Securities body ramps up risk surveillance

Securities watchdog, the International Organization of Securities Commissions (IOSCO), has revamped its structure to better identify market risks and develop regulatory standards for capital markets.

IOSCO has approved a new structure and funding so it can continue to “provide the lead in the development of regulatory standards for capital markets”, said Jane Diplock, chair of IOSCO’s executive committee.

The funding changes were to ensure that IOSCO had the resources to identify emerging securities markets risks and could respond to requests for targeted work by the G20 and the Financial Stability Board.

After last week’s IOSCO conference in Cape Town, Diplock said that securities markets did not “as many market participants once fondly believed” regulate themselves. “Regulation must play its part – regulation that aims at sustaining the financial system and preventing individuals and businesses from exploiting and weakening it, even bringing it to its knees.”

She said IOSCO was now recognised as the standard setter for securities markets regulation by the G20 and international financial institutions.

The decision to re-structure and re-fund ensured that IOSCO could meet those challenges.

Diplock said that the power of IOSCO’s Objectives and Principles for Securities Regulation were in the fact that they were internationally agreed and nationally applicable. “Unlike some other global multilateral efforts which have stalled,” she said, “IOSCO has made significant progress in global standard-setting.

“This is why the G20 has mandated full implementation of the IOSCO Principles in every G20 country and encouraged their use in all others.”

Diplock pointed to what she called IOSCO’s other success story: the development and implementation of a global protocol, the IOSCO MoU, for the exchange of information needed to police and sanction market misconduct.

Of the 122 member regulators, 80 now fully meet the MoU’s requirements and were “engaged in combating fraudulent market activity and its consequences for investors”, Diplock said.

Diplock, who is chair of the soon-to-be-disbanded New Zealand Securities Commission, will stand down this week after 10 years at the NZSC. The irony is that, during this position, she was nicknamed Plane Jane due to the amount of time she spent overseas as the executive chairman of IOSCO.

The New Zealand Shareholders’ Association said the country’s securities commission had failed.The association’s chairman, John Hawkins, described the regulator as a “late-arriving ambulance at the bottom of the cliff”.

Hawkins doubted that Diplock achieved the two main tasks of setting “boundaries of acceptable behaviour in the market” and enforcing the rules.