The Working Party views its work on the current mandate as furthering IOSCO's commitment to improving the international regulatory environment for securities and futures markets through, among other things, enhanced enforcement cooperation. In that regard, indentifiable progress has been made in fostering cooperative relationships, often embodied in MOUs, among many of the members of IOSCO. There are areas, however, such as the international enforcement problems created by under-regulated and uncooperative jurisdictions, in which there are obstacles of a long-standing and continuing nature. These problems do not lend themselves to easy or universally applicable solutions. The suggestions set forth below are made with the view toward encouraging improvements in this area.

Through analyzing both the nature of the obstacles and the experience of Working Party members, the Working Party has identified means for expanding the ability of securities and futures regulators to get information and assistance from under-regulated and uncooperative jurisdictions. The Working Party recognizes that the usefulness of virtually any approach may depend on legal and regulatory structures of the countries involved. Therefore the suggestions below provide general approaches that can be adapted to best suit individual situations. Working Party no. 4 encourages IOSCO members to share their experiences with using these approaches.

1. Implementing IOSCO basic principles

The development of high regulatory standards and of mutual cooperation ant assistance among IOSCO members is dearly stated as a major goal in IOSCO's by-laws. The preamble of IOSCO's by-laws states:

"Securities authorities resolve :

• to cooperate together to ensure a better regulation of the markets, on the domestic as well as on the international level in order to maintain just and efficient markets;
• to exchange information on their respective experiences in order to promote the development of domestic markets ;
• to unite their efforts to establish standards and an effective surveillance of international securities transactions;
• to provide mutual assistance to ensure the integrity of the markets by a vigorous application of the standards and by effective enforcement against offenses".

Working Party No. 4 strongly believes that all IOSCO members should work toward achieving the goals set forth in the by-laws by, among other things, developing or improving their ability to collect and provide information to foreign securities and futures regulators.

2. Encouraging greater cooperation and regulation

Based on the Working Party's observations, it appears that the under-regulation and uncooperativeness that characterize some jurisdictions may arise, at least in part, in an effort to attract certain types of business. However, it is the Working Party's experience that most jurisdictions do not wish to be viewed by the international community as havens for fraud. In this regard, it should be noted that some jurisdictions already have increased, or at least maintained, their attractiveness to business through strengthening their regulatory standards and entering into information-sharing relationships with other countries. Members of the Working Party have noted that a well-developed regulatory structure may tend to attract, rather than deter, business.

It may be worthwhile for members of IOSCO to approach under-regulated and uncooperative jurisdictions with a view to increasing their awareness about problems that arise from under-regulation and uncooperativeness; encouraging the strengthening of regulatory standards; and enhancing cooperation with foreign regulators through the exchange of information In that regard, IOSCO members should be encouraged to ensure that this report is widely disseminated. In addition, where appropriate, IOSCO members could work with these jurisdictions to identify and find ways to resolve or overcome existing deficiencies in regulation and obstacles to cooperation.

3. Developing alternate routes for assistance

The Working Party recognizes that many jurisdictions are unlikely to create functionally equivalent counterparts for foreign securities and futures regulators, and therefore foreign regulators seeking assistance will need to develop other routes for getting assistance. It has been the experience of some members of the Working Party that, especially in matters involving serious frauds, assistance may be available from criminal or judicial authorities. One practical consideration which may encourage cooperation in such matters is whether the alleged fraud may involve a breach of the statutory or regulatory requirements in the jurisdiction receiving the request. Moreover, the implementation of the speciality principle may influence positively the readiness of the requested party to exchange information.

The development of criminal channels for securing assistance in securities and futures matters also may be promoted through appropriate international agreements. Consistent with the legal framework of each jurisdiction, securities and futures authorities may benefit from the development of such agreements, provided that they are sufficiently broad in scope.

4. Addressing confidentiality concerns

As the Working Party has noted in its previous reports concerning "Principles for MOUs. and "Addressing Difficulties Encountered While Negotiating and Implementing Memoranda of Understanding", the potential uses or disclosure of information requested by a foreign securities or futures authority may raise issues that need to be addressed before information can be provided, even by a highly regulated and cooperative jurisdiction. It is the experience of members of the Working Party that under-regulate and uncooperative jurisdiction have articulated such concerns.

Responding to such concerns at an early stage may facilitate receiving information from under-regulated and uncooperative jurisdictions. Accordingly, in seeking assistance in obtaining information from such jurisdictions, securities and futures regulators should consider providing an explanation of any laws or regulations governing the confidentiality of information obtained, as well as information about the purposes for which the requested information may be used. To the extent that some jurisdictions may be reluctant to cooperate because of confidentiality concerns, efforts should be made to understand and address these concerns in order to pave the way for cooperation.

CONCLUSION

In this report, IOSCO Working Parry n 4 attempted to address the issues confronted by securities and futures regulators when trying to obtain information from under-regulated and uncooperative jurisdictions. The Working Parry believes that such issues are of the utmost importance to the maintenance of market integrity and investor protection around the world, and therefore considers that its report should be followed by effective action to promote mutual cooperation and assistance in the securities and futures field.

The Working Party therefore prepared a Resolution on this subject, calling upon IOSCO members and applicants for membership to affirm their commitment to the principles of maintaining high regulatory standards and providing the fullest mutual assistance and cooperation, as expressed in the preamble of the by-laws set forth above and in the 1986 and 1989 Resolutions, and to assess their own ability to provide assistance to foreign securities and futures regulators. The Resolution further states IOSCO's intention to closely monitor the ability of its members to obtain information from other jurisdictions in light of the obstacles identified in the Report and to take such steps as may be appropriate. Finally, the Resolution declares IOSCO's support and encouragement of the efforts of its members to draw the attention of unregulated and uncooperative jurisdictions to the benefits of maintaining high regulatory standards and the principles of mutual assistance ant cooperation expressed in the bylaws and resolutions, ant the desirability of adopting and promoting such principles in their own regulatory structures.

It is hoped that this report and the Resolution will lead to constructive action in addressing enforcement issues raised by under-regulated and uncooperative jurisdictions.

OICV/ IOSCO C.P.171, Tour de la Bourse 800, square Victoria, 45e étage Montreal (Quebec) H4Z 1 C8

Tel.: (514) 875-8278 Fax: (514) 875-2669