6.11.2009 SEC Chairman Mary Schapiro spoke at the 34th annual conference of the International Organization of Securities Commissions (IOSCO) on “Improving the Role of the Securities Regulators in a Changing Global Financial System.” Chairman Schapiro stated that it should be the call of all regulators to constantly improve their effectiveness even without a looming financial crisis. “We need to be constantly considering whether there are gaps in and between our regulatory regimes through which certain players or products can easily slip. And, we need to be constantly doing whatever it takes to keep pace with the newest financial products of the day—so we can understand those products just as well as the people selling them. We need to be constantly alert to the risks that may attend dynamic innovation in the way financial products are packaged and sold.” Chairman Schapiro spoke about how the markets are interconnected, which makes fraud and its effect interconnected as well. Chairman Schapiro focused on three core principles that should govern all regulators: (1) the protection of investors; (2) ensuring that markets are fair, efficient and transparent; and (3) the reduction of systemic risk.

Chairman Schapiro concluded by giving brief examples of what regulators in the U.S. are doing:

  • Considering rules regarding executive compensation that would allow investors to know more about how businesses compensate their top officials;
  • Helping investors by seeking to eliminate holes in our regulatory fabric so that hedge funds, credit default swaps, asset-backed securities and other less-well-regulated pools and products are subject to effective supervision or oversight;
  • Contemplating more stringent rules for investment advisors who maintain custody of their client assets;
  • Considering whether and how to harmonize the responsibilities of investment advisers and broker-dealers;
  • Thinking about the role of the credit rating agencies in the crisis and whether more disclosure from credit rating agencies, including the assumptions underlying their methodologies, fees received from issuers, and factors that could change ratings; and
  • Looking into enhancing the standards that apply to money market funds—to improve liquidity and credit quality and to consider more fundamental changes to the structure of these instruments.

Click http://www.sec.gov/news/speech/2009/spch061109mls.htm to access Chairman Schapiro’s speech.