Taking stock of information sharing in securities matters

Abstract

Reviews past developments in information sharing for securities regulation, including cases where the US Securities Exchange Commission (SEC) initiated investigations into suspicious insider trading in US markets through accounts located outside the USA: the St Joe case, and SEC v Wang & Lee. Moves on to policy developments: the 1988 SEC policy statement, development of information‐sharing memoranda of understanding (MOU) with foreign counterparts. Looks at legal challenges to information‐sharing legislation, including the Elsag Bailey and Global Securities decisions; plus the increased international multilateral focus, involving IOSCO, G7, FATF, and OECD. Concludes with opportunities for increased enforcement cooperation and swifter and more creative efforts; recent examples include the Rentech case, the Oeschle actions, and the joint investigative database that SEC has established with the British Columbia Securities Commission.

Information sharing and financial market regulation

“…The report by the GAO illustrates how difficult it is for consumers to lodge complaints on hybrid products due to the level of complexities and the intersectional and multilayered nature of financial markets [16]. The lack of coercive power on the current sharing mechanism among the regulatory agencies could also create an opportunity for irresponsible actors to gain advantage by manipulating the system [14].…”

“…In addition, compliance with an MOU also depends on the underlying legal authority and jurisdictions of each party [14]. In a similar manner, multilateral arrangements across nations, as a form of MOU, were also criticized for the high information asymmetries resulting from differences in legal systems, supervisory arrangements, social and moral habit, and competition among financial centers for securities transactions [3,14]. d) Legacy information systems impede the access Different regulators maintain different and separate information systems and these different systems can significantly complicate routine information sharing.…”

“…The effectiveness of an MOU largely depends on the "goodwill" of the counterparties signing the MOU. In addition, compliance with an MOU also depends on the underlying legal authority and jurisdictions of each party [14]. In a similar manner, multilateral arrangements across nations, as a form of MOU, were also criticized for the high information asymmetries resulting from differences in legal systems, supervisory arrangements, social and moral habit, and competition among financial centers for securities transactions [3,14].…”

“…Liabilities of privacy and proprietary data and information [30] Liabilities of privacy and proprietary data and information [30] Liabilities of privacy and proprietary data and information [30] Security of personal data Lack of enforceable action for the current information sharing mechanism Dependence on the "goodwill" of counterparties [3,14] Dependence on the "goodwill" of counterparties [3,14] Opportunities to manipulate the system Higher vulnerability to fraud and exposures Developing capabilities for collaboration and developing new procedures Gaps in capabilities that hamper collaboration [34,35] Gaps in capabilities that hamper collaboration [34,35] effort by regulators to open up access to information and enhance the public consultative process, this condition will make the public, especially individual investors, more vulnerable to fraud and more exposed to losses. Their inability to identify relevant information could distort decisions that ordinary investors make regarding their investment.…”

Canadian securities regulation and foreign blocking legislation

“…The Securities and Exchange Commission (SEC) in the USA commenced enforcement action in April 2001 against Stephen Sayre, a resident of Los Angeles, alleging that he posed as a financial analyst to promote and then profit from trading in stock that he recommended (Friedman et al, 2002). The Securities and Exchange Commission (SEC) in the USA commenced enforcement action in April 2001 against Stephen Sayre, a resident of Los Angeles, alleging that he posed as a financial analyst to promote and then profit from trading in stock that he recommended (Friedman et al, 2002).…”