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Regulators set their sights on the Securities Markets in 2021

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Based out of Madrid since it was founded back in 1983, the International Organization of Securities Commissions (IOSCO) has a membership including the Financial Conduct Authority (FCA) from the UK, and the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) from the US, basically all the regulators involved in securities markets. This month they discussed some of the priority themes for 2021 in global banking:

In September #DisruptionBanking covered a story about an IOSCO report from June, where algorithmic trading was reported to be responsible for over 60% of all US equity trading. This time the IOSCO Board, and several committees met at the 45th Annual Meeting last week to discuss progress made on IOSCO priority work on sustainable finance, financial stability risks, market fragmentation, asset management and retail market conduct.  

The IOSCO Board also added two additional priority themes for 2021:

  • Financial stability and systemic risks in non-bank financial intermediation (NBFI)
  • Remote working, misconduct risks, fraud and scams, and operational resilience, in the context of the COVID-19 pandemic.

Sustainable Finance

Mark Carney, Former Governor of the Bank of England and now UN Special Envoy on Climate Action and Finance, had some input into discussions by the IOSCO Board on the relevance of sustainability-related disclosures.

The Board discussed the purpose of a consistent and comprehensive framework that builds on the current global initiatives on corporate disclosures by the alliance of international sustainable finance standard settlers, together with IFRS Foundation proposals for a standard setting mechanism. IOSCO currently chairs the Monitoring Board that oversees the work of the IFRS Foundation from a public interest perspective.

The Board agreed that the IOSCO Sustainable Finance Task Force should further explore the following areas:

  • Pathways to mandatory disclosure beyond comply or explain requirements;
  • Engaging with the IFRS Foundation to ensure that any proposals stemming from the consultation paper meet securities regulators’ expectations both in terms of content and governance; and
  • Advancing discussions regarding the establishment of an assurance framework for sustainability disclosures.

The Board also discussed the Sustainable Finance Task Force’s other work on sustainability-related disclosures, green-washing and the increasing activity of ESG data providers and credit rating agencies regarding ESG ratings.

Financial Stability Engagement Group (FSEG)

The Board discussed the next steps in the FSEG’s work on the impact of the March turmoil on market-based financial intermediation (NBFI), specifically on money market funds (MMFs), open-ended investment funds, bond liquidity and margins.

Members expressed their full commitment to further collaboration within IOSCO and with the Financial Stability Board on addressing the issues arising from the March turmoil in capital markets.

Retail Market Conduct Task Force (RMCTF)

The Board approved a RMCTF report aimed at assisting IOSCO members in addressing emerging conduct in issues in retail markets arising from the pandemic and other similar crises. The report identifies the common drivers of this misconduct and actions taken by firms and regulators to mitigate risks and retail investor harm. The Board discussed further work for the task force aimed at strengthening investor confidence and trust in the markets.

Ashley Alder, Chair of the IOSCO Board, said: “Though the Annual Meeting was virtual this year, members made tremendous progress in addressing the emerging risks arising from the COVID 19 pandemic and other critical matters such as climate change and financial stability issues. IOSCO has proven it can respond quickly and effectively to events that could harm investors and undermine market integrity.”

With more to come from the IOSCO and other key regulators, #DisruptionBanking works to keep our readers uptodate with the most important regulatory updates from securities markets.

#IOSCO #NBFI #SecuritiesMarkets #SustainableFinance #FSEG #RMCTF #IFRS #MarchTurmoil #ESG

Author: Andy Samu

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