Global securities regulators are trying to push more countries to participate in its co-operation and information sharing agreement in order to beef up cross-border enforcement.
The International Organization of Securities Commissions (IOSCO) adopted measures Wednesday designed to encourage members that haven’t signed on to its Multilateral Memorandum of Understanding (MMoU) on co-operation and information exchange. The MMoU, which was established in 2002, is used by securities regulators around the world to collaborate and share information in an effort to fight cross-border financial services misconduct that can weaken global markets and undermine investor confidence.
However, IOSCO reports that 28 of its members have yet to sign the MMoU. So, to encourage those countries to join, it has approved a resolution that calls for gradually restricting opportunities of these regulators to participate in key IOSCO decisions “due to the limited support they can provide to IOSCO’s enforcement efforts.”
“As long as jurisdictions remain outside the international enforcement regime of the MMoU, they offer potential safe havens for wrong doers and create gaps in IOSCO’s global enforcement network,” it says.
The MMoU provides a mechanism for securities regulators to share information with each other, such as beneficial ownership information, securities and derivatives transaction records, and bank and brokerage records. It also sets out specific requirements for the exchange of information, ensuring that no domestic banking secrecy, blocking laws or regulations prevent the provision of enforcement information among regulators.
So, to push regulators to sign on to the agreement, starting September 30, regulators that haven’t signed the MMoU will be restricted from nominating candidates from their organization to leadership positions within IOSCO. As of March 31, 2014, any existing representatives from these organizations that are in leadership positions within the group will be asked to step down. In June 2014, they will be banned from participating in IOSCO policy committees, and as of Sept. 30, 2014, their voting rights will be suspended.
Additionally, the resolution suggests that “members take precautions when exercising their authorization or supervisory and enforcement responsibilities” when dealing with firms and individuals linked to countries that don’t participate in the MMoU.
Some IOSCO members already have these sorts of measures in place, it says. For example, the Hong Kong Securities and Futures Commission requires overseas companies seeking a listing on the local exchange to be incorporated in a jurisdiction where arrangements are in place to ensure reasonable regulatory co-operation. And, India requires foreign investors in Indian mutual funds and equity shares to reside in a country that ensures regulatory co-operation.
The latest signatories to the MMoU include regulators in Vietnam and Andorra, the State Securities Commission of Vietnam (SSC) and the Institut Nacional Andorrà de Finances (INAF), respectively, which both formally signed the agreement today.
IOSCO reports that the growing number of signatories to the MMoU in recent years has facilitated an increase in cross-border co-operation among IOSCO members, enabling regulators to investigate an increasing number of insider traders, fraudsters, and other offenders. In 2006, a total of 520 requests for assistance were made under the MMoU; that was up to 2,374 in 2012.