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Tag: Global securities

  • Global securities regulators move to enhance commodities market

    The International Organisation of Securities Commissions (IOSCO) has published a report that sets out good or sound practices to assist relevant storage infrastructures and their oversight bodies to identify and address issues that could influence the pricing of commodity derivatives and in turn affect market integrity and efficiency.

    In its final report, Commodity Storage and Delivery Infrastructures: Good or Sound Practices, IOSCO identifies a number of issues that may apply to storage infrastructures and sets forth a range of possible actions to mitigate them.

    The practices are intended to benefit the activities of market participants regarding physical commodities, which are the tangible or cash market goods which underlie derivative contracts that are subject to financial regulation and commodity derivatives, which are financial instruments whose price is derived from the underlying physical or cash market commodities.

    The overarching objective of the good or sound practices is to create a framework that incentivises the market to adopt best practices and self-correction, rather than one that prohibits certain behaviours.

    IOSCO advocated the adoption of these good or sound practices by all relevant storage infrastructures, their oversight bodies, and financial regulators in IOSCO member jurisdictions, as appropriate to their role and activities.

    IOSCO believed that the implementation of these practices will lead to a more transparent and robust environment for the physical storage and delivery of commodities, producing benefits for all commodity market participants.

    IOSCO noted the existence of global or regional codes of conduct for certain commodities, as well as specific regulation in some jurisdictions for commodities such as gas and power. IOSCO does not intend the practices to conflict with or duplicate existing codes and encourages market participants to seek to identify and follow best practice where overlaps exist.

  • Global securities regulators issue good practices on audit quality

    The board of the International Organisation of Securities Commissions (IOSCO) has published its IOSCO Report on Good Practices for Audit Committees in Supporting Audit Quality. The report seeks to assist audit committees in promoting and supporting audit quality.

    IOSCO is global body of securities regulators and its members regulate more than 95 per cent of the world’s securities markets in more than 115 jurisdictions.

    According to IOSCO,  the quality of a company’s financial report, supported by an independent external audit, is key to market confidence and informed investors, and to the effective functioning of capital markets.

    The global body pointed out that while the auditor has primary responsibility for audit quality, the audit committee should promote and support audit quality and thereby contribute to greater confidence in the quality of information in the listed company’s financial reports.

    “The good practices report can assist audit committees in considering ways in which they may be able to promote and support audit quality,” IOSCO said.

    The report provides good practices that audit committees may consider when recommending the appointment of an auditor; assessing potential and continuing auditors; setting audit fees;           facilitating the audit process; assessing auditor independence; communicating with the auditor and when assessing audit quality.

    The report sets out good practices regarding the features that an audit committee should have to be more effective in its role, including matters such as the qualifications and experience of audit committee members.

    The IOSCO board is the governing and standard-setting body of the Commissions, and is made up of 34 securities regulators. Mr. Ashley Alder, the Chief Executive Officer of the Securities and Futures Commission (SFC) of Hong Kong, is IOSCO Board chairman. Its board members are the securities regulatory authorities of Argentina, Australia, Belgium, Brazil, China, Egypt, France, Germany, Hong Kong, India, Indonesia, Ireland, Italy, Japan, Kenya, Korea, Malaysia, Mexico, the Netherlands (observer), Ontario, Pakistan, Panama, Portugal, Quebec, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Arab Emirates, the United Kingdom and the United States (both the U.S. Commodity Futures Trading Commission and U.S. Securities and Exchange Commission). The Chair of the European Securities and Markets Authority (ESMA) and the Chair of IOSCO´s Affiliate Members Consultative Committee are also observers.

     

  • Global securities regulators move to reinforce market regulation

    The board,  International Organisation of Securities Commissions (IOSCO) at the weekend, met in Toronto  to reinforce its position as the key global reference point for financial services and markets regulation.

    The board’s discussion during the two-day meeting focused on three sets of activities in key priority areas as identified in the IOSCO 2020 Strategic Direction, including identifying and responding through guidance to global market risks; providing assistance to IOSCO members and supporting the G20 efforts to promote stability in the global financial system.

    IOSCO is the leading international policy forum for securities regulators and is recognised as the global standard setter for securities regulation. The organisation’s membership regulates more than 95 per cent of the world’s securities markets in more than 115 jurisdictions. Nigeria is a key member of IOSCO and it sits on the board of the organisation.

    The meeting was preceded by a discussion among board members on recent market developments, including recent market volatility and increased leverage, particularly in growth and emerging markets

    This was followed by a round table discussion with industry representatives on improving small and medium scale enterprises’ access to market-based finance.

    As part of its efforts to identify and respond to emerging risks, the board discussed progress  in IOSCO’s work on asset management and agreed to publish a report on liquidity risk management in collective investment schemes.

    It further decided to conduct work on enhancing collection of data about asset management activity and considered developing guidance on liquidity risk management beyond its 2013 principles including on stress testing

    The board discussed its work in other key areas, including the risks posed by market conduct, cyber resilience and audit quality, discussed progressing recommendations in the recently published report on cross border regulation and endorsed work to provide further guidance to financial benchmark administrators and crowd funding. Corporate governance and IOSCO’s possible contribution to international integrated reporting were also discussed.

    On assisting IOSCO members in building capacity and co-operating to develop, supervise and enforce laws in their jurisdiction, the board agreed to proceed with the launch of a Global Certificate Programme designed specifically for securities regulators.

    IOSCO also discussed fostering greater cooperation and exchange of information among regulators for enforcement purposes through the enhancement of the current IOSCO Multilateral Memorandum of Understanding on cooperation and the exchange of information.

  • Global securities regulators launch 43-point strategy to deepen markets

    The International Organisation of Securities Commissions (IOSCO), the global body for regulators of more than 95 per cent of the world’s securities markets, has launched a 43-point strategic plan aimed at fostering and deepening the capital markets over the next five years.

    The “2020 Strategic Direction for IOSCO” envisages that IOSCO’s goal for the rest of this decade will be to reinforce its position as the key global reference point for securities regulation. The strategic direction was approved by the Presidents Committee of IOSCO, which comprised of all the chairs of ordinary and associate members. Nigeria is a member of the board of IOSCO.

    The strategic direction and goal will be implemented through 43 initiatives in action plans covering six priority areas including research and risk identification, under which the global body plans to identify risks arising from securities markets, including market activities, technology and product developments, and unintended consequences of changes or proposed changes in laws and regulations.

    Also the global body will improve the international regulatory framework for securities markets by developing standards and guidance that are timely, responsive to market developments and internationally recognised.

    IOSCO will also promote implementation of IOSCO standards through monitoring and assessment while simultaneously addressing capacity building needs of its members, particularly in growth and emerging markets.

    It will also strengthening the exchange of information and co-operation in the enforcement of markets regulation, and in the supervision of markets and market intermediaries while ensuring effective representation of IOSCO’s views in other international organisations and effective collaboration with other standard setters within the international financial regulatory community.

    “The Strategic Direction to 2020 builds on our achievements in recent years by intensifying activity across each of our programs.  This is what our members are telling us they want.  It will benefit all members – with a particular emphasis on members from Growth and Emerging Markets,” Chairman of IOSCO, Greg Medcraft said.

    IOSCO had at its annual conference in London discussed the progress of its work across its policy, research, capacity building and co-operation agenda.

    IOSCO’s private meetings preceded public sessions focusing on the theme of Building a New Financial World which will focus on conduct standards, financial innovation and the many other challenges which financial regulators and industry face.

    “Our work agenda continues to highlight and reinforce our role as the key global reference point for securities regulation during a period of rapid change,” Medcraft said “We continue to be proactive and forward looking in building trust and confidence in markets which are grappling with new and emerging opportunities and risks, including those posed by digitisation.”

    IOSCO’s Growth and Emerging Markets (GEM) Committee, the largest of IOSCO’s Committees, also met and agreed to conduct policy work in priority areas,including impact of digitisation and innovation on capital markets, strengthening corporate governance, and the development of a toolkit on crisis management and contingency planning for emerging markets.

    Members also agreed to publish the GEM Committee’s report on SME Financing through Capital Markets, which reviews and identifies ways to facilitate capital market financing for SMEs in emerging markets.

    IOSCO is the leading international policy forum for securities regulators and is recognised as the global standard setter for securities regulation.  The organization’s membership regulates more than 95 per cent of the world’s securities markets in 115 jurisdictions and its membership continues to expand.

    Nigeria is a member of the board of IOSCO, the governing and standard-setting organ of IOSCO. IOSCO board consists of 32 securities regulators, including securities regulatory authorities of Argentina, Australia, Belgium, Brazil, Chile, China, France, Germany, Hong Kong, India, Italy, Japan, Korea, Malaysia, Mexico, Morocco, the Netherlands, Ontario, Pakistan, Portugal, Quebec, Romania, Singapore, South Africa, Spain, Switzerland, Trinidad and Tobago, United Kingdom and the United States.

  • Global securities regulators move to curb reliance on credit rating agencies

    The International Organisation of Securities Commissions (IOSCO), the global body which membership regulates more than 95 per cent of the world’s securities markets, has published its final report on good practices on reducing reliance on credit rating agencies (CRAs) in asset management, as part of efforts to reduce over-reliance on external credit ratings in the asset management industry.

    The report stresses the importance of asset managers having the appropriate expertise and processes in place to assess and manage the credit risk associated with their investment decisions. To help managers avoid over-reliance on external ratings, the report lists eight good practices that they may consider when resorting to external ratings.

    In the report, IOSCO notes that the use of external ratings by asset managers is mainly demand-driven, as various forms of reliance on external credit ratings remain on the investor side. References to external credit ratings may derive from regulatory requirements or an investor’s own internal rules. This may result in mechanistic reliance, which could trigger forced asset sales in the event of downgrades.

    To address these concerns, IOSCO recommends that the Financial Stability Board consider potential ways to reduce possible investor overreliance on external ratings as a result of references in regulatory requirements, such as those in the Basel framework or the Solvency regime.

    The good practices address national regulators, investment managers, and investors, where applicable. To identify these sound practices, IOSCO drew on the feedback received from various stakeholders, including asset managers and their representative trade bodies, institutional investors, and their associations as well as CRAs.

    IOSCO noted that while the CRAs remain important in the financial firmament, the role of CRAs has come under regulatory scrutiny, mainly as a result of the over-reliance of market participants, including investment managers and institutional investors, on CRA ratings in their assessments of both financial instruments and issuers in the run-up to the 2007-2008 financial crisis.

    In response to concern on over-reliance, the Financial Stability Board (FSB) published in October 2010 its report on Principles for Reducing Reliance on CRA Ratings. The goal of these Principles was to end mechanistic reliance on ratings by banks, institutional investors, and other market participants.

    The eight-point sound practices included that asset managers should make their own determinations as to the credit quality of a financial instrument before investing and throughout the holding period.

    Also, asset managers should have the appropriate expertise and processes in place to perform credit risk assessment appropriate to the nature, scale and complexity of any investment strategy they implement and the type and proportion of debt instruments they invest in, and should refrain from investing in products  and issuers when they do not have enough information to perform an appropriate credit risk assessment.

    External credit ratings may form one element, among others, of the internal assessment process but it should not constitute the sole factor supporting the credit analysis.

    The manager’s internal assessment process should be regularly updated and applied consistently and where external credit ratings are used, asset managers should understand the methodologies, parameters and the basis on which the opinion of a CRA was produced, and have adequate means and expertise to identify the limitations of the methodology and assumptions used to form that opinion.

    The report also highlighted that asset managers should review their disclosures describing alternative sources of credit information in addition to external credit ratings and make available to investors, as appropriate, a brief summary description of their internal credit assessment process, including how external credit ratings may be used to complement or as part of the manager’s own internal credit assessment methods.

    Besides, when assessing the credit quality of their counterparties or collateral, asset managers should not rely solely on external credit ratings and consider alternative quality parameters including liquidity, valuation and correlation among others.

    Also, where external credit ratings are used, a downgrade should not automatically trigger the immediate sale of the asset and should the manager or board decide to divest, the transaction is conducted within a timeframe that is in the best interests of the investors.

  • Global securities regulators issue new rules on securitisation

    The International Organisation of Securities Organisations (IOSCO) has released some recommendations aimed at ensuring that securitisation markets develop on a sound and sustainable basis.

    The recommendations, contained in the global body’s final report on Global Developments in Securitisation Regulation, would ensure that securitisation becomes more valuable financing tool that contributes to economic growth and the efficient diversification of risk.

    IOSCO is the umbrella body for securities regulators. The organisation’s membership, which included Nigeria, regulates more than 95 per cent of the world’s securities markets in 115 jurisdictions. Nigeria is a member of IOSCO board, the governing and standard-setting council of the global body. There are also 31 other countries on IOSCO board including securities regulatory authorities of Argentina, Australia, Belgium, Brazil, Chile, China, France, Germany, Hong Kong, India, Italy, Japan, Korea, Malaysia, Mexico, Morocco, the Netherlands, Ontario, Pakistan, Portugal, Quebec, Romania, Singapore, South Africa, Spain, Switzerland, Trinidad and Tobago, Turkey, United Kingdom and the United States.

    The new set of rules comes as part of ongoing efforts by the Financial Stability Board (FSB) to review the reforms of securitisation markets, in line with ongoing work for the G20 on the shadow banking sector. FSB had requested that IOSCO conduct a stock-taking exercise on certain aspects of securitisation, including risk retention, transparency and standardization, and to provide necessary policy recommendations.

    In a statement made available to The Nation, IOSCO stated that the final report on securitisation was another step in its efforts to support sustainable growth of securitisation markets. It had in June 2012 published the report of a round table with industry participants and responses to a consultation paper on global developments in securitisation regulation.

    “IOSCO has worked on the premise that regulation can contribute to a restoration of confidence and trust by setting standards market participants must meet to address issues that surfaced through the Crisis. These include securitisation practices and structures that created misaligned or wrong incentives and encouraged inadequate risk management practices. IOSCO considers that risk retention requirements and enhanced disclosure requirements have an important role to play in addressing these issues,” IOSCO stated.

    IOSCO said the new regulatory recommendations on securitisation were based on its analysis of the various standards being implemented and extent to which different approaches to regulatory reform might result in impediments to cross border activity.

    According to the global standard-setting body, the new regulatory recommendations cover a roadmap toward convergence and implementation of approaches to incentive alignment, in particular regarding risk retention requirements.

    “Risk retention requirements better align the incentives of the suppliers of securitisation products and, in particular, investors. Enhanced disclosure requirements about the underlying assets, flow of funds or waterfall and performance of securitisation structures will help inform investors, and have the potential to re-build investor confidence in the securitisation market. The greater availability of information will also help reduce the reliance on credit ratings agencies,” IOSCO noted.

    It noted that the newly recommended rules built on recent developments in standardised templates for asset level disclosure and other disclosure-related initiatives to assist informed investment decisions.

    The final report also contained several useful observations about the role sound securitisation markets can play in supporting economic growth and the role regulation can play in reducing systemic risk and restoring investor trust and confidence while it also summarised key themes, observations and issues coming out of the responses to the consultation paper in relation to approaches to risk retention, transparency and standardization.