IOSCO outlines challenges faced by global securities regulators

IOSCO board chair, Greg Medcraft, who chaired the meeting, emphasized the growing role behavioral economics and social media will play in IOSCO’s work, particularly in its efforts to improve informed decision making by retail investors; which was also highlighted at its recent board meeting in Montreal in mid-June.

At that meeting, IOSCO board members agreed to embed behavioral economics in IOSCO’s approach to regulatory work in an effort to enhance the effectiveness of market regulation. It reports that board members also agreed that social media “could serve as a vehicle to influence investor behavior, gather market intelligence and identify market trends, thereby furthering IOSCO’s effort to be proactive and forward looking.”

David Wright, IOSCO’s secretary-general, and Tajinder Singh, deputy secretary-general, also described IOSCO’s agenda and set out some of its new initiatives, including the creation of a committee on retail investors and a task force on cross border regulation, which were also approved at its board meeting in Montreal.

At that meeting, Howard Wetston, chair of the Ontario Securities Commission (OSC) was named as chair of the new Committee on Retail Investors, which was “given a broad mandate to lead IOSCO’s work on retail investor education and protection.”

“The aim of the committee is to ensure IOSCO takes a consistent and comprehensive approach to retail investment products and services. By focusing on investor education, it will enable IOSCO members to share their experiences and build expertise globally in financial literacy,” it noted.

As for the task force on cross-border regulation, it was asked to develop a tool box of measures for regulating markets across borders, and, if appropriate, it will develop principles to guide the coordinated use of these tools, which may include substituted compliance, mutual recognition and supervisory co-operation.

IOSCO staff also reported on the prevailing risks that its research team has identified, including risks posed by the low interest rate environment, managing collateral, and the risks posed by central counterparties and cyber-crime.

Medcraft also outlined the challenges faced by securities regulators globally and the role IOSCO aims to play. “The major challenges we face are structural change, the risks posed by innovation and the ongoing globalization of our markets,” he said.

“By being proactive and forward looking, IOSCO through its standard setting work, engagement with industry and stakeholders and co-operation among its members can make a significant contribution to those challenges,” he noted.

“This was an important and constructive engagement with stakeholders and is part of our on-going endeavor to meet the IOSCO objectives of reducing systemic risk and ensuring that investors are confident and informed, and markets are fair and efficient,” Medcraft said.

IOSCO notes that at the recent meeting in Montreal it made progress in finalizing its work on margin requirements for non-centrally cleared derivatives; and, it agreed on a series of internal organizational improvements that seek to streamline its decision making, increase its inclusivity, and to give emerging markets a bigger say in IOSCO decision making, among other things.