securities regulation: trends and challenges washington d.c., april, 15 th 2003

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SECURITIES REGULATION: TRENDS

AND CHALLENGESWashington D.C., April, 15th 2003

Dr. Doğan CANSIZLARChairman of the Capital Markets Board of

Turkey

Chairman of the Emerging Markets Committee (IOSCO)

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I. ROLE OF IOSCO PRINCIPLES AND OBJECTIVES OF SECURITIES REGULATION

II. EVENTS TRIGGERING FUTURE OF SECURITIES REGULATION

• September 11th

• Corporate Collapses

III. OTHER MAJOR ISSUES• Investor education, • The role of securities analysts • Demutualization of exchanges

OVERVIEW

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I. IOSCO PRINCIPLES AND OBJECTIVES OF SECURITIES

REGULATION

I. IOSCO PRINCIPLES AND OBJECTIVES OF SECURITIES

REGULATION

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IOSCO 30 Core Principles and Objectives of Securities Regulation

•Aims to meet the need of international consensus on sound prudential principles and practices for Securities Regulation

•Provides information for effective Securities Regulation

•Need to be implemented under relevant legal framework

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THE OBJECTIVES OF SECURITIES REGULATION

•The protection of investors

•Ensuring that markets are fair, efficient and transparent,

•The reduction of systemic risk

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II. EVENTS TRIGGERING

THE FUTURE INITIATIVES FOR

SECURITIES REGULATION

II. EVENTS TRIGGERING

THE FUTURE INITIATIVES FOR

SECURITIES REGULATION

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Globalisation

Technological Improvements

Political, Social and Economic Factors

Dynamic Securities Regulation

8www.spk.gov.tr

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EVENTS TRIGGERING FUTURE INITIATIVES

FOR SECURITIES REGULATION

A. The Effects of September 11th

B. The Effects of Corporate Collapses

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A. THE EFFECTS OF SEPTEMBER 11th

1. Importance of sound contingency planning

2. Need for cooperation among industry and regulators

3. Necessity of client identification

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1. Contingency Planning

• Aims to minimize systemic disruptions in the event of unforeseen problems

• Keeps the confidence of market participants

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2. Cooperation and Information Sharing

• Globalization brings the increasing interdependence of financial regulators

• It helps to improve developing financial markets

• IOSCO has several resolutions on cooperation and mutual assistance

- Rio Declaration (1986)* Resolution Concerning Mutual

Assistance

- Istanbul Meeting (2002)* IOSCO Multinational MOU

• IOSCO MOU facilitates cross-border cooperation and information sharing

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3. Client Identification

•Has critical importance for international cooperation

•Has great importance to combat money laundering and financing of terrorism

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B. THE EFFECTS OF CORPORATE COLLAPSES1. Improvement of transparency

and

disclosure standards

2. Auditor oversight

3. Independence of external

auditors

4. Sarbanes- Oxley Act

5. Accounting reform

6. Corporate governance

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1. Improvement of Transparency and Disclosure

•Required in order to rebuild investor confidence

•Full, timely and accurate disclosure of information is vital for investor protection

•IOSCO endorsed a paper recommending a set of ongoing disclosure and material development principles

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2. Auditor Oversight

• Independent auditors have a critical role for the reliability of financial information

• Problems of self-regulation of accounting and audit profession

• Oversight of auditors: peer reviews, oversight by professional bodies, governmental oversight

• IOSCO has developed a list of general principles for oversight of audit firms and auditors

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3. Auditor Independence

• Vital for the objective decision-making

• Auditor should be independent not only in appearance but also in actual fact

• IOSCO encourages to strengthen existing national and international standards governing independence

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4. Sarbanes-Oxley Act

• A big step taken towards the improved protection of investors

• Various issues regulated including governance of accounting profession, disclosure by public companies, corporate governance and enhanced criminal penalties for securities fraud.

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5. Accounting Reform

• Convergence of US GAAP and the IAS

• EU requires the use of IAS by 2005

• The use of IAS will enhance the quality of financial disclosure

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6. Corporate Governance

• Corporate Governance is essential to the development of robust, well-regulated capital markets

• Emerging Markets Committee prepared a report on Corporate Governance Practices and trends among emerging markets

• Emerging Markets Committee approved a resolution recommending members to adopt Corporate Governance principles using OECD Principles as a benchmark

• Corporate governance index for listed companies is discussed widely in many markets

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III. OTHER MAJOR ISSUESIII. OTHER MAJOR ISSUES

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OTHER MAJOR ISSUES

A. Investor Education

B. Securities Analysts and Management of Conflicts of Interests

C. Demutualization of exchanges

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A. Investor Education

• Different investor profile in developing countries requires unique strategies

• The use of internet has facilitated the sharing and processing of information

• Many new and complicated frauds and crimes

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B. Role of Securities Analysts and Management of Conflict of Interests

• Investors rely on the recommendations of Securities Analysts

• conflict of interests arise between

- clients and financial institution

- Issuer and investment bank

- Client and analyst

- Within the financial institution

• Some jurisdictions adopted new rules to prevent and disclose possible conflicts of interests

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C. Demutualization of Exchanges

• To better cope with more competitive and global business environment

• Exchanges converted from a non-profit member owned organization to shareholder owned corporation• Stockholm Stock Exchange, Borsa Italiana, Deutsche

Börse, London Stock Exchange, Kuala Lumpur Stock Exchange, Athens Stock Exchange etc.

• More capital to finance modernization

• Run by a management team driven to generate profit

• Separation of trading privileges and the ownership

• IOSCO Technical Committee has prepared a report on demutualization and EMC is working on the challenges of demutualization for emerging markets

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THANK YOU!THANK YOU!