Reviewing the issues facing securities regulators following the
recent volatility in the global credit markets is top of the agenda
for the International Organization of Securities Commissions
(IOSCO) during 2008, according to the chair of the organisation’s
executive committee, Jane Diplock.

Jane Diplock, IOSCODiplock, who also chairs
the New Zealand Securities Commission and is currently nearing the
end of her second two-year term as IOSCO chair, told TA
the technical committee of IOSCO has taken the subprime crisis
“extremely seriously”. A dedicated subprime crisis task force
established in November will report substantively to the IOSCO
meeting in Paris this May.

“[The task force is] looking very carefully at issues of risk
management, transparency, the valuation of assets and the
accounting issues relating to [the subprime crisis],” Diplock said.
“[We are also looking into the role of] rating agencies and
obviously working with the joint forum and also with the financial
stability forum because these are critical global issues.”

The IOSCO task force will investigate general issues facing global
markets. It will develop guidance that domestic regulators may be
able to look at to identify whether there are elements they need to
address in their domestic legislation.

The task force is going to revisit a selection of accounting
issues, particularly the accounting treatment of structured
products. In particular, it will look at special purpose vehicles,
whether they are an on or off balance sheet item and the
implications in risk management and information, particularly for
listed companies. “Accounting issues are integral to the
infrastructure of capital markets generally, so whenever any of
these issues occur there usually is an accounting component,”
Diplock said.

The IOSCO chief said she cannot speculate as to whether the task
force’s work will have any effect on the accounting profession. “I
think we’d probably just have to see what comes out of all that
before we know exactly how that will play out over time,” Diplock

The group will also study the way credit agencies rate structured
products and IOSCO’s current code of conduct for agencies. The
transparency and accessibility of market data relating to
structured financial products is another key issue that will be
explored. Diplock said the task force will be examining what type
of data investors – particularly mutual fund investors – consider
when investing in these products. They will also look at whether
regulators receive sufficient information about structured

On the transparency front, the establishment of international
standards, such as IFRS, is seen by IOSCO as a positive step
towards improving the transparency of financial data. Diplock said
IOSCO is particularly adamant that countries sign up to the pure
International Accounting Standards Board-issued IFRS, without
carve-outs, so investors can make “sensible” comparisons between
issuers in various jurisdictions around the world. Drawing on her
experience as a national regulator, she said: “As we’ve discovered
in New Zealand, we can move to IFRS as promulgated by the IASB.
Once we get that global standard we need it to be implemented
globally and it’s certainly the view of IOSCO that we want to
encourage that.”