The Securities Industry and Financial Markets Association has come out in support of principles-based regulation.

The SIFMA commended the British Financial Services Authority for its recent paper on principles-based regulation and called for financial services regulators world-wide to promote a pragmatic, principles-based approach to regulatory requirements.

“Technology, innovation and globalization have transformed capital markets. Focusing on outcomes rather than processes is the best possible way of ensuring that regulation works with the grain of dynamic and innovative capital markets,” said Karsten Moller, senior managing director and head of SIFMA for Europe and Asia.

“Our global marketplace needs healthier, principles-based regulation that eliminates redundancy and duplication and makes it easier to harmonize our divergent regulatory landscapes globally,” said Marc Lackritz, SIFMA president and CEO.

SIFMA believes that the main benefits of a more principles-based regulatory environment are:
-reducing the regulatory burden; clarifying regulators’ expectations, thereby making regulation more predictable;
-enhancing an atmosphere of trust and partnership between regulators and market participants;
-adapting quickly to changing market needs and circumstances, thereby providing flexibility that will encourage innovation and competition;
-placing the responsibility clearly and firmly on those who run businesses to achieve the highest standards,
-strengthening market participants’ confidence, by making it more difficult to bypass a principle than a rule;
-improving the purpose and quality of regulation, by making regulators focus on outcomes that matter;
-and, facilitating global convergence and mutual recognition of financial services regulation.

Consequently, SIFMA urges the international regulatory community to actively reflect on how principles-based regulation can be better deployed, employed and implemented. SIFMA applauds the efforts of the SEC, the European Commission and CESR towards a mutually acceptable global accounting standard and is encouraged by the work of IOSCO, which can serve as a catalyst for the development of international principles-based regulatory standards.