The International Organization of Securities Commissions (IOSCO) has published a report, Credible Deterrence, which identifies key enforcement factors that may deter misconduct in international securities and investment markets. The report reflects the collective experience and expertise of the member jurisdictions of IOSCO’s Committee 4 on Enforcement and the Exchange of Information.
The purpose of the report is to identify and promote awareness of those factors that may credibly deter misconduct in securities and investment markets. The report identifies seven key elements for credible deterrence:
- legal certainty – consequences for misconduct must be certain and predictable;
- detecting misconduct – regulators must be well connected and obtain the right information;
- co-operation and collaboration – safe havens must be eliminated by working together;
- investigation and prosecution of misconduct – enforcement must be bold and resolute;
- sanctions – strong punishments must be given to wrongdoers so as to stop them profiting from misconduct;
- public messaging – public understanding, transparency and caution must be promoted; and
- regulatory governance – good governance is necessary to deliver better enforcement.
The report cautions that credible deterrence cannot be one size fits all and regulators must decide what it means for them in the context of their strategic objectives, powers and responsibilities. They also need to take into account their own market, economic and financial situation.
Georgina Philippou, acting director of enforcement and market oversight at the FCA and chair of IOSCO Committee 4, said of the report:
“This is an important contribution to our global efforts to crack down on financial misconduct and rebuild and strengthen financial systems post-crisis. This is not an assessment tool but a think piece to encourage and support securities regulators around the world to consider how they can build credible deterrence strategies.”