Friday, June 12, 2009

International Update

In remarks delivered by videoconference on the closing day of the International Organization of Securities Commissions (IOSCO's) 2009 annual conference yesterday in Tel Aviv, U.S. Securities and Exchange Commission Chairman Mary L. Schapiro noted that the interconnectedness of today's global markets means that no securities regulator can 'go it alone.'

"IOSCO also keeps us all focused on three core principles that must continue to animate all who oversee securities markets;" said Schapiro, citing those principles as: (1) the protection of investors (2) ensuring markets are fair, efficient and transparent, and (3) the reduction of systemic risk.

When I first read Schapiro's remarks, I wondered if she was providing a new or updated set of principles for IOSCO, with the third one in particular - reduction of systemic risk - seemingly arising from the past couple of years experience during the credit crisis. In fact, her reference to IOSCO's core principles ties back to the principles articulated by IOSCO in 2003, detailed further in IOSCO's Objectives and Principles of Securities Regulation.

Schapiro also updated IOSCO on six investor-oriented initiatives in which the SEC is currently engaged, and referenced her June 10 statement on executive compensation . (June 10 was the day that a set of proposed principles were released by U.S. Treasury Secretary Tim Geithner, one day in advance of hearings on Compensation and Systemic Risk conducted on June 11 by the House Financial Services Committee). (As further background, in her June 10 statement, Schapiro described potential additional disclosure requirements for executive comp. such as:
  • how a company — and its board — manages risks.
  • a company’s overall compensation approach
  • potential conflicts of interest by compensation consultants, including disclosure of relationships between the consultants and the company and their affiliates
  • more information about director nominees, including their experience and qualifications to serve on the board or on particular board committees — and about why a board has chosen its particular leadership structure.
As further background - Schapiro also noted in her June 10 statement the importance of not only providing additional information to investors, but giving them the power to act on that information - in ways other than only buying more shares or selling their shares - by potentially affording them enhanced ability to nominate or vote out corporate directors, through the proposed rule on proxy access approved for release by a majority of commissioners on May 20, and posted for public comment on June 11.

IOSCO Forms Strategic Direction Task Force
In other IOSCO-related news, the organization issued a statement at the conclusion of its annual conference, IOSCO finalizes policy responses to credit crisis. Highlights include:
  • IOSCO will shortly issue final reports setting out recommended principles for the regulation of short selling and the oversight of hedge funds.
  • IOSCO will consult on disclosure principles for offerings of asset-backed securities and investment managers due diligence in relation to structured products investment.
  • IOSCO will also issue a report on the impact on Emerging Markets and their responses to the financial crisis.
  • IOSCO's Executive Committee has launched a Strategic Direction Task Force.
IOSCO Endorses Clarified ISAs
Separately, earlier this week, the organization issued IOSCO Statement on International Auditing Standards. Highlights include:
  • IOSCO endorses the replacement of the previous International Standards on Auditing (ISAs) with the new standards [issued by the International Auditing and Assurance Standards Board under IAASB's recently concluded Clarity project], noting the improvements that have resulted from clarifying the ISA requirements.
  • IOSCO looks forward to continued progress in terms of the translation, education and other efforts by many to facilitate global audit practices as well as the continuous improvement of ISAs over time.
  • IOSCO encourages securities regulators to accept audits performed and reported in accordance with the clarified ISAs for cross-border offerings and listings, recognizing that the decision whether to do so will depend on a number of factors and circumstances in their jurisdiction.
  • Further, IOSCO notes the potential role of the clarified ISAs for purely domestic offerings and listings and thus encourages securities regulators and relevant authorities to consider the clarified ISAs when setting auditing standards for national purposes, recognizing that factors at the national and regional level will be relevant to their considerations.

IFAC To Hold G-20 Accountancy Summit
The International Federation of Accountants (IFAC), parent organization of the IAASB, issued a statement on June 11 welcoming IOSCO's endorsement of the clarified International Standards on Auditing (ISAs). Separately, IFAC announced earlier this week, "IFAC agreed to hold a G-20 Accountancy Summit on July 23-24 in London to obtain the perspectives of accountancy institutes on how the profession can best contribute to strengthening the global financial system." IFAC President Robert Bunting said: "Our goal is to identify and summarize the collective viewpoints of IFAC and accountancy institutes in G-20 countries and to submit these to the G-20 Working Groups prior to their September meeting." He added, "This will be a follow up to IFAC's letter to three G-20 Working Groups in March, in which we indicated our support of their recommendations to implement international standards, improve the international regulatory framework, and strengthen the roles of the International Monetary Fund and the World Bank."

IASCF Monitoring Board Issues Statement to G-20
Separately, on June 8, the Monitoring Board of the International Accounting Standards Committee Foundation issued a Statement ... Regarding Due Process Toward Addressing Calls from G-20 Leaders. In their statement, the Monitoring Board said: "We believe that standard setters will be best able to produce high quality standards if they are able to exercise independent judgment relying on their skills, experience and due process, and taking into account the urgency of certain issues and the views of all stakeholders. Therefore, with respect to the steps taken by the IASB, we reiterate that the IASB’s due process and transparency in financial reporting are critical to our continued support, as the authorities charged in our jurisdictions with determining accounting standards for use in our capital markets, for IFRS in its role as a global accounting standard. We will continue to engage with the International Accounting Standards Committee Foundation Trustees as they work to monitor the due process and the transparency."

IASB's Tweedie Briefs ECOFin
The IASCF Monitoring Board's statement was issued one day prior to IASB Chairman Sir David Tweedie's remarks before the European Union's Council on Economic and Financial Affairs (ECOFin). In those remarks, Tweedie touched on actions taken by the IASB and related actions of FASB in response to global concerns, and IASB's reaction to concerns voiced by the European Union, particularly as relate to IAS 39, Financial Instruments, and related standards.

On the Domestic Front...
Returning to the domestic front... I'm looking forward to seeing some readers of this blog (and some people who we cover in this blog) at next week's Maryland Business Expo, sponsored by the Maryland Association of CPAs (MACPA).

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