IOSCO Strategic Review By Jane Diplock, Chairman, Executive Committee and Greg Tanzer, Secretary General October 2009

Agenda 1.Background 2.Strategy Overarching Strategy 4.Block 1: Building Research Capacity 5.Block 2: Expanding MMOU Efforts 6.Block 3: Intensifying Implementation Assessments 7.Next Steps and Timetable

1. Background Aim of the Strategic Review Why a strategic review? Strategy fits IOSCO mission Key points from strategy Outcome of the strategy

1. Background: aim of Strategic Review Establishes IOSCO´s priorities for next 5 years Establishes the framework for IOSCO´s actions Provides IOSCO with the resources needed to implement the plan Requests members to support the initiative, since its success will depend upon individual actions

1. Background: why a strategic review? Objective: improve the effectiveness and the efficiency of the Organization Reasoning: it will enable IOSCO to – plan – coordinate actions – focus common efforts Specific circumstances: review more than ever needed due to financial crisis and world wide developing of global securities markets

1. Background: strategy fits IOSCO mission IOSCO´s By-Laws, Sections 1.1 & Securities commissions are joined together in IOSCO to better carry out their respective missions through the forum of cooperation & discussion provided by the Organization 1.2 In particular, the objective of the organization is to enable members to exchange information with a view to (a) Developing securities markets & improving their efficiency (b) Coordinating the enforcement of securities regulation & (c) Implementing common standards

1. Background: key points from strategy 1.Maintaining the role of IOSCO as the international standard setter for securities regulations 2.Improving enforcement related cross-border cooperation 3.Implementing the IOSCO objectives and principles of securities regulation 4.Continuing to raise the international profile of IOSCO and the level of internal communication

1. Background: outcome of the strategy IOSCO improved its reputation as the global standards setter in the securities markets by: a.Creating new standards b.Quick and important work on the crisis c.Updating Principles and Methodology 2.Enforcement and information exchange success: IOSCO´s MMOU is the new global standard of cooperation 3.Assessments of Implementation of Principles by IOSCO and by IMF and World Bank FSAP Program 4.Reputation of IOSCO has risen considerably; internal communication has intensified

2. Strategy steps approach: 1.Substance 2.Form

2. Strategy Step 1: Substance (finished mid 2010) Research CapacityMMOU Assessments and Implementation of Principles Overarching Strategy Other t.b.d.

2. Strategy Step 2: Form (post mid-2010) FUNDING STRUCTURE OF THE ORGANIZATION

3. Overarching Strategy Lessons from the Global Financial Crisis: 1. While the crisis commenced in unregulated segments of the market and became a credit (rather than market) crisis, the key elements of risk were transmitted through markets which IOSCO members regulate or exempt from regulation. 2. While much has been written on the lessons from the crisis for industry, regulators and governments, there are a few key themes which have consistently surfaced in the literature, most notably in the G20 declarations: – The need for attention to be given to implementation of global standards; – The need for regulators to look for emerging systemic risks and take actions to mitigate them; and – The need for improved communication and cooperation globally between regulators.

3. Overarching Strategy: reformed mission The suggested reformed mission aims would be that IOSCO’s members are committed: to cooperate together to develop, and promote adherence to and implementation of, internationally recognized standards of regulation in order to maintain orderly, efficient and fair markets, to reduce systemic risk and to protect investors; to exchange information on their respective experiences in order to assist the development of domestic markets and their appropriate regulation; and to promote investor confidence in the integrity of capital markets through effective cooperation in enforcement actions against misconduct in those markets.

3. Overarching Strategy: strategic goals (1) 1. Maintain the international regulatory consensus for securities markets via the setting of international standards, especially through: oBuilding members´ regulatory capacity through the systematic implementation of the IOSCO Objectives and Principles of Securities Regulation throughout its membership and its training and education program; oBuilding the enforcement and surveillance framework, through full implementation of the IOSCO MOU, possible enhancements to it, and working with uncooperative and/or under regulated jurisdictions; and oDevelopment of international standards, through the systematic and periodic review of the IOSCO Objectives and Principles of Securities Regulation, and developing standards to deal with emerging risks and inadequate functioning of markets.

3. Overarching Strategy: strategic goals (2) 2. Identify and address systemic risks to the fair and efficient functioning of markets, especially through: oBuilding an independent research capacity to identify risks to the fair and efficient functioning of markets; oDeveloping implementable actions, within members’ responsibility, to help mitigate these risks; oLiaising with other international financial standard setters and other global bodies having a mission complementary to that of IOSCO;

3. Overarching Strategy: strategic goals (3) 3. Strengthen IOSCO´s role within the international financial community in order to advance the implementation of high-level objectives and principles of securities regulation, especially through: oRepresentation of IOSCO in relevant decision making forums; oStrengthening communications with stakeholders, in particular the other international financial standard setters and with bodies representing the industry; oImproving interaction within the IOSCO membership; and oEstablishing the accountability of relevant international standard setters to securities regulators.

4. Block 1: Building Research Capacity Types of research 1.Risk assessment – Global Securities Regulation Risk Outlook – Exploratory Analysis 2.Fundamental economic analysis on the functioning of markets – Fundamental economic research 3.Project management support – Impact assessments – Ad hoc analyses, calculations and data analyses

4. Block 1: Building Research Capacity Options for research and economic analysis Building a network: 1.Highly experienced and pro-active researchers of IOSCO members 2.External specialists 3.A small research staff at the General Secretariat What is needed: A small dedicated staff at the General Secretariat Commitment of the IOSCO members’ experienced researchers Commitment of a sponsor with a high reputation

4. Block 1: Building Research Capacity Other options that are considered by the Task Force: Outsource model Bigger research department at the General Secretariat

5. Block 2: Expanding MMOU Efforts Expected Status of MMOU at : almost all jurisdictions to App. A or B Some work left: 1.5 non-applicants: continued effort to obtain applications 2.Jurisdictions B  A: plan 3.MMOU update

6. Block 3: Intensifying Implementation Assessments 2005 Presidents´ Committee decision: give priority to Implementation of Principles Great demand by IOSCO members and G20 Served by IOSCO or FSAPs (IMF, WB) or a joint IOSCO-IMF effort How much? 40 in 5 years is reasonable. Who first? Both Emerging market members and G20.

7. Next Steps and Timetable SUBSTANCE Presentation of progress at Regional C’ttee, TC and EMC meetings on overarching paper and options papers (QIV´09) Input from IOSCO membership (QIV´09) Proposals to Presidents´ Committee (June ´10) FORM Second half of 2010