SECURITIES INDUSTRY ASSOCIATION

DISCUSSION PAPER

PROMOTING FAIR AND TRANSPARENT REGULATION

I.

Setting The Foundation for Open and Fair Securities Markets

Deep and liquid capital markets are the essential building blocks of today s

economy, supplying the funds for economic growth and job creation.  The firms that

participate in the markets price risk, allocate capital, provide investors with advice and

investment opportunities, and supply the liquidity needed to make markets work

efficiently.

Just as capital markets underpin economic growth and job creation, transparent

and fair regulatory systems are essential to the development of deep and liquid capital

markets.  A system of regulation that is transparent to market participants instills the

confidence needed to attract both the suppliers and users of capital to make the best use

of the markets.

Governments, regulators and the international financial institutions have

undertaken substantial projects designed to improve the quality of the financial systems

world wide.  Attention is now focused on building fair and transparent regulatory

systems   grounded in the principles of market integrity and investor protection   to

oversee those markets.  Consistent with those goals and the principles of prudential

regulation, discriminatory practices and considerations, such as the nationality of

individuals or the place of origin of firms, should not be permitted to influence regulatory

policies or actions.

This paper is based on the assumption that a country's relevant laws should

promote fair and transparent regulation.  The principles outlined in this paper are not

intended to prevent a regulator from taking measures for prudential or legitimate public

policy reasons recognized under the World Trade Organization, including protecting

investors, ensuring that markets are fair, efficient and transparent, and reducing systemic

risk.

A consensus view, supporting the development of active, sound and efficient

markets based upon established principles for capital market regulation, is rapidly

emerging.  In September 1998, the International Organization of Securities Commissions

(IOSCO) issued a paper entitled  The Objectives and Principles of Securities Regulation 

that urged the adoption by all regulators of processes and regulations that are:

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