; regularly reviewing the perimeter of regulation; and requiring that conflicts of interest and misalignment of incentives are avoided, eliminated, disclosed or otherwise managed.
The principles, which are an agreed set of high-level global standards, outline the basis of an appropriate, effective and robust securities regulatory system, therefore their proper implementation by securities regulators is critical to the creation and maintenance of a sound global regulatory system. The principles also play an important role in promoting a sound global financial regulatory system through their use by the International Monetary Fund (IMF) and World Bank assessors in the performance of the securities sector element of country financial sector assessment programmes.
Jane Diplock, chairman of the executive committee, said: “The global spotlight is focused on financial regulation, its form and function and regulatory outcomes, as the world strives to emerge from the greatest financial crisis in recent times it is challenging regulators to provide cogent answers. In our IOSCO meetings this week we have risen to that challenge and accomplished a significant reform of the basis for global securities regulation.
“We have achieved this through the formulation of eight new principles of securities regulation which are to be implemented globally including, very importantly, two principles addressing systemic risk in markets. Where traditional economic orthodoxy has considered systemic risk to be only a matter for prudential regulators, the financial crisis has shown us that financial stability depends on both of the virtuous twins of effective market regulation and effective prudential regulation.
“Therefore markets matter for the identification and management of systemic risk and the new IOSCO principles concerning systemic risks in markets recognise the vital importance of this concept. Finally, in response to the changing regulatory environment, IOSCO has also this week reformulated its strategic mission and goals with the aim of maintaining the organisation’s position as the international standard setter for securities regulation and promoting the protection of investors, and fair, efficient and transparent markets.”
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