Regulators Call For More International Cooperation

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Source: Compliance Reporter
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International regulators on Thursday said they need to work harder to cooperate on cross-border enforcement and regulatory oversight. In particular information sharing and coordination of enforcement investigations were highlighted as essential. Roel Campos, commissioner at the Securities and Exchange Commission, said, for example, International Organization of Securities Commissions standards on corporate governance oversight are a good step that international regulators should embrace.

At an International Organization of Securities Commissions conference in Frankfurt, Germany, regulators said IOSCO's memorandum of understanding that lifts information-sharing restrictions could aid enforcement. "Enforcement is the bedrock of market integrity," said Sharon Brown-Hruska, commissioner of the Commodity Futures Trading Commission. Enforcement cooperation should be regulators' top priority as markets globalize because investors need reassurance that firms have to be accountable wherever they are, Brown-Hruska said.

The collapse of Italian dairy giant Parmalat is a good example, said Campos. Parmalat was probably "the largest and most brazen fraud the world has ever seen," said Campos. He said international standards that could have exposed the fraud have been implemented inconsistently, meaning global oversight of Parmalat's trading and finances was patchy. Consistent implementation will make cooperation between regulators easier and will improve the likelihood of successful enforcement, he noted. For example, Campos said IOSCO standards on corporate governance oversight are a good step that international regulators should embrace.

Carlo Biancheri, head of international relations at the Italian Commissione Nazionale per le Società e la Borsa, said IOSCO's review of investment banking conflicts, which was planned in the summer, should aid oversight. For example, conflict management standards could have required firms to disclose if they knew about problems at Parmalat and may have exposed the fraud earlier, he said.

But Arthur Doctors van Leeuwen, chairman of the Committee of European Securities Regulators, said there are obstacles. By relying on each other to oversee a firm regulators can cut duplication, which benefits both the firm and the regulators, he noted. "Regulators should delegate tasks to each other," he noted. But, "do they have to have a 13-way conference call in five different languages?"

Peter Kurer, group general counsel at UBS in Zurich, said some steps toward coordination are becoming visible. For example, Swiss, U.K. and U.S. regulators regularly cooperate on inspections at UBS, he noted.

Vladimir Gusakov, deputy head of the Russian Federal Service for Financial Markets, said more memorandums of understanding--both from IOSCO and independently among regulators would further help remove legal barriers to sharing information. He added the Russian Parliament will shortly debate a law to give his regulator the power to participate in such MOUs.