The mutual recognition arrangement provides a framework for the SEC, the Australian government, and ASIC to consider regulatory exemptions that would permit US and eligible Australian stock exchanges and broker-dealers to operate in both jurisdictions, without the need for these entities (in certain aspects) to be separately regulated in both countries.

SEC Chairman Cox announced this week:

"Today's signing marks a significant milestone in our partnership with Australia to reduce the barriers that US and Australian investors now face in investing in each other's markets. The framework we are establishing is designed to ensure that the significant protections afforded to investors under each nation's regulatory system are maintained and enhanced. An important part of this arrangement is strengthening the ability of the SEC and ASIC to cooperate with each other in our enforcement and supervisory efforts, thereby enhancing the integrity of both our markets."

ASIC Chairman D'Aloisio added:

"ASIC welcomes this opportunity to be included in the first mutual recognition arrangement with the SEC and looks forward to strengthening the connections between the USA's and Australia's capital markets. This arrangement reflects the importance of promoting the freer flow of capital in providing wider investment opportunities for Americans and Australians where sound market integrity and investor protection regulatory regimes are in place."

Through this mutual recognition arrangement, the SEC and the Australian authorities agree to consider providing exemptions to exchanges and securities brokers in one another's countries.

Once implemented, these exemptions could permit US stock exchanges and broker-dealers regulated by the SEC, subject to conditions imposed by the Australian authorities, to offer their services to Australian wholesale investors and financial firms without being subject to most ASIC regulation.

Likewise, eligible Australian stock exchanges and broker-dealers regulated by ASIC, subject to conditions imposed by the SEC, could offer their services to certain types of US investors and firms without being subject to most SEC regulation.

Chairman D'Aloisio also noted:

"This will give both Australian and US investors easier and more competitive access to each other's markets, and will offer Australian market participants and US broker-dealers new ways of doing business with clients in each other's markets."

Ethiopis Tafara, Director of the SEC's Office of International Affairs, added:

"Over the past several years and continuing to this day, there has been increased interest by US investors in foreign securities. The SEC-Australia mutual recognition arrangement recognizes this investor interest and serves as a pilot exercise in building a cross-border regulatory infrastructure to address the increasing globalization of our securities markets."

An integral component of the mutual recognition arrangement is an Enhanced Enforcement Memorandum of Understanding (MOU) and a new Supervisory MOU that will allow for considerably greater regulatory and enforcement cooperation and coordination between the SEC and ASIC.

These MOUs will apply broadly to all US and Australian market activity and not just those related to the mutual recognition arrangement.

Under the arrangement, both the SEC and ASIC will retain jurisdiction to pursue violations of their respective anti-fraud laws and regulations.

Following today's signing of the mutual recognition arrangement, the SEC and Australian authorities will begin considering regulatory exemptions under the arrangement as they are submitted to the two agencies.

It is expected that the process of considering the initial applications for exemptions for approval by the authorities could be concluded in early 2009.