Iosconews84

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11  //  33  

 
 

1 March 2005 

 
 

MEDIA RELEASE 
 
 

IOSCO ACTION PLAN TO 
STRENGTHEN CAPITAL MARKETS AGAINST FINANCIAL FRAUD 

 
 

The Technical Committee of the International Organization of Securities Commissions (IOSCO) 
today released its Report on Strengthening Capital Markets Against Financial Fraud.  The Report 
is the result of an in-depth study of recent financial scandals involving large, global companies 
and represents a top-to-bottom  review of securities market regulation aimed at identifying 
possible weaknesses to the international financial system and how these weaknesses can be 
addressed. 

The past few years have seen several well-known companies with significant international 
operations become mired in financial scandal.  In some of these cases, investors have lost 
hundreds of millions or even billions of dollars.  A number of the companies involved have been 
forced into bankruptcy as a direct or indirect result of the scandals.  Collectively, these financial 
scandals caused many to be concerned about investors’confidence in the integrity of global 
capital markets.  

In the wake of these scandals, IOSCO, as the principal international securities regulatory 
standards-setting organization, recognized that reassuring investors about the integrity of global 
capital markets was essential to financial stability and economic prosperity.  Consequently, the 
IOSCO Technical Committee formed a high-level Task Force charged with inquiring into the 
regulatory issues exposed by these scandals and identifying any broad trends.  After considering 
the Task Force’s work, the Technical Committee agreed on an action plan to address these 
issues.  The Report released today outlines the issues and the action plan.  The Report also 
includes a description of priority work designed to rectify the most pressing concerns.  A list of 
specific actions that IOSCO will undertake is included as an appendix to the Report’s Executive 
Summary. 

Significantly, the Report also sets out two overarching operational priorities for IOSCO’s future: 
(1) promoting implementation of existing international standards and principles; and (2) 
improving the abilities of securities regulators to cooperate with each other in enforcing existing 
securities laws and regulations.  The Report notes that, in many cases, there already exist 
international standards and principles designed to address the weaknesses identified by the Task 
Force.  However, absent thorough implementation and enforcement by all securities regulators, 
these weaknesses will remain.  Consequently, by emphasizing implementation and enforcement 

http://www.iosco.org/pubdocs/pdf/IOSCOPD192.pdf


2/3 

cooperation, the Technical Committee believes it can significantly enhance the effectiveness of 
the international infrastructure supporting securities markets.. 

The Report notes that the Technical Committee is adopting three policies to help achieve these 
goals: 

1. Emphasizing implementation of all existing IOSCO standards and principles by assessing 
IOSCO members on their implementation, setting implementation benchmarks, and 
making implementation a cornerstone of IOSCO’s program to provide technical 
assistance and advice to securities regulators in developing markets; 

2. Confirming that the IOSCO Multilateral Memorandum of Understanding Concerning 
Consultation and Cooperation and the Exchange of Information is the benchmark for 
enforcement cooperation among IOSCO members, with the goal of eventually making 
the ability to sign on to the Multilateral MOU a primary benchmark for continued 
membership in IOSCO;1   

3. Prioritizing those historically under-regulated and uncooperative jurisdictions posing the 
most significant threat to global financial system and engaging these jurisdictions in a 
dialogue on how they can improve their regulatory oversight and abilities to cooperate 
with foreign counterparts. 

Commenting on the Report, Hong Kong Securities and Futures Commission and IOSCO 
Technical Committee Chairman Andrew Sheng noted “The Technical Committee’s Report on 
Strengthening Capital Markets Against Financial Fraud is a blueprint for IOSCO’s future.  By 
reviewing the regulation of global capital markets as an entire interlocking system, the Technical 
Committee has been able to identify where the weaknesses in the system are and set its priorities 
accordingly.”  

The Task Force charged with inquiring into recent financial scandals was jointly chaired by 
Commissioner Roel C. Campos of the US Securities and Exchange Commission and Chairman 
Lamberto Cardia of the Italian Commissione Nazionale per le Societa e la Borsa.  Commissioner 
Campos noted, “Through this Report, the Technical Committee has looked at securities 
regulation from the ground up.  Recent scandals have involved issues ranging from weak 
corporate governance to auditing failures to the use of complex corporate structures.  By looking 
at the system as a whole, patterns emerge that may not be as easily identified when these 
scandals are viewed in isolation.” 

Chairman Cardia, however, warned that strengthening capital markets against financial fraud is 
not something securities regulators can do alone.  “Even with the highest quality regulatory 
standards, fully implemented and enforced, it will not be possible to totally eliminate financial 
fraud.  It takes constant vigilance by all stakeholders — corporate issuers, investors, auditors, 
analysts, intermediaries, and regulators alike — to minimize market misconduct.” 

                                                 
1 When signing the IOSCO Multilateral MOU, securities regulators agree to assist other signatories in their 
enforcement investigations and prosecutions by collecting and sharing certain enforcement-related information with 
each other, such as bank and brokerage account information and witness testimony.  A copy of the IOSCO 
Multilateral MOU can be found on IOSCO’s website, along with a list of current signatories. 



3/3 

Further details of the IOSCO Action Plan and this project can be found in the report located on 
the IOSCO website at www.iosco.org. 

 

For further information contact 

Philippe Richard, IOSCO Secretary General 34 91 417 5549 or 34 650 378 898 

Andrew Larcos, Public Affairs Officer 34 91 417 5549 or 34 679 969 004

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11  //  33  

 
 

1 March 2005 

 
 

MEDIA RELEASE 
 
 

IOSCO ACTION PLAN TO 
STRENGTHEN CAPITAL MARKETS AGAINST FINANCIAL FRAUD 

 
 

The Technical Committee of the International Organization of Securities Commissions (IOSCO) 
today released its Report on Strengthening Capital Markets Against Financial Fraud.  The Report 
is the result of an in-depth study of recent financial scandals involving large, global companies 
and represents a top-to-bottom  review of securities market regulation aimed at identifying 
possible weaknesses to the international financial system and how these weaknesses can be 
addressed. 

The past few years have seen several well-known companies with significant international 
operations become mired in financial scandal.  In some of these cases, investors have lost 
hundreds of millions or even billions of dollars.  A number of the companies involved have been 
forced into bankruptcy as a direct or indirect result of the scandals.  Collectively, these financial 
scandals caused many to be concerned about investors’confidence in the integrity of global 
capital markets.  

In the wake of these scandals, IOSCO, as the principal international securities regulatory 
standards-setting organization, recognized that reassuring investors about the integrity of global 
capital markets was essential to financial stability and economic prosperity.  Consequently, the 
IOSCO Technical Committee formed a high-level Task Force charged with inquiring into the 
regulatory issues exposed by these scandals and identifying any broad trends.  After considering 
the Task Force’s work, the Technical Committee agreed on an action plan to address these 
issues.  The Report released today outlines the issues and the action plan.  The Report also 
includes a description of priority work designed to rectify the most pressing concerns.  A list of 
specific actions that IOSCO will undertake is included as an appendix to the Report’s Executive 
Summary. 

Significantly, the Report also sets out two overarching operational priorities for IOSCO’s future: 
(1) promoting implementation of existing international standards and principles; and (2) 
improving the abilities of securities regulators to cooperate with each other in enforcing existing 
securities laws and regulations.  The Report notes that, in many cases, there already exist 
international standards and principles designed to address the weaknesses identified by the Task 
Force.  However, absent thorough implementation and enforcement by all securities regulators, 
these weaknesses will remain.  Consequently, by emphasizing implementation and enforcement 

http://www.iosco.org/pubdocs/pdf/IOSCOPD192.pdf


2/3 

cooperation, the Technical Committee believes it can significantly enhance the effectiveness of 
the international infrastructure supporting securities markets.. 

The Report notes that the Technical Committee is adopting three policies to help achieve these 
goals: 

1. Emphasizing implementation of all existing IOSCO standards and principles by assessing 
IOSCO members on their implementation, setting implementation benchmarks, and 
making implementation a cornerstone of IOSCO’s program to provide technical 
assistance and advice to securities regulators in developing markets; 

2. Confirming that the IOSCO Multilateral Memorandum of Understanding Concerning 
Consultation and Cooperation and the Exchange of Information is the benchmark for 
enforcement cooperation among IOSCO members, with the goal of eventually making 
the ability to sign on to the Multilateral MOU a primary benchmark for continued 
membership in IOSCO;1   

3. Prioritizing those historically under-regulated and uncooperative jurisdictions posing the 
most significant threat to global financial system and engaging these jurisdictions in a 
dialogue on how they can improve their regulatory oversight and abilities to cooperate 
with foreign counterparts. 

Commenting on the Report, Hong Kong Securities and Futures Commission and IOSCO 
Technical Committee Chairman Andrew Sheng noted “The Technical Committee’s Report on 
Strengthening Capital Markets Against Financial Fraud is a blueprint for IOSCO’s future.  By 
reviewing the regulation of global capital markets as an entire interlocking system, the Technical 
Committee has been able to identify where the weaknesses in the system are and set its priorities 
accordingly.”  

The Task Force charged with inquiring into recent financial scandals was jointly chaired by 
Commissioner Roel C. Campos of the US Securities and Exchange Commission and Chairman 
Lamberto Cardia of the Italian Commissione Nazionale per le Societa e la Borsa.  Commissioner 
Campos noted, “Through this Report, the Technical Committee has looked at securities 
regulation from the ground up.  Recent scandals have involved issues ranging from weak 
corporate governance to auditing failures to the use of complex corporate structures.  By looking 
at the system as a whole, patterns emerge that may not be as easily identified when these 
scandals are viewed in isolation.” 

Chairman Cardia, however, warned that strengthening capital markets against financial fraud is 
not something securities regulators can do alone.  “Even with the highest quality regulatory 
standards, fully implemented and enforced, it will not be possible to totally eliminate financial 
fraud.  It takes constant vigilance by all stakeholders — corporate issuers, investors, auditors, 
analysts, intermediaries, and regulators alike — to minimize market misconduct.” 

                                                 
1 When signing the IOSCO Multilateral MOU, securities regulators agree to assist other signatories in their 
enforcement investigations and prosecutions by collecting and sharing certain enforcement-related information with 
each other, such as bank and brokerage account information and witness testimony.  A copy of the IOSCO 
Multilateral MOU can be found on IOSCO’s website, along with a list of current signatories. 



3/3 

Further details of the IOSCO Action Plan and this project can be found in the report located on 
the IOSCO website at www.iosco.org. 

 

For further information contact 

Philippe Richard, IOSCO Secretary General 34 91 417 5549 or 34 650 378 898 

Andrew Larcos, Public Affairs Officer 34 91 417 5549 or 34 679 969 004