IOSCO 2016: 5 key takeaways for securities regulators

IOSCO 2016: 5 key takeaways for securities regulators
May 20, 2016

Last week, global capital market securities regulators attended the 41st Annual Conference of the International Organization of Securities Commissions (IOSCO) in Lima, Peru.

The IOSCO conference brings together market regulator chairs from over 115 jurisdictions—together representing over 95 percent of global capital markets by value. IOSCO is recognized for setting the global standard in securities regulation, and its 2016 conference was no different.

Here are five key takeaways from the conference for securities regulators.

1. Crowdfunding rules

In comparison to other parts of the world, the United States has taken the lead in setting standards around crowdfunding. For example, Bert Chanetsa, Deputy Executive Officer of a South African investment institution, echoed similar statements about his region not being aware of the potential of crowdfunding by stating that there's no market uptake of crowdfunding in South Africa and other emerging markets.

As a presenter on the panel New Ways for the Financing of Small and Medium Enterprises and the Challenges of Crowdfunding, Mary Jo White, Chair of the U.S. Securities and Exchange Commission, stated that the SEC has issued new rules on securities crowdfunding, which went into effect on May 16, 2016.

The goal of these new rules is to protect inventors, streamline capital formation for smaller issuers, and help to accelerate market adoption.

The new crowdfunding requirements under Title III of the JOBS Act includes:

  • SEC-registered intermediaries of broker-dealers
  • SEC-registered crowdfunding portals to serve as gatekeepers to protect investors
  • Limiting raising capital by crowdfunding to $1 million in a 12-month period for each issuer
  • Specific initial and ongoing disclosure requirements regarding the business, the securities offering, and the requirements for financial statements

2. Audit firm transparency reporting

IOSCO recognizes that the reputation of an audit firm is an important factor investors may consider in their decision-making process. In an effort to improve audit quality, the IOSCO Board approved the 2016 publication of Survey Report on Audit Committee Oversight of Auditors while meeting in Lima. In this publication, IOSCO states that it recognizes audit firm transparency reporting is a fairly recent practice that continues to evolve.

According to the IOSCO, transparency in audit firm reporting can foster introspection and discipline within firms, and may encourage them to sharpen their focus on audit quality—which would also benefit investors and other stakeholders. By comparing audit firms competing for an audit engagement, audit firm transparency reporting can provide valuable information regarding audit quality to those responsible for selecting a public company’s auditor.

IOSCO has hosted roundtables to discuss whether audit firms should provide more information to the public on their governance structure and internal operations—including quality control systems—and whether such reporting might contribute in some way to enhanced audit quality. The marketplace can expect to see more IOSCO discussions emerging on this topic throughout 2016.

3. International benchmark for cross-border co-operation among security regulators

The IOSCO Board unveiled plans for an enhanced Multilateral Memorandum of Understanding (MMoU) between IOSCO members that would bolster regulators' enforcement capabilities globally. Established in 2002, it has provided securities regulators with the tools for combating cross-border fraud and misconduct that can weaken global markets and undermine investor confidence.

The IOSCO Presidents Committee approved the text of a new Enhanced MMoU on co-operation and the exchange of information. The Enhanced MMoU, which is aspirational in nature, provides for the additional powers that IOSCO believes are necessary for its member regulators to ensure their continued effectiveness in deterring cross-border misconduct and fraud in securities markets.

It builds on the success of the current MMoU on cooperation and exchange of information, while taking into account technological and regulatory developments since the launch of the original MMoU 14 years ago.

The Enhanced MMoU sets out five new powers in addition to those in the current MMoU:

  • To obtain and share audit papers
  • To compel attendance for testimony by being able to apply a sanction in the event of noncompliance
  • To advise and provide existing information to another regulator on how to freeze assets, or to freeze assets on behalf of another regulator
  • To obtain existing Internet service provider records, not including the content of communications
  • To obtain existing telephone records, not including the content of communications.

4. Corporate governance

In the area of corporate governance, the board gave an update on an upcoming report about how capital market regulators can apply the Organisation for Economic Co-operation and Development (OECD) principles to corporate governance to ensure more resilient capital markets. The report is expected to be released in 2016 and will affect all IOSCO members.

5. Other IOSCO Board policy updates

The IOSCO Board discussed the issue of liquidity in corporate bond markets. The board will soon publish a consultation paper on corporate bond market liquidity. The board also agreed to take up further work on corporate bond market transparency in the coming years.

On the issue of infrastructure finance, the board agreed to establish a working group comprised of board members that will engage with development banks, institutional investors, and other stakeholders to discuss issues relevant to market based finance for infrastructure development.

The board also discussed its work on cyber resilience and FinTech. It agreed to consider different mechanisms for securities regulators to share and gather information on cyberrisk and cybersecurity issues that are relevant to securities regulators across its membership.

In addition, the board discussed the update on IOSCO work on the potential impact of FinTech and RegTec, and digitalization on securities markets and regulation. IOSCO will culminate in a report that draws on contributions from members, and the report is expected to be released in 2016.

The board appointed a new chair, Mr. Ashley Alder, the Chief Executive Officer of the Securities and Futures Commission of Hong Kong.

For further updates from the conference, visit

Liv Watson

About the author

Liv Watson the Director of New Markets at Workiva, with primary focus on monitoring and evaluating new market opportunities globally. She helped found the XBRL International and is one of the original developers for XBRL.