The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published the results of a survey on the implementation of its September 2009 recommendations with respect to securitisation and credit default swap markets – Task Force on Unregulated Markets and Products – Implementation Report.
The report shows that all jurisdictions surveyed by the Task Force had at least one, if not multiple initiatives in progress to implement the recommendations on: disclosure; the retention of economic interest (skin in the game); investor suitability, and international coordination; and regulatory cooperation. Most measures are expected to be implemented in 2010 and 2011.
The Technical Committee, based on the survey responses and subsequent discussions, has made two further recommendations:
· TFUMP Recommendation 1 – IOSCO recommends regulators encourage improvements in disclosure standards for private or wholesale offerings of securitised products; and
· TFUMP Recommendation 2 – IOSCO recommends regulators engage in international cooperation toward convergence of national regulations, where desirable, and review progress regularly.
The major themes which emerged from the review were that:
· The skin in the game concept is endorsed by most jurisdictions at this time. Furthermore, the majority of member jurisdictions are expected to implement the requirement for originator/sponsors to retain long term economic exposure to the securitisation;
· In many instances, current laws, regulations or market practices for offering documents often covered elements of disclosure and third party service providers. Most jurisdictions are either enhancing or considering enhancements for these areas;
· In relation to investor suitability, most jurisdictions are refining the definition of a sophisticated or wholesale investor. Depending on the jurisdiction, a greater burden will be put on the issuer/seller (to determine investor suitability) or on the investor (responsibility to buy products they understand); and
· Industry bodies such as the Association for Financial Markets in Europe, Japan Securities Dealers Association, Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais, Association of German Banks and Australian Securitisation Forum are working with regulators on various unregulated markets and products related initiatives.
The Task Force on Unregulated Financial Markets and Products (TFUMP) was formed in November 2008 in support of G-20 calls for a review of the scope of financial markets and in particular unregulated financial markets and products.