On 25 November, the International Organization of Securities Commissions (IOSCO) published a consultation report, IOSCO Task Force on Cross-Border Regulation (the Consultation), on cross-border securities regulation and challenges.
Mr Ashley Alder, Chief Executive Officer of the Securities and Futures Commission in Hong Kong and Chair of the Task Force on Cross-Border Regulation (the Task Force), noted that the Consultation marks “a good start to an ambitious project because of the significant diversity of approaches to cross-border regulation by different countries and markets”.
The objective of the Task Force (established in June 2013) and the Consultation is to assist policymakers and regulators in dealing with cross-border securities challenges, such as market integrity, investor protection and reducing systemic risk.
The Consultation summarises and analyses three broad classifications of cross-border regulatory tools that have been used, or are under consideration, by IOSCO members with respect to a variety of entities, products and services. These tools were identified by respondents to a survey of IOSCO members and supplemented by comments from subsequent international round-table meetings:
- national treatment – foreign entities and products are generally treated in the same manner in terms of entry and ongoing regulatory requirements as host entities and products (although there may be some alternative treatment, exemptions or other accommodations)
- (unilateral or multilateral) recognition – following assessment by the host regulator of the foreign regulatory regime it “recognises” all or parts of the foreign regulatory regime as sufficiently comparable to rely on the foreign regulatory regime
- passporting – based on a single authorisation/registration which permits the provision of services within the relevant area under the supervision of a “home” regulator. This involves a common set of rules applicable in the jurisdictions covered by the passporting arrangement and may involve a legal framework or an international treaty and a high degree of rule harmonisation (e.g. as used within the EU and within Canada).
The Consultation acknowledges that, in practice, use of the tools by jurisdictions may involve overlap of characteristics or elements as amongst the tools.
The Consultation also set outs key challenges and experiences faced by regulators in coordinating and implementing approaches to cross-border securities dealings, such as a lack of universal principles to guide cross-border cooperation amongst regulators and resolution of conflicts of laws and interests which may arise, lack of consensus on quality thresholds to enable host regulators to rely on foreign regulatory regimes and insufficient access to overseas information and documents.
IOSCO invites comments from all stakeholders, including policymakers, investors, industry professionals and self-regulatory bodies on their experiences with, and understanding of cross-border securities markets as characterised in the Consultation. The closing date for submissions on the Consultation is 23 February 2015.