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Methodology for Assessing Implementation of the IOSCO ...

Methodology For Assessing Implementation of the IOSCO Objectives and principles of Securities Regulation INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS. MAY 2017. Copies of publications are available from: The International Organization of Securities Commissions website International Organization of Securities Commissions 2017. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ii TABLE OF CONTENTS BOOK I 1. A. principles Relating to the Regulator .. 5. B. principles for 5. C. principles for the Enforcement of Securities Regulation .. 5. D. principles for Cooperation in 5. E. principles for Issuers .. 6. F. principles for Auditors, Credit Rating Agencies, and Other Information Service Providers .. 6. G. principles for Collective Investment 6. H. principles for Market Intermediaries .. 6. I. principles for Secondary and Other Markets.

Methodology for Assessing Implementation of the IOSCO Objectives and Principles of Securities Regulation(“Methodology”) is designed to provide IOSCO’s interpretation of

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Transcription of Methodology for Assessing Implementation of the IOSCO ...

1 Methodology For Assessing Implementation of the IOSCO Objectives and principles of Securities Regulation INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS. MAY 2017. Copies of publications are available from: The International Organization of Securities Commissions website International Organization of Securities Commissions 2017. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ii TABLE OF CONTENTS BOOK I 1. A. principles Relating to the Regulator .. 5. B. principles for 5. C. principles for the Enforcement of Securities Regulation .. 5. D. principles for Cooperation in 5. E. principles for Issuers .. 6. F. principles for Auditors, Credit Rating Agencies, and Other Information Service Providers .. 6. G. principles for Collective Investment 6. H. principles for Market Intermediaries .. 6. I. principles for Secondary and Other Markets.

2 7. J. principles Relating to Clearing and Settlement .. 7. I INTRODUCTION .. 8. A. Objectives of Securities Regulation .. 10. 1. The Objectives .. 10. 2. Discussion of the Objectives .. 10. B. The Regulatory Environment .. 12. C. Background of the principles .. 13. D. Purpose of Developing an Assessment 14. E. Scope of this Methodology and Intended Scope of Assessments .. 15. F. The Assessment Process and Assessment Measures .. 15. II PRINCIPLE-BY-PRINCIPLE ANALYSIS .. 20. A. principles Relating to the Regulator .. 20. 1. Preamble .. 20. 2. Scope .. 21. 3. principles 1 through 8 .. 22. B. Principle Relating to Self-Regulation .. 53. 1. Preamble .. 53. 2. Scope .. 53. 1. Book II is a compilation of Annexes relating to the conduct of assessments prepared for IOSCO members. Book II is not publicly available on the IOSCO website. iii 3. Principle 9 .. 55. C. principles Relating to Enforcement.

3 63. 1. Preamble .. 63. 2. Scope .. 64. 3. principles 10 through 12 .. 65. D. principles Relating to Cooperation .. 80. 1. Preamble .. 80. 2. Scope .. 81. 3. principles 13 through 15 .. 82. E. principles Relating to Issuers .. 100. 1. Preamble .. 100. 2. Scope .. 100. 3. principles 16 through 18 .. 104. F. principles for Auditors, Credit Rating Agencies, and Other Information Service Providers .. 127. 1. Preamble .. 127. 2. Scope .. 128. 3. principles 19 through 23 .. 129. G. principles Relating to Collective Investment Schemes and Hedge Funds. 150. 1. Preamble .. 150. 2. Scope .. 151. 3. principles 24 through 28 .. 155. H. principles Relating to Market Intermediaries .. 191. 1. Preamble .. 191. 2. Scope .. 192. 3. principles 29 through 32 .. 194. I. principles Relating to Secondary and Other Markets .. 221. 1. Preamble .. 221. 2. Scope .. 223. 3. principles 33 through 37.

4 224. J. Principle Relating to Clearing and Settlement .. 266. Appendix 1 The Legal 269. iv LIST OF principles . A. 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. 6. The Regulator should have or contribute to a process to identify, monitor, mitigate and manage systemic risk, appropriate to its mandate. 7. The Regulator should have or contribute to a process to review the perimeter of regulation regularly.

5 8. The Regulator should seek to ensure that conflicts of interest and misalignment of incentives are avoided, eliminated, disclosed or otherwise managed. B. principles FOR SELF-REGULATION. 9. Where the regulatory system makes use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, such SROs should be subject to the oversight of the Regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities. C. principles FOR THE ENFORCEMENT OF SECURITIES REGULATION. 10. The Regulator should have comprehensive inspection, investigation and surveillance powers. 11. The Regulator should have comprehensive enforcement powers. 12. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and Implementation of an effective compliance program.

6 D. principles FOR COOPERATION IN REGULATION. 13. The Regulator should have authority to share both public and non-public information with domestic and foreign counterparts. 14. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts. 5. 15. The regulatory system should allow for assistance to be provided to foreign Regulators who need to make inquiries in the discharge of their functions and exercise of their powers. E. principles FOR ISSUERS. 16. There should be full, accurate and timely disclosure of financial results, risk and other information which is material to investors' decisions. 17. Holders of securities in a company should be treated in a fair and equitable manner. 18. Accounting standards used by issuers to prepare financial statements should be of a high and internationally acceptable quality.

7 F. principles FOR AUDITORS, CREDIT RATING AGENCIES, AND OTHER. INFORMATION SERVICE PROVIDERS. 19. Auditors should be subject to adequate levels of oversight. 20. Auditors should be independent of the issuing entity that they audit. 21. Audit standards should be of a high and internationally acceptable quality. 22. Credit rating agencies should be subject to adequate levels of oversight. The regulatory system should ensure that credit rating agencies whose ratings are used for regulatory purposes are subject to registration and ongoing supervision. 23. Other entities that offer investors analytical or evaluative services should be subject to oversight and regulation appropriate to the impact their activities have on the market or the degree to which the regulatory system relies on them. G. principles FOR COLLECTIVE INVESTMENT SCHEMES. 24. The regulatory system should set standards for the eligibility, governance, organization and operational conduct of those who wish to market or operate a collective investment scheme.

8 25. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets. 26. 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. 27. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme. 28. Regulation should ensure that hedge funds and/or hedge funds managers/advisers are subject to appropriate oversight. H. principles FOR MARKET INTERMEDIARIES. 29. Regulation should provide for minimum entry standards for market intermediaries. 30. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

9 6. 31. Market intermediaries should be required to establish an internal function that delivers compliance with standards for internal organization and operational conduct, with the aim of protecting the interests of clients and their assets and ensuring proper management of risk, through which management of the intermediary accepts primary responsibility for these matters. 32. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk. I. principles FOR SECONDARY AND OTHER MARKETS. 33. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight. 34. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

10 35. Regulation should promote transparency of trading. 36. Regulation should be designed to detect and deter manipulation and other unfair trading practices. 37. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption. J. principles RELATING TO CLEARING AND SETTLEMENT. 38. Securities settlement systems, central securities depositories, trade repositories and central counterparties should be subject to regulatory and supervisory requirements that are designed to ensure that they are fair, effective and efficient and that they reduce systemic risk. 7. I N T R O D U CT I O N. INTERPRETATIVE TEXTS AND Methodology FOR Assessing . Implementation OF THE IOSCO OBJECTIVES AND principles OF. SECURITIES REGULATION. I INTRODUCTION. The International Organization of Securities Commissions ( IOSCO ) is the leading international grouping of securities 2 market regulators.


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