facing regulators of global securities markets, which had become increasingly auto-
mated and linked, was to “ensure efficiency and honesty.” The Policy Statement is
important because it sets out the basis for some of the SEC’s actions over the last
decade and provides a blueprint for the direction that the SEC may take in this area
in the future.
The Commission stated that an effective regulatory structure for an international
securities market system would include the following features:
- Efficient structures for quotation, price, and volume information and dissemina-
tion; order routing; order execution; clearance; settlement and payment; and
strong capital adequacy standards - Sound disclosure systems, including accounting principles, auditing standards,
auditor independence standards, registration and prospectus provisions, and list-
ing standards that provide investor protection yet balance costs and benefits for
market participants - Fair and honest markets, achieved through regulation of abusive sales practices;
prohibitions against fraudulent conduct; and high levels of enforcement cooper-
ation
The SEC urged securities regulators in other nations to work closely with their for-
eign counterparts and to seek coordinated international solutions to world market
problems.
On the subject of “sound disclosure systems,” the SEC stated that investors par-
ticipating in the international securities markets should be protected through a sound
disclosure system based on mutually agreeable accounting principles, auditing stan-
dards, auditor independence standards, registration and prospectus provisions, and
listing standards. The Commission expressed its opinion that the goal in addressing
international disclosure and registration problems should be to minimize regulatory
impediments without compromising investor protection. Differences in disclosure re-
quirements, accounting principles, auditing standards, and auditor independence
standards between countries are impediments to multijurisdictional offerings, and se-
curities regulators should, therefore, in the SEC’s view, seek ways to accommodate
and, to the extent possible, minimize these differences in order to facilitate transna-
tional capital formation, while at the same time ensuring adequate disclosure for the
protection of investors. The SEC suggested that regulators consider the multijuris-
dictional registration mechanism, the SEC prototype for which—the multijurisdic-
tional disclosure system with Canada—is discussed below, as a means of facilitating
transnational capital formation.
The SEC opined that mutually acceptable international accounting standards are
desirable, because they will reduce the unnecessary regulatory burdens resulting
from current disparities between the various national accounting standards. Accord-
ingly, therefore, securities regulators and members of the accounting profession were
urged by the SEC to continue efforts to revise and adjust international accounting
standards with the aim of increasing comparability and reducing costs.
The SEC’s position with respect to accounting disclosure requirements was re-
fined in further public statements by the Commission and its commissioners, who
have stated that any such standards, to be acceptable to the SEC, must constitute a
core set of accounting standards that:
14 • 10 GLOBALIZATION OF WORLD FINANCIAL MARKETS