PERMANENT COUNCIL OF THE ORGANIZATION OF AMERICAN STATES
SPECIAL COMMITTEE ON INTER-AMERICAN SUMMITS MANAGEMENT

OEA/Ser.G CE/GCI-32/95
3 November 1995
Original: English

REPORT OF THE COUNCIL OF SECURITIES REGULATORS OF THE AMERICAS (COSRA) TO THE SPECIAL COMMITTEE ON INTER-AMERICAN SUMMITS MANAGEMENT

IMPLEMENTATION OF THE SUMMIT OF THE AMERICAS INITIATIVES FIRST COSRA REPORT - OCT 95

This report will focus on the efforts the Council of Securities Regulators of the Americas - COSRA has made aiming at the development and the progressive integration of the regional capital markets since the Summit of the Americas was held. An overview of the decisions taken during its annual meeting is presented below, followed by a detailed description of the two main issues concerning COSRA's progress in implementing the Summit's initiatives, i.e., Principles of Effective Market Oversight and Anti-Corruption Measures.

I. ANNUAL MEETING

On May 29-30, 1995, the Council of Securities Regulators of the Americas (COSRA) held its Fourth Annual Meeting in Sao Paulo, Brazil.

The highlights of the meeting were:

• adoption of principles on effective market oversight, including the appropriate use of government regulation and self regulation;

• discussion of regulatory issues raised by derivatives trading;

• announcement of an Inter-American Development Bank decision to support and fund COSRAmembers' efforts to implement COSRA principles; and

• agreement on a future work agenda which will include the implementation of (1) the Summit of the Americas' anticorruption initiatives, (2) market structure, and (3) capital formation.

II. PRINCIPLES OF EFFECTIVE MARKET OVERSIGHT

Regulators of thirteen countries have adopted principles that describe the mechanisms needed for establishing and implementing a self-regulatory system for effective market oversight, with an emphasis on the critical role of government oversight to ensure a balance between industry self interest and the public interest.

The members have also discussed the importance of the principles, particularly in light of the increasing links between the region's markets. and that regard, COSRA members have considered and adopted principles vital to accomplishing market integrity by providing a framework for the development of effective market oversight in each COSRA member's jurisdiction,

The principles call on COSRA members to:

• impose responsibility and accountability for fair and efficient markets on market operators and intermediaries;

• monitor compliance with securities and futures laws and applicable self-regulatory organization rules; and stablish or bolster an effective enforcement system.

Copy of both COSRA's Resolution of May 30 and the Principles of Effective market Oversight are provided herewith.

III. SUMMIT OF THE AMERICAS ANTI-CORRUPTION MEASURES

At the Summit, the Declaration of Principles and the Plan of Action included a commitment to combat corruption, including the adoption of measures against bribery in international business transactions. COSRA has agreed it was important to assess efforts to undertake to combat corruption, and has agreed upon a work program in which regulators can act to implement this Summit principle.

In fact, securities regulators have an important role to play in stemming bribery, as a complement to the criminalization of such conduct, by requiring the management of publicly-held companies to be responsible for the institution and maintenance of controls to ensure that illicit payments either do not Occur or do not remain unaccounted for, because corporate accountability is essential to ensuring market integrity and investor confidence.

In this regard, COSRA held a round table discussion on October 29 focusing on reviewing current systems in each country for addressing illicit payments made by public companies. Issues discussed by COSRA members at the Roundtable included the role of internal accounting controls and auditors in deterring and detecting bribery, the need for greater cooperation among COSRA members in this area, the importance of coordinating efforts to enforce laws against illicit payments with banking regulators and criminal authorities, and the significance of being able to pierce bank secrecy laws in investigating cases involving potential illicit payments. The participants agreed to do a report to COSRA on the result of the Roundtable with a view towards preparing a Resolution on bribery for COSRA members to consider in advance of the annual meeting.