12 November 2008

IOSCO - regulatory gaps must be closed

Regulatory gaps, such as those posed by certain unregulated or under-regulated products, must be closed, IOSCO said in a letter ahead of the G20 meeting in Washington. “While financial regulatory structures may remain national, consistent global solutions are desired by many”, the organisation notes.

The letter is accompanied by four separate statements on accounting standards, credit rating Agencies, transparency, and short selling.

In particular, IOSCO favours a “consistent global regulatory approach” to monitoring the activities of CRAs and urges legislators to consider the IOSCO Code of Conduct when framing legislation.

With regard to global accounting standards IOSCO strongly supports the IFRSs and underlines that the standard setting process must be “accountable and subject to appropriate consultation”. A Memorandum of Understanding between the Monitoring Board and the IASC Foundation will come into effect in the coming weeks.

IOSCO underlines that short-selling may be problematic in the midst of a loss in market confidence and warns “that there are circumstances in which short-selling can be used as a tool to mislead the market.”

Finally, IOSCO notes that regulatory gaps created by certain unregulated or under-regulated products, such as derivatives traded on the over-the-counter market, must be closed. “The current regulatory framework in many jurisdictions does not apply to certain financial instruments that have been significantly involved in the credit crisis, resulting in minimal information having been made available to regulators, investors and market participants about these instruments”, IOSCO notes. “Policy makers will need to consider necessary legislative changes to fill these gaps in legal and regulatory authority.”

Press release

Open letter

© IOSCO