The International Organization of Securities Commissions (IOSCO) has published a final report which sets out principles regarding cross-border supervisory cooperation. The report was prepared by the IOSCO Technical Committee’s Task Force on Supervisory Cooperation.
The principles focus on three elements of successful supervisory cooperation:
- General principles which describe the usefulness of cooperation and the types of information and consultation that regulators should share and engage in.
- Principles on the mechanisms for cooperation which describe the functioning of memoranda of understanding, supervisory colleges and regulatory networks.
- Principles relating to the mechanics of cooperation, such as the basic principles of constructing a supervisory cooperation memorandum of understanding. An annotated sample memorandum of understanding is set out in Annex A of the report.
The report analyses the different types of regulated entities that operate in the markets and how their operations have become global. Based on this analysis, the report offers suggestions as to how regulators can enhance cross-border cooperation to better supervise those entities they regulate that have expanded their operations across borders. The report suggests that regulators expand the notion of supervisory cooperation to establish mechanisms to consider and evaluate the global market. IOSCO states that instead of narrowly focusing on entity-specific oversight, regulators should explore opportunities to further collaborate on identifying, assessing and mitigating emerging risks and seek to address and evaluate them on a global basis.
The report also describes different types of collaborative mechanisms that securities regulators may use to foster greater supervisory cooperation, including ad hoc discussions, memoranda of understanding, supervisory colleges and networks of regulators. The report discusses the advantages and disadvantages of each form.
The report highlights existing obstacles to cooperation that regulators should be aware of and, depending on the circumstances, may wish to address in order to make supervisory cooperation more effective. These obstacles include legal and organizational impediments to sharing information.
The Task Force co-chairs commented:
“Today’s report sets out the framework for better supervisory cooperation outside enforcement matters, improving information sharing arrangements and conducting joint inspections, which is in keeping with G20 recommendations.
"We expect this to be useful for members in their drive to improve their oversight of entities which operate across borders, such as investment advisers, credit rating agencies, hedge funds, exchange operators and clearing houses."
View IOSCO publishes principles on cross-border supervisory cooperation, 25 May 2010