Corporate Governance and Jane Diplock AO 15 August 2008 Securities - PDF document

1 Corporate Governance and Jane Diplock AO 15 August 2008 Securities Law

Introduction • High standards of corporate governance instill confidence in investors fid i i t • Securities Commission’s role to strengthen Securities Commission s role to strengthen confidence in capital markets • Fi Financial markets are now truly global i l k t t l l b l • Globalization means it is vital we understand Globalization means it is vital we understand diverse treatments of corporate governance around the world around the world 2

Three key themes for CG • Conceptual convergence with implementation diff differences • Effective benchmarks exist around the world Effective benchmarks exist around the world • Benchmarking & recognizing equivalence will f facilitate mutual recognition ilit t t l iti 3

Increasing convergence in CG • Increasing scope to recognize equivalence in frameworks of others frameworks of others • Expect implementation differences p p • Key elements of corporate governance: – integrity, understanding of roles & responsibilities, i t it d t di f l & ibiliti honesty & fairness, transparency • Manifest in various ways across jurisdictions: rules-based and principles-based 4

Differing approaches • Differing approaches reflected in different l legislative provisions and structures i l ti i i d t t • Differences in NZ’s Companies Act and p Australia’s Corporations Act insufficient to undermine confidence in the regulatory regime of the other 5

Differing approaches (cont’d) • Development of legislation and regulation often the product of particular history and market th d t f ti l hi t d k t conditions- – eg Sarbanes-Oxley • Important to understand divergent histories and Important to understand divergent histories and circumstances when building regulatory cooperation cooperation 6

Effective Benchmarks • Benchmarks exist for recognition of equivalence – statutes, codes, principles , , p p • Examples: – OECD Principles of Corporate Governance OECD P i i l f C t G – Commission’s Principles and Guidelines 2004 • Commission agrees with international research: – failure of corporate governance contributes to p g corporate failure – many examples of poor governance in failed finance companies 7

Regulatory cooperation • Recognizing equivalence facilitates regulatory cooperation • IOSCO – International standards setter for securities regulation g • Vision – markets operate across the world on sound principles – markets operate across the world on sound principles & standards – regulators cooperate & exchange information across g p g borders to enforce securities law • Members are regulators from 109 jurisdictions, g j , & regulate 90% of world’s capital markets 8

IOSCO (cont’d) • Aims for IOSCO Principles to be implemented in member jurisdictions member jurisdictions – to raise level & consistency of regulation worldwide • IOSCO MMOU enables cooperation & exchange of information for enforcement • IOSCO Principles & MMOU – foundations for regulatory cooperation globally regulatory cooperation globally 9

Convergence – IFRS • International Financial Accounting Standards (IFRS) (IFRS) excellent example of convergence ll t l f • Vision is for a single worldwide set of accounting Vision is for a single worldwide set of accounting standards • Investors will benefit from a high level of I ill b fi f hi h l l f comparability and consistency 10

Mutual Recognition • Does not require adoption of identical standards • Allows domestic laws and regulations to reflect national imperatives national imperatives • Provides capacity for cross-border cooperation and enforcement • Common basis of principles for assessing • Common basis of principles for assessing effectiveness essential 11

Examples p • US SEC is developing MR arrangements with: Australia, Canada, EU • NZ & Australia – mutual recognition of securities • NZ & Australia – mutual recognition of securities offerings • Voluntary opt-in scheme for collective investment schemes in Asia-Pacific 12

Requirements for Mutual Recognition q g • Trust in the capacity and willingness of the other p y g regulator to enforce and cooperate will be key • IOSCO 30 Principles & MMOU provide a IOSCO 30 Principles & MMOU provide a foundation for assessing equivalence • Calibration of other jurisdiction’s corporate governance framework important g p 13

A vision • A mutually recognised network of multilateral and bilateral frameworks around the world and bilateral frameworks around the world • Recognition of equivalence in corporate g q p governance will be essential 14

Conclusion • Good corporate governance around the world – based on globally accepted benchmarks, which are effectively enforced – coupled with a practice of recognizing equivalence l d i h i f i i i l between jurisdictions – fundamental role in the growth and development of f d t l l i th th d d l t f our capital markets 15

16 16 Thank you