Global Approach to Securities?


REGULATORS of securities markets around the world are seeking greater consistency in their regulations - a ``level playing field'' to make global competition more fair. Officials of the International Organization of Securities Commissions (IOSCO) last week in Montreal prepared a common approach to assessing the capital adequacy of securities brokers. The exact details are being closely guarded until the group meets Sept. 18-21 in Venice.

The IOSCO's deliberations come in response to calls for action in the global securities markets akin to the international regulation of banking that has been under way for more than 15 years now.

Though international securities trading has grown in recent years, there is decided diversity among countries when it comes to regulation, as international brokerage houses can attest.

``What we've got to do is figure out some way of harmonizing registration requirements, listing requirements, disclosure requirements, new issue requirements - all these things are vastly different among the major securities markets around the world,'' says Robert Hormats, vice-chairman of Goldman Sachs International. ``Some degree of consistency is probably necessary.''

``The uniformity question is what's most interesting in this exercise,'' agrees Scott Pardee, co-chairman, Yamaichi International (America) Inc.

A possible nudge toward more uniform standards of global regulation has come from the White House. President Bush announced last week that he would nominate Richard Breeden, a key adviser on the savings-and-loans bailout, to be the new head of the Securities and Exchange Commission (SEC). Mr. Breeden and Alan Greenspan, the Federal Reserve chairman, support the effort to harmonize international trading in securities.

But both men also worry that over-regulation in the US might drive away potential foreign sellers of securities in this country. This fact underlines the difficulty that IOSCO faces, and officials have repeatedly noted that the process of harmonization will not be easy.

One of the key questions in global trading is setting a standard for sufficient capital adequacy of securities houses.

``I don't worry too much about the US side of it, or for that matter the Japanese side of it, because certainly on the US side we have very stringent capital requirements already set down by the SEC. I think the bigger effort would be to make them uniform from country to country,'' says Mr. Pardee.

Another area to examine, he says, is ``universal banks'' - banks that also perform the functions of security firms.

``One of the things that is overlooked by those here and in Japan who want to do away with the distinction between banks and securities houses is that the two strongest equity markets in the world with great liquidity are the US and Japanese stock markets. It's useful to have independent securities houses. The criticism of the universal banks is the immense power that banks can gain within an economy through interlinkages of boards of directors and in quite many cases ownership of major industrial companies,'' Pardee says.

There is much more to harmonize, as Mr. Hormats explains.

``In the United States, for example, you have to disclose ownership of shares by board members. You don't have that elsewhere,'' he says. ``Quarterly reports are required in this country. You don't have that elsewhere.''

And then there are the employees of securities firms. Should there be some sort of standard for examining their fitness? Pardee thinks it might not be a bad idea. ``The individuals who are trading and dealing with the public should have a certain minimum basis in how much they know of the rules and regulations of the exchanges, and certainly the mathematics and language of the securities they trade.''

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