On 26 June 2020, the International Organization of Securities Commissions (IOSCO) published a report, Good practices on processes for deference.

The G20 has previously stated that jurisdictions and regulatory authorities should be able to defer to one another when it is justified by the quality of their respective regulatory and enforcement regimes, based on similar outcomes, in a non-discriminatory way and paying due regard to home country regulatory regimes.

In June 2019, IOSCO published a report on ‘Market Fragmentation and Cross-Border Regulation’ (the 2019 Report) which examined harmful, unintended market fragmentation in wholesale securities and derivatives markets.

The 2019 Report explored the concept of deference, particularly how its use has evolved in recent years and the lessons that could be learned from how members have applied tools such as substituted compliance, recognition and passporting.

The 2019 Report found that deference between regulators, through the use of cross-border regulatory tools, has significantly increased in recent years, in parallel with increased supervisory and enforcement cooperation. While these developments have helped mitigate some instances of harmful market fragmentation, certain challenges remain. The 2019 Report suggested there may be benefit in identifying good and sound practices to make the processes for deference determinations more efficient.


IOSCO has identified a number of good practices (the Good Practices), which are the subject of this newly published report.

The Good Practices should be understood as practices that regulators could consider in carrying out their regulatory activities. Such practices would not be reflected in IOSCO’s methodology as they do not represent a standard that IOSCO members are necessarily expected to implement or be assessed against but could be adaptable for use by IOSCO members.

IOSCO recognizes that there is no “one-size-fits-all” and that not every Good Practice may be applicable in all jurisdictions or in all circumstances. However, the Good Practices could nevertheless represent a helpful way of addressing certain issues.

The new report is divided into three substantive chapters. Chapter 2 focuses on the objectives of deference and provides a brief description of the types of deference determinations that currently exist, building on an earlier IOSCO report. Chapter 3 addresses the Good Practices themselves and sets out how they are currently applied as a way to provide insight into their practical application. Chapter 4 concludes with some final remarks.