David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: Global regulator organisation seeks social media solutions

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Photo / Thinkstock
Photo / Thinkstock

Social media.

Everyone's fretting about it, including the International Organisation of Securities Commissions (IOSCO), of which our own Financial Markets Authority (FMA) is a member.

In the latest dispatches from the IOSCO board, which met in Montreal mid-June, social media and "behavioural economics" topped the agenda.

Prior to the board meeting proper, IOSCO delegates were entertained by a "Round Table" debate involving themselves and "six external experts drawn from industry, academia and the regulatory community on behavioral economics and social media" that teased out the issues.

The board took it on board.

"Board members agreed to embed behavioural economics in IOSCO's approach to regulatory work going forward, as a means to enhance the effectiveness of market regulation," the IOSCO communique says.

"Members also agreed that social media could serve as a vehicle to influence investor behaviour, gather market intelligence and identify market trends, thereby furthering IOSCO's effort to be proactive and forward looking."

What this means in practice is difficult to gauge from the above paragraphs: regulation by tweet? More Facebook friends for the FMA?

Perhaps IOSCO can save the financial world via social media (this video on the topic is more instructive), however, the global body of financial regulators is keeping busy with plenty of other projects including: producing guidelines for financial benchmarks; working on "mandates to repair the financial system"; identification of "emerging and systemic" risks.

The organisation has also embarked on efforts to more closely co-ordinate global financial regulation, with two new committees now in production: the Task Force on Cross Border Regulation, and; the Committee on Retail Investors.

According to IOSCO, the Cross Border Task Force could eventually "develop principles to guide the coordinated use of these tools, which may include substituted compliance, mutual recognition and supervisory co-operation".

Meanwhile, the committee to keep retail investors safe is intended to create "a consistent and comprehensive approach to retail investment products and services".

"By focusing on investor education, it will enable IOSCO members to share their experiences and build expertise globally in financial literacy," the July 1 release says.

The push for one world financial regulation, which got a big push in the aftermath of the GFC, is gathering steam.

But IOSCO hasn't cornered the globe just yet, with 95 members, representing about 95 per cent of the world's financial markets, signed up to its "Multilateral Memorandum of Understanding on cooperation and exchange of information, the instrument used by securities regulators around the world to combat cross-border fraud and misconduct".

To date 29 IOSCO members have yet to sign the memo.

"As long as these jurisdictions remain outside the international enforcement regime they offer potential safe havens for wrong doers and create gaps in IOSCO's global enforcement," the release twitters on.

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

Read more by David Chaplin

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