SIFMA Praises New 'Best Practice' Guidelines For Financial Market Regulation

by Glen Shapiro, LawAndTax-News.com, New York

17 November 2006

The Securities Industry and Financial Markets Association (SIFMA) on Wednesday commended the best practice guidelines for improved regulation of the world’s financial markets, developed by the International Council of Securities Associations (ICSA).

SIFMA, through its predecessor organizations (the Securities Industry Association and The Bond Market Association) is an active member of ICSA.

The guidelines, which are targeted toward the community of international financial regulators, came out in advance of the IOSCO Technical Committee Conference in London, which brings together the world’s leading securities regulators and the securities industry in a dialogue on the global regulatory agenda for financial markets.

ICSA’s Principles for Better Regulation were developed in response to the growing and unprecedented regulatory burden that is now facing financial institutions. The guidelines highlight the need for an approach to regulation that supports competition and consumer protection while at the same time avoiding unnecessary and excessive regulation.

“These guidelines underscore the fact that a drive for efficient, effective regulation is a top priority for our industry around the globe,” explained Marc Lackritz, SIFMA Co-CEO.

Key recommendations included in 'Principles for Better Regulation' are:

• Establish first whether there is a significant market failure or financial misbehavior arising from firms’ conduct, risk management or relations with consumers, which is not appropriately addressed by existing regulations and their enforcement and which is unlikely to be mitigated over a reasonable period of time by market forces.
• Setting a robust burden of proof for regulatory action to deal with a market failure or financial crime helps to prevent inappropriate or excessive regulation, which tends to distort markets. As important is recognizing the degree of failure which should be accepted – whether of markets or of behavior – since risk, uncertainty and insolvency are unavoidable in a healthy, dynamic and innovative market. In other words, the goal of zero-failure is both undesirable and unattainable.
• As far as practical, regulators should rely on stable, principles-based regulations.
• Where two or more regulators operate in a given jurisdiction, there must be proper coordination between those organizations.

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