Governance of Securities Regulators: A Framework

36 Pages Posted: 20 Apr 2016

See all articles by Richard Pratt

Richard Pratt

Consultant

Alex Berg

World Bank - Financial and Private Sector Development

Date Written: March 1, 2014

Abstract

This paper reviews the published work on the governance of regulatory authorities in order to identify the basic governance standards that apply and some of the factors that affect the implementation of good governance. There are four pillars of good regulatory governance: independence, accountability, transparency, and integrity. The regulator should be operationally independent from commercial and political influences in the exercise of its functions and powers. Accountability is the means whereby a regulatory authority is held responsible for the actions it takes. Transparency refers to the publication of relevant information designed to demonstrate consistency and openness. The fourth governance pillar, integrity, refers to the internal processes that the authority adopts to ensure there is discipline and consistency in its operations and to limit the risks of regulatory staff acting in their own self-interest as opposed to that of the authority and the market. These four elements are mutually reinforcing, in that accountability is necessary to provide legitimacy to independence, transparency is necessary to demonstrate that independence does not lead to abuse or improper behavior, and integrity is necessary to provide the discipline to control the exercise of independent powers. Available evidence suggests that independence and accountability are far from being universally applied in practice. The paper concludes with some practical suggestions that experience indicates are likely to enhance the effectiveness of the governance of securities regulators. Good governance of the securities regulator is necessary for effective regulation. It is also of importance in setting an example to encourage good corporate governance in the private sector.

Keywords: National Governance, Public Sector Regulation, Emerging Markets, Debt Markets, Public Sector Corruption & Anticorruption Measures

Suggested Citation

Pratt, Richard and Berg, Alex, Governance of Securities Regulators: A Framework (March 1, 2014). World Bank Policy Research Working Paper No. 6800, Available at SSRN: https://ssrn.com/abstract=2407242

Alex Berg

World Bank - Financial and Private Sector Development ( email )

United States

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