The Investment Industry Association of Canada (IIAC) has joined a coalition dedicated to promoting regulatory convergence for transatlantic securities dealings.
The IIAC announced yesterday it is now a member of the EU-US Coalition on Financial Regulation, an organization made up of trade associations from EU countries and the United States.
While the effort to open up regulations within international securities markets is not new, this coalition represents a renewed effort from a newly formed group of industry constituents.
Ian Russell, president and CEO of the IIAC says the global spread of economic woes brought on by the credit crisis in the U.S. has increased awareness of global connectedness. “The crisis that we are going through is indicative of the environment in which we live, which is a global economy,” he said in an interview. “What you are starting to see is a lot of cross flow in terms of transactions—buying and selling of securities and investment products occurring on a global basis.”
Russell says regulatory barriers are a “huge impediment” for investors looking outside of traditional borders. “To be able to open up your horizon globally for investors is a good thing,” he said. “It helps companies lower cost of capital. It gives investors higher returns and it promotes greater liquidity in their marketplace.”
He likens the concept of mutual recognition of regulations to provincial driver’s licenses. A driver is Ontario has no problem renting a car in B.C. and the same should be true of an investor interested in securities in Europe or the U.S., he said.
The coalition also supports the need for foreign markets and exchanges to be able to offer execution services regardless of methodology (such as location of trading screens in host states), without being required to meet local licensing and regulatory requirements.
“Improved exchange access will enhance and deepen liquidity of European and U.S. markets and provide greater choice in global investment and sources of capital for issuers, investors and other consumers of financial services,” reads a report released yesterday by the coaltition.
The IIAC believes that the coalition and this new report will promote healthy dialogue between the securities industry and regulators in Canada, the U.S. and the EU. It says the current global system of regulation places unnecessary costs on investors and financial service providers.
The true global nature of the economy has been revealed recently by the way the sub prime mess in the U.S. spread its toxicity around. While this has increased understanding of the global nature of economies, it may also make the goals of the new coalition more difficult to achieve. The vulnerabilities of the financial system have been amply demonstrated and this can easily lead to a desire for more, rather than less, regulation.
“The biggest challenge will be encouraging regulators to embrace aggressive reform related to market access,” said Russell, when asked about barriers the new coalition faces. “What we’re talking about is quite an enlightened and forward-thinking approach. I think the current environment would suggest regulators are going to be much more skittish, much more gun-shy about looking at a more liberalized approach to regulation. The bias is going to be toward more prescriptive regulation.”
This coalition is not the only organized effort to ease cross-border securities rules. Last year, federal Finance Minister Jim Flaherty announced the federal government’s plan to encourage free trade in securities with the G7 countries. As well, IOSCO is an international group of securities regulators that aims for united standards for international transactions.
According to Russell, this newer coalition will be a great asset to these other two forums. “The advantage that we bring to the table is that our consortium is made up of people in the market, practitioners who are dealing every day with practical problems.”
The coalition was created in 2005 and yesterday’s report, which argues for establishing a more open, simplified and integrated transatlantic securities marketplace, is its second release. Other members include the British Bankers’ Association, the Swiss Bankers’ Association and the Securities Industry and Financial Markets Association (SIFMA), among others.
Russell says a convergence of rules will benefit investors in search of further choice and diversification in their portfolios as well as corporate issuers searching for capital injections.
The coalition is meeting in London in May to begin hashing out a strategic plan.
IIAC joins coalition on cross-border financial regulation
Regulators likely to be "skittish" about enlightened rule changes, says IIAC
- By: Regan Ray
- April 2, 2008 April 2, 2008
- 13:40