Regulatory Cooperation in Securities Market Regulation: Perspectives from Australia

Abstract

The global financial crisis highlighted the interconnectedness of international financial markets and the risk of contagion it posed. The crisis also emphasized the importance of supranational regulation and regulatory cooperation to address that risk.

Yet, although capital flows are global, securities regulation is not. As a 2019 report by IOSCO notes, the regulatory challenges revealed during the global financial crisis have by no means dissipated over the last decade. Lack of international standards, or differences in the way jurisdictions implement such standards, can often result in regulatory-driven market fragmentation.

This article considers a range of cooperative techniques designed to achieve international regulatory harmonization and effective cross-border financial market supervision. It discusses three major techniques: (i) transgovernmental networks of financial regulators; (ii) complex multilateral arrangements; and (iii) mutual recognition agreements, and considers the benefits and downsides of each of these regulatory mechanisms.

The article focuses particularly on developments in Australia. It examines, for example, a high profile cross-border supervisory experiment, the US-Australian Mutual Recognition Agreement, which the SEC and Australia’s business conduct regulator, ASIC, signed in 2008. This was the first agreement of its kind for the SEC. The article also considers some key regulatory developments in Australia and Asia since the time of the US-Australian Mutual Recognition Agreement.

Keywords: Financial market regulation, transnational regulatory networks, transgovernmental regulatory networks, multilateral regulation, mutual recognition agreements, global governance

JEL Classification: F02, F55, G18, G28, G30, G38, K22, K33, O16