The International Organization of Securities Commissions (IOSCO) has concluded its 34th Annual Conference in Tel Aviv. This has been the first general meeting of IOSCO’s entire membership since the financial crisis entered its second critical phase in September 2008.
In a series of intense meetings of senior regulators, significant progress has been made by IOSCO in dealing with key operational issues facing capital markets as a result of the financial crisis. The issues addressed included those seen as contributing to the development of, and in some cases exacerbating, the crisis such as disclosure related to asset-backed securities, unregulated market segments and financial products, the regulation of short selling and hedge funds oversight.
There has also been focus on the crisis’ effect on the regulatory systems of emerging markets jurisdictions and the actions they have taken to counter these problems.
IOSCO will shortly issue final reports setting out recommended principles for the regulation of short selling and the oversight of hedge funds, while it will also consult on disclosure principles for offerings of asset-backed securities and investment managers due diligence in relation to structured products investment. IOSCO will also issue a report on the impact on Emerging Markets and their responses to the financial crisis.
The increased focus on the operational aspect of IOSCO’s work, the role it plays in restoring confidence in the world’s capital markets and how IOSCO should be positioned in the post-crisis global financial architecture has prompted the Executive Committee to launch a Task Force to consider IOSCO’s Future Strategic Direction (Strategic Direction Task Force).
This coincides with the achievement of the 2005 Strategic Objective in relation to the IOSCO Multilateral Memorandum of Understanding (MMOU) which demonstrates that it is possible to turn IOSCO guidelines and standards into hard-edged processes requiring compliance from regulatory authorities.
The Strategic Direction Task Force will focus on identifying what IOSCO needs to do to ensure it maintains its pivotal role as the international standard setter for securities regulation in the 21st century. The internal consultation process has already begun and to ensure its effectiveness the review will be correspondingly broad in its reach taking into account all IOSCO members’ views, those of the industry and the international financial institutions.
Jane Diplock, Chairman of the Executive Committee, said:
“Now more than ever, IOSCO must work towards reaffirming and building confidence in the world’s financial markets, and explore new mechanisms for doing that. Some constants remain of course: reducing systemic risk; encouraging efficient, well-functioning markets; and continuing to protect investors. These essentials are the heart of our mission and always will be.“Over the years, we have built the relationships and the trust needed to embed global solutions at the national level. We have laid down a strong foundation for a global securities framework with our IOSCO Principles. And the MMOU is a unique example of an international standard implemented across the globe. We are already helping to resolve issues arising from the crisis that are right now having a detrimental effect on capital markets.
“I believe that we must always look to the future. Four years ago, IOSCO set out on the five-year journey represented by its major strategic change of direction. We have come a long way. We are now on the brink of our next five years, and the global financial crisis makes it imperative that we plan our next steps carefully.
“We need to understand what direction to take in order to reaffirm IOSCO’s pivotal role in the international financial architecture. To do that, we must take account of the lessons every country represented here has learned from the crisis. We need to focus more on identifying risks in financial markets and to addressing stability issues within the purview of securities regulators. Recent work on credit rating agencies and hedge funds are good examples of this focus.
“We need to begin formulating a vision that will take us beyond this decade and into the next – a vision that looks towards a future without forgetting the past. By the time we meet again, in Montreal in 2010 a broad direction will have been mapped out.
“While recovery now seems inevitable, challenges remain. The ongoing crisis highlights the importance of addressing stability concerns and reducing systemic risk while continuing to protect investors and promote the fairness, efficiency and transparency of markets.”
IOSCO has also published media statement outlining its current areas of focus and the decisions reached at this year’s Annual Conference.