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2006 Annual Report

ACHIEVEMENTS 2006 - 2007 cntd.

INTERNATIONAL

The Commission’s goal in this key result area is that New Zealand’s markets and regulatory environment are respected internationally, creating a climate for increased investment and good relationships with overseas regulators.

Responsibilities

promote New Zealand as a well-regulated securities market
keep abreast of developments in global standard setting
contribute the Commission’s view in international forums
fulfil our obligations under the IOSCO Multilateral Memorandum of Understanding and under bilateral MOUs
contribute to the work and development of IOSCO and other relevant international bodies
enhance the Commission’s relationship with the Australian Securities & Investments Commission

Achievements this year

promoted New Zealand as a well-regulated market at IOSCO and other international forums
hosted meetings of IOSCO’s Executive and Technical Committees and its Emerging Markets Advisory Board in Wellington in February 2006
worked to implement IOSCO’s strategic direction globally and enhance its relationships with other international standard setters
re-elected to IOSCO’s Executive Committee and to Deputy Chair of the Asia Pacific Regional Committee
re-elected to chair IOSCO’s Executive Committee for a second two-year term
fulfilled our obligations under IOSCO’s Multilateral Memorandum of Understanding and under bilateral MOUs
presented papers at IOSCO meetings and other international forums
contributed to international standard setting by completing IOSCO surveys
worked closely with the Australian Securities & Investments Commission

19% of expenditure

IOSCO
IOSCO is the global forum for securities regulators and is recognised as the international standard setter for securities regulation. Some 184 regulatory and other agencies are members of IOSCO. Together they regulate more than 90 percent of the world’s securities markets.

IOSCO works in five areas:

multinational disclosure of information including harmonisation of international accounting and audit standards;
regulation of secondary securities markets including examining the use of the internet and other electronic communications;
regulation of market intermediaries and their products;
enforcement and exchange of information across national borders; and
investment management.

Executive Committee of IOSCO
The Executive Committee is the governing body of IOSCO responsible for achieving the objectives of the organisation. The Commission was re-elected to the Executive Committee for a third term. Chairman Jane Diplock was elected chair of this Committee two years ago and was re-elected for a second two year term in June 2006. This role enables New Zealand to raise its international profile as a market regulated in accordance with the IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles). It also gives New Zealand a key role in IOSCO’s work to raise the standard of securities regulation world wide.

IOSCO strategic direction After the adoption of the strategic direction in April 2005, IOSCO has encouraged its member jurisdictions to improve standards of securities regulation and cross-border enforcement. The strategic direction is designed to:

encourage and assist member jurisdictions to implement the IOSCO Principles; and
increase the number of countries that are signatories to IOSCO’s Multilateral Memorandum of Understanding (IOSCO MMoU).

The 30 IOSCO Principles are based on three objectives - the protection of investors, ensuring that the markets are fair, efficient and transparent, and reducing systemic risk. The IOSCO Principles are used by the International Monetary Fund and the World Bank in the financial sector assessment programmes when evaluating a jurisdiction’s securities regulation. Wider implementation of the Principles will make the regulatory standards and practices consistent across member jurisdictions. The IOSCO MMoU enables signatories to exchange information across borders for enforcement purposes, which is vital for combating financial crime.

Under IOSCO’s strategic plan various forms of assistance are available to members seeking to implement the IOSCO Principles as well as to help them prepare for the scrutiny they must undergo before being accepted as signatories to the IOSCO MMoU. The Presidents Committee set a deadline of 1 January 2010 for all IOSCO member regulators to commit to joining the IOSCO MMoU. With the help of training seminars and technical assistance more members have been able to implement the IOSCO Principles and to make progress in joining the IOSCO MMoU this year. There are now 34 signatories and a further nine regulators are listed on Appendix B which commits them to undertaking reforms needed to become signatories.

IOSCO meetings
We hosted meetings of IOSCO’s Executive and Technical Committees and its Emerging Markets Advisory Board in Wellington in February 2006. The Commission was re-elected Deputy Chair of the Asia Pacific Regional Committee (APRC). We attended other IOSCO meetings during the year including the annual conference, a Technical Committee Conference, and a training seminar hosted by the China Securities Regulatory Commission (CSRC) where our Chairman was a keynote speaker.

Other international liaison

The Commission hosted visits of representatives from the Securities and Exchange Board of India (SEBI), the CSRC, the Securities and Exchange Commission of Sri Lanka, the Financial Services Agency of Japan, the Israel Securities Authority and the Islamic Financial Services Board.

The Chairman took part in meetings with the Financial Stability Institute, the International Monetary Fund, the World Bank, the Financial Stability Forum, the International Accounting Standards Board, the IOSCO General Secretariat, the United States Commodity Futures Trading Commission and the United States Securities and Exchange Commission (SEC). The Chairman visited SEBI, the Malaysia Securities Commission, the Thailand Securities and Exchange Commission, the French Autorit&#eacute; des March&#eacute;s Financiers, and the Financial Services Authority in London. As Chairman of the Executive Committee of IOSCO, the Chairman was appointed to the Trustee Appointments Advisory Group of the International Accounting Standards Committee Foundation.

The Chairman took part in the first academic Trans-Atlantic Dialogue on Financial Regulatory Policy at Cambridge University, the 17th Asian Pacific Conference on Accounting Issues, Corporate Governance and Auditing, and the Corporate Corruption, Integrity and Governance Symposium in Hong Kong hosted by the Independent Commission Against Corruption. She also spoke to regulators and industry representatives at a meeting hosted by SEBI in Mumbai. Commission Members spoke at the OECD Roundtable on Capital Market Reform in Asia, the Australian Law Teachers’ Association Conference, and the Australasian Institute of Banking and Finance Forum. Staff attended the US SEC’s International Institute on Securities Enforcement and Market Oversight, an executive course at Harvard Business School, and visited the Ontario Securities Commission. We assisted in an evaluation of New Zealand’s compliance with the Convention Against the Bribery of Foreign Public Officials in International Business Transactions carried out by the OECD, and the New Zealand Financial Action Task Force Inter-agency Working Group for establishing an appropriate supervisory regime to combat money laundering and the financing of terrorism.

International standard setting
The Commission contributed to an IOSCO survey on regulation of non-audit services provided by auditors and an APRC survey on regulation of collective investment schemes. We contributed to, coordinated and analysed an APRC survey on the IOSCO MMoU and the IOSCO Assessment Methodology.

Trans-Tasman relationships
The Commission continued to work towards trans-Tasman alignment that will promote investment in both New Zealand and Australia, reduce compliance costs for issuers, and increase the choice for investors. We welcomed the announcements by the Minister of Commerce on progress with the mutual recognition of securities offerings between the two countries and the MOU on coordination of business law. The Chairman is a member of the Australia New Zealand Leadership Forum.

The Commission signed a revised bilateral MoU with the Australian Securities & Investments Commission (ASIC). We held three meetings with ASIC to develop closer working relationships and to maximise opportunities for cooperation in areas of mutual interest. The Chairman was a keynote speaker at ASIC’s Summer School. As usual, some members of staff attended the Summer School followed by a short secondment to ASIC.

Bilateral agreements
As well as signing a revised MOU with ASIC, the Commission entered into new bilateral arrangements with the Israel Securities Authority and the Financial Services Agency of Japan.

Requests for assistance
The Commission received a number of requests for regulatory assistance from counterparts overseas. These emanated from the Hong Kong Securities and Futures Commission, ASIC, the United States Commodity Futures Trading Commission and the Financial Supervisory Commission of the Cook Islands. They were all made under the IOSCO MMoU with the exception of the Cook Islands. We give priority to any request for assistance from overseas. We see this as critical in discharging our international obligations.

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