Developments in the financial services industry: Investor protection in the new economy and CLERP 6
An address by Alan Cameron, AM, ASIC Chairman, to the Melbourne Chapter luncheon of the Financial Planning Association of Australia Ltd, Melbourne, 30 May 2000.
Investing in the time of the New economy
Sydney recently hosted the 25th annual conference of the International Organisation of Securities Commissions (IOSCO). Delegates from regulatory bodies from around the world attended and discussed issues of global economic significance. One of those issues was the 'New Economy' and how it can be most effectively regulated.
IOSCO's Statement of Objectives and Principles of Securities Regulation sets forth the following three objectives:
- the protection of investors
- ensuring that markets are fair, efficient and transparent
- the reduction of systemic risk.
These objectives and the principles that support them represent a commitment by IOSCO members to serve the interests of public investors through adoption and implementation of sound regulatory standards that may be applied effectively under varying economic conditions, in both buoyant and depressed markets. Underlying this regulatory framework is the fundamental truth that a well-informed investor is a better-protected investor.
Developments in today's fast-changing, technology-fuelled New Economy suggest that it is important for regulators and market professionals not to lose sight of this truth or the need to serve the interests of the public investor. Accordingly, the IOSCO Technical Committee issued a Bulletin regarding Investor Protection in the New Economy.
The Bulletin sought to remind investors, market professionals, and regulators that in the robust but volatile conditions that the New Economy has brought to many countries' securities markets, it is important not to lose perspective. Markets are cyclical creatures. The need to identify market and investment risks, and to disclose these risks to investors so that they understand them, and the need for market professionals to discharge their responsibilities properly, are as great, if not greater, at the upper part of a market cycle as they are at the bottom. These are not new issues, but are of heightened importance in the New Economy. As the Treasurer said in opening the conference:
'Everybody loses interest in corporate regulation when a market booms. It's only when it fails they look to allocate liability. But it's when it's booming, when the activity is going on, that people need to be at their most vigilant.'