In an endeavour to effectively regulate cross-border marketing of CIS, regulatory authorities have traditionally adopted a number of ways to improve their oversight of the markets. These methods generally involve mechanisms for exchanging information and co-operation with other regulators. The approach that regulatory authorities have adopted to deal with cross border activity has been to develop agreements with other regulators, such as memoranda of understanding or mutual assistance agreements.

(1) Memoranda of Understanding:

The increasing globalisation of the world's securities and futures markets has caused many jurisdictions to enter into treaties and bilateral agreements (such as MOUs) with other jurisdictions in order to protect their domestic markets from fraud and illicit conduct which may be beyond the jurisdictional reach of a particular jurisdiction. MOUs are not enforceable agreements, but are statements of intent by the relevant parties. These agreements mainly focus on the ability of jurisdictions to exchange information and establish processes and procedures for doing so often in order to obtain evidence for the purposes of civil or criminal proceedings. Almost all the regulatory authorities represented on the Working Group have entered into MOUs with other jurisdictions.

(2) Mutual Assistance agreements:

Where a foreign regulatory authority requires information or evidence, or wishes to examine a particular person who may be in breach of its legislation, some jurisdictions have domestic legislation which will assist that foreign regulatory authority in obtaining the relevant information, subject to certain conditions. This assists in overcoming a situation where a foreign regulatory authority does not have the power or authority in another jurisdiction to inspect relevant books, records, obtain evidence, or subpoena a person to attend a hearing.

Australia has introduced such domestic legislation (the Mutual Assistance in Business Regulation Act 1992) which provides that in certain circumstances, a foreign regulatory authority is able to seek the ASC's assistance by requesting that the ASC exercise its compulsory powers in obtaining documentation or evidence or requesting that a person to attend a hearing before the ASC on behalf of the foreign regulatory authority. Other countries such as the US, UK and Hong Kong also have similar legislation.

(3) Informal arrangements for co-operation and sharing information:

It is not uncommon for regulatory authorities to enter into ad-hoc or informal arrangements for obtaining information or requesting assistance from other regulatory authorities, in addition to negotiating more formal agreements such as MOUs. However informal arrangements may be largely dependent on a system of "personal contacts" in other regulatory organisations and may not be reliable or available for use by the organisation as a whole. In addition, informal arrangements may not assist a regulator in obtaining confidential information from a jurisdiction where its domestic legislation prohibits the release of such information unless certain conditions or procedures are satisfied. Many regulatory authorities therefore consider it preferable to establish more formal agreements with other regulatory authorities, in addition to any informal arrangements it may have.

(4) Conclusion

MOUs and the laws and protocols governing requests and procedures in relation to investigations and obtaining evidence abroad are extremely important for effectively regulating international securities trading.

They generally include provisions relating to the processes for information exchange, regulatory co-operation and unsolicited assistance.

As previously stated, the Working Group recognises the work of Working Group No. 4 as being primary in the area of enforcement and in the negotiation of MOU's, and it does not wish to cause any overlap in the work undertaken by the two Groups. However, the Working Group is interested in looking at issues specifically relating to information sharing in relation to the regulation of CIS which do not necessarily involve enforcement proceedings. In this respect, the Working Group is considering strategies to facilitate regulatory co-operation, as a supplement to present and future MOU agreements, in an endeavour to effectively regulate global funds management activity. Such strategies are outlined in the following chapters.