Annex 5.D List of IOSCO Objectives and Principles of Securities Regulation
The three core objectives of securities regulation are (a) protecting investors; (b) ensuring that markets are fair, efficient, and transparent; and (c) reducing systemic risk.
Principles Relating to the Regulator
1. The responsibilities of the regulator should be clear and objectively stated.
2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.
3. The regulator should have adequate powers, proper resources, and the capacity to perform its functions and exercise its powers.
4. The regulator should adopt clear and consistent regulatory processes.
5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.
Principles for Self-Regulation
6. The regulatory regime should make appropriate use of self-regulatory organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.
7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.
Principles for the Enforcement of Securities Regulation
8. The regulator should have comprehensive inspection, investigation, and surveillance powers.
9. The regulator should have comprehensive enforcement powers.
10.The regulatory system should ensure effective and credible use of inspection, investigation, surveillance, and enforcement powers, as well as implementation of an effective compliance program.
Principles for Cooperation in Regulation
11.The regulator should have authority to share public and nonpublic information with domestic and foreign counterparts.
12.
Regulators should establish information sharing mechanisms that set out when and how they will share both public and nonpublic information with their domestic and foreign counterparts.
13.The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in connection with the discharge of their functions and the exercise of their powers.
14.There should be full, timely, and accurate disclosure of financial results and other information that is material to investors’ decisions.
15.Holders of securities in a company should be treated in a fair and equitable manner.
16.Accounting and auditing standards should be of a high and internationally acceptable quality.
Principles for Collective Investment Schemes
17.The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.
18.The regulatory system should provide rules for governing the legal form and structure of collective investment schemes, as well as the segregation and protection of client assets.
19.Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.
Principles for Market Intermediaries
21.Regulation should provide for minimum entry standards for market intermediaries.
22. There should be requirements concerning initial and ongoing capital and other prudential requirements for market intermediaries; the requirements should reflect the risks that the intermediaries undertake.
23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that are designed to protect the interests of clients and to ensure proper management of risk; under such standards, management of the intermediary should accept primary responsibility for those matters.
24. Procedures for dealing with the failure of a market intermediary should minimize damage and loss to investors and should contain ways to handle systemic risk.
Principles for the Secondary Market
25. The establishment of trading systems, including securities exchanges, should be subject to regulatory authorization and oversight.
26. Ongoing regulatory supervision of exchanges and trading systems should strive to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance amid the demands of different market participants.
27. Regulation should promote transparency of trading.
28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.
29. Regulation should strive to ensure the proper management of large exposures, default risk, and market disruption.
30. Systems for clearance and settlement of securities transactions should be subject to regulatory oversight and should be designed to ensure not only that they are fair, effective, and efficient but also that they reduce systemic risk.
