Iosco Strengthens Cross-Border Cooperation

Terry Flanagan

The International Organization of Securities Commissions has adopted measures to encourage non-signatory members to sign the Iosco Multilateral Memorandum of Understanding on cooperation and exchange of information.

Iosco has approved a resolution that calls for gradually restricting opportunities of non-signatory members to influence key Iosco decisions due to the limited support they can provide to its enforcement efforts.

The measures, which will be phased in over the next 12 months, restrict non-signatory members from nominating candidates to Iosco leadership positions, suspend participation of non-signatory members in Iosco policy committees, and suspend voting rights of non-signatory members.

As long as jurisdictions remain outside the international enforcement regime of the MMoU, they offer potential safe havens for wrongdoers and create gaps in Iosco´s global enforcement network.

The latest signatories, the Institut Nacional Andorrà de Finances (INAF) and the State Securities Commission of Vietnam (SSC), formally signed the MMoU on Wednesday, bringing to 97 the total number of signatories to the MMoU out of a total of 125 eligible Iosco members.

“The MMoU has raised the standards of international cooperation in securities enforcement activities and has significantly deterred market misconduct in increasingly globalized markets,” said Vu Bang, chairman of the State Securities Commission of Vietnam. “Not only are we looking forward to the significant benefits of the assistance provided by international regulators in our pursuing wrongdoings, but also we are fully committed to honoring the requests from fellow MMoU signatories to the fullest extent permissible and in a swift and faithful manner.”

Established in 2002, the MMoU provides a vehicle through which securities regulators share with each other essential investigative material, such as beneficial ownership information, and securities and derivatives transaction records, including bank and brokerage records.

It sets out requirements for the exchange of information, ensuring that no domestic banking secrecy, blocking laws or regulations prevent the provision of enforcement information among securities regulators.

Some Iosco members already have measures to enforce the MMoU. The Hong Kong Securities and Futures Commission, for example, expects an overseas company seeking a listing on the local exchange to be incorporated in a jurisdiction where arrangements are in place to ensure reasonable regulatory cooperation. India requires foreign investors in Indian mutual funds and equity shares to fulfill criteria, including being resident in a country that is a signatory to Iosco’s MMoU or a signatory of a bilateral MoU with the Securities and Exchange Board of India.

“By signing the MMoU, the SSC and INAF have strengthened their ability to investigate cross border market misconduct and contributed to enhancing the level of global regulation and enforcement,” said Georgina Philippou, co-chair of Iosco’s MMoU Screening Group. “Our aim is that the introduction of these graduated measures will encourage more jurisdictions to become signatories as quickly as possible.”

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