Explaining IOSCO (with Paul Andrews)

[0:00:00 Speaker 1] from the Salem Center for Policy at the University of Texas at Austin. Welcome to an episode of Policy and Pieces. I’m your host, Scott Dogus.

[0:00:12 Speaker 0] When it comes to climate related disclosures, for example, I think were far ahead of entities like the Financial Stability Board. I think we’re ahead of organizations like the Basel committee. I think we’re ahead of of the insurance regulators, so I mean, we’re trying to be on the front foot and not always be responding to things for trying to help set the standard.

[0:00:34 Speaker 1] That was Paul Andrews. He’s the outgoing secretary general of IOSCO, the International Organization of Securities Commissions. He talks about global coordination of financial market regulation, described how countries collaborate on solutions to common problems and dispels perceptions that the rise in nationalism is undercut these efforts. He also shares his views on financial stability, game stops, packs

[0:00:55 Speaker 0] and financial,

[0:00:56 Speaker 1] and how IOSCO can address priority items in the Biden administration. My co host for today is UT Law student and Phoenix Paul. Welcome to the show.

[0:01:10 Speaker 0] Thank you, Scott. It’s a it’s a pleasure to be here, and I I’m glad to have the opportunity to chat with you and Adam and looking forward to it.

[0:01:18 Speaker 1] Thanks. And Adam annexes my UT Law student co host for today. Adam, Welcome.

[0:01:24 Speaker 0] Thank you, professor. So, Paul, we’re

[0:01:26 Speaker 1] really looking forward to this interview today because you are just concluding a five year tour as head of IOSCO. And it seems like the perfect time to get your reflections role in an importance in serving the global financial system. There’s a lot of listeners out there who may not know what IOSCO is or what it does. So we’re thinking that’s where we should start. Can you tell us about IOSCO what it does and how it came about.

[0:01:53 Speaker 0] But let me give you the thumbnail sketch, which Moscow stands for, the International Organization of Securities Commissions and what it does is it. It’s a standard setting body that brings together about 95% of the regulators that oversee the markets worldwide. So it’s the major regulators in Europe and in North America and South America, Asia and Africa. And essentially, what we do is we we set standards for the industry when it comes to, say, intermediary oversight or market oversight, or try to set standards when it comes to asset management to the extent that we can, and it has its origins actually in North America, believe it or not, it started as an organization in Montreal back in 1983 and was sort of a combination of securities regulators of the Americas, and that’s really where it started. But then in and around the late nineties, it decided it needed to be much more global because markets financial markets are global in nature. And when it made that decision, it said it needed to be more centrally located. And that’s how we ended up in Madrid. So started in Montreal, ended up in Madrid and that’s where we are today and have been in Madrid since about the year 2000. What makes Madrid

[0:03:09 Speaker 1] centrally located

[0:03:10 Speaker 0] well, I mean more centrally located globally, I would say, than than certainly Montreal, because we, we sort of sit in the middle of the world and so far as the North American markets are concerned and the Asian market so so we straddle two trading days when it comes to being in the Central European Times ago.

[0:03:31 Speaker 1] So you said there are quite a few members. Why do they join? Why is it important for them to be a part of IOSCO?

[0:03:37 Speaker 0] Well, you know, about 85% or thereabouts. Let’s say 80 to 85% of our members are from growth in emerging markets. And for them, I mean having a body to look towards. Four standards want while they’re ramping up their markets and trying to get their arms wrapped around these complex instruments that are that are manifesting themselves in in these markets, it’s important for growth markets for from a standard setting and from an exchange point of view. So the more advanced markets it’s really a chance to interact with your colleagues from around the world to share information about latest developments in oversight, supervision, enforcement and people join. Really for for all those reasons, whether you’re in an advanced market or whether you’re in an emerging market, to learn how and learning new ways of doing things to oversee financial markets, which is which is critical, given that their global What does the secretary general do? Well, if you think about the secretary general, it’s really the equivalent, at least in my mind of of being the chief executive officer of a company. And so what you do is you oversee sort of the team that supports the organization and in our case supports the IOSCO board, but certainly supports the organization more generally. So I have responsibility for the fiscal management of the organization for helping to direct the strategy of the organization, helped set that strategy with the board and then carrying out that strategy. And we do that through a small team that’s based in Madrid. It’s about 32 people that are in the Secretariat, but we leverage sort of the membership globally through our committee structure, both from a policy point of view, but also from a regional point of view. And that’s I oversee that what I would call that vast empire if I could put it that way on a day to day basis in terms of making sure the work is getting done. So I hope that helps just give a thumbnail sketch of what I do on a day to day basis. That does. And where does your team come from? Well, it’s it’s interesting, you know, we have 32 people, more or less, I would say, and, uh, we have about 20 different geographical jurisdictions represented among those 32 people. So we have folks from Africa. We have folks from Japan. We have folks from India, from North America from South America. So we pride ourselves on having a global operation, and we do look for diversity in geography and in people, gender, et cetera. And so it really makes a robust team. And that’s why it’s great to work with people from all over the world.

[0:06:33 Speaker 1] So, Paul, how

[0:06:34 Speaker 0] did you find

[0:06:34 Speaker 1] yourself in the role of Secretary general?

[0:06:37 Speaker 0] You know, it’s, uh, it’s kind of an interesting story. Well, I think it’s an interesting story. I mean, your listeners might not, but to me, it was one of those things that had a series of events not happened before I applied to become secretary general. I never would be in this position. And so I’ll tell you a little bit and very reform. I mean, I started life as a lawyer and practiced law for four years, but quickly realized that working in a law firm was really not for me, and I really wanted to do something more in the regulatory field dealing with interesting issues and securities was an area that I was very, very keen on and wanted to learn more about. So I made the decision to move and work at the Securities and Exchange Commission and learn the business if I could put it that way of oversight and supervision. And while I was there, I was asked to head up a small office of international work that was within the division of market regulation, as it was known at the time. Now it’s called the Division of Trading and Markets, and so I was working internationally there and really enjoyed. It was doing some traveling and dealing with intermediaries and banks and securities regulators around the world. And then a friend of mine who was the chief of staff of what was then called the NASD, now called FINRA, was leaving, and the chief executive officer and the chair was looking for replacement. And so my friend called me and said, You know, look, you’ve got some experience internationally a little bit, you have the regulatory background, Would you be interested and taking this role? And I thought about it and certainly thought it would be a good opportunity. So I went to talk to the guy, he hired me, and he was very global in his outlook, in terms of what he wanted to do at any SD and I helped establish what was then called NASDAQ Europe and then from there went back to, uh, NASD, which became FINRA. I headed up the International division for about 17 years, got involved in IOSCO, learned about the organization, and when the position of secretary general opened up, I had a number of colleagues encouraged me to apply for it. And so I did. And one thing led to another. And here we sit five years later. Well, you mentioned that your interest grew out of an interest in working on interesting regulatory matters. So what about international finance? Speak to your attention. Well, I think the fact that it is extremely challenging to be honest, to work with people in different cultures with different regulatory regimes, yet trying to solve a very similar regulatory problem. And it was it was sort of that combination of, I would say, problem solving with cultural differences that really led me to gravitate, I would say to the international field and understanding how people enforce their rules, how they came about making their rules and sort of the mechanics of how they went about doing what they did and comparing it to how we did in the United States. I learned very quickly that there are many, many ways to do things that establish a common goal, and that’s that’s just interested in me. And I found working with different cultures, in particular one of the more challenging things because you have to speech sort of their language not necessarily the verbal language, but the same approach, I would say philosophically.

[0:10:16 Speaker 1] So that’s a good way to segue to the next question I have in dealing with cultural differences. How does IOSCO establish priorities and accomplished goals? It’s not a treaty organization. There’s no enforcement authority. As far as I know. How do you get things done?

[0:10:34 Speaker 0] No, you’re right. There is. There is no treaty basis to IOSCO. It’s really a consensus space member driven organization. And as unwieldy as it sounds, we have a board made up of 34 members and they come from the world. I mean, they’re geographically dispersed and it’s really my job, along with the chair’s job of the board to help lead the board and what we do on a yearly basis is we, through our committee structure, come up with ideas about where we think IOSCO should be spending its time on a priority basis for for the coming year. And we make a presentation to the board and we justify why we think that these are the top three things we should be be looking at and focusing our time and attention on and we have the conversation at the board level and typically we reach a consensus. I mean, I would say that we may not end up with three. We may start out with, say, 10 and then we whittle it down to three or we may start with three and whittle it down to two. So it just sort of depends on the on the nature and and usually we find that we can build consensus and we do have the power to vote around the board if we need to. But in my five years of being secretary general, I think we’ve had to institute the vote maybe one time because we do compromise and we do find legitimacy in that in that compromise because that gives people greater buy in. And when they buy into what you’re trying to do, their committed to it and they carry it out.

[0:12:13 Speaker 1] Can you give an

[0:12:14 Speaker 0] example of

[0:12:15 Speaker 1] something that I also has done that wouldn’t have otherwise been possible without the organization?

[0:12:21 Speaker 0] Well, I think, to to pick up on a on a recent issue. We’ve had a lot of discussion around Covid 19 and around liquidity in the marketplace and arising from that, I mean three years ago. Now we put in place some recommendations around how firms should manage their liquidity. So liquidity risk management tools. And I’m not saying we were prescient by any stretch of the imagination. But I will tell you that those liquidity risk management tools actually were universally adopted and applied. I would say not. Not universally. I mean, some firms didn’t necessarily apply them, but by and large they were universally adopted and they were used during the Covid 19 crisis, and they proved to be worthy about setting up gates and suspensions and swing practicing and various different things that we looked at and set the standard for three years ago. now. One of the reasons we did that was because we had the great financial crisis back in 2000 and eight and 2000 and nine and really had to look at some of these issues that arose from that. And so we put in some recommendations in 2000 and 12 and then did some additional recommendations in 2017. So that’s that to me is an example of of something that I don’t think would have been possible about an organization like IOSCO. I’ll give you another example if it’s helpful and that is around enforcement. You know, markets keep saying our worldwide and they don’t know borders and the same is true of frauds and scams and things that happen today because of the Internet. I mean, it’s easy for thrusters to perpetuate their schemes, cross border without any difficulty. One of the great success stories I would say if I ask A that would not have been possible without us is our multilateral memorandum of understanding, which is signed by about 130 countries now, which is an agreement. It’s an MOU, so it’s not a contract, but it’s an understanding that we will exchange information among each other for enforcement purposes to be sure that fraudsters can’t move from one country to another and get away with it. And that’s been a huge, huge success. And I think that it is something that we need to be touting. I would say even more than we do, because it’s proven its worth with how countries exchange information to stop the bad guys. And it’s been particularly important in a covid environment where frauds and scams of I would say increase pretty substantial. So yeah, I asked. So I think has really proven its worth in many areas. But those are just a couple of examples that I hope help. Could you tell us a bit about getting that memorandum of understanding adopted? We understand there was some European data privacy laws that were a problem with that. Can you tell us a bit about how members adhere to what the process was like in terms of getting agreement? And you know what the end result has has been? Yeah, well, it’s interesting. I mean, if you go back to when it first started the MOU, the mou we call it was back in 2000 and three or something. And it was, you know, germinated out of one of the policy committees that IOSCO has. We have 10 committees of the board, eight of which are policy committees. One deals with the risks and one deals with analysis. So the the origin of the agreement came out of the committee and came up to the board and the board approved it and everybody was happy and it was working great. And then we had G d. P are the European General data protection regulation come into effect, which basically called into question the use and the efficacy of the IOSCO and MOU. And this was particularly true of our European members. And we said, Whoa, this is going to be a problem because if we don’t get ahead of this, then Europe is going to be cut out of using the MOU, and that’s that’s not good because so much business is transacted between non European countries and European countries. And so we established a very small committee of the board and said, Look, we need to go talk to our European colleagues in the data protection area, and we looked at the regulation and we looked at ways that we could satisfy them that are MoU was satisfactory and would protect privacy information. And and the end result of that was that we negotiated what’s called an administrative arrangement with the European Data Protection Board, which was sort of a bit of an add on. I would say to the MOU, which doesn’t add any real obligations. But it gives assurances that we will adhere to the g d. P. R. And it was really a negotiation between the regulators from Europe and I ask, Oh, and I think it’s worked extremely well and we were in the vanguard of that and the first to sign an administrative arrangement with our European colleagues to be able to continue using the MoU. And it’s gone extremely smoothly, I would say, and that fortunately was satisfactory. And then we’ve had other standard setting bodies come to us and say, How in the world did you do this? And, uh, you know, we made that arrangement public. It’s on our website and for the world to see, and so I’m particularly proud of that because we anticipated the problem. We address the problem and we solved the problem.

[0:18:06 Speaker 1] Can we talk about financial stability?

[0:18:09 Speaker 0] Sure, sure, but my understanding

[0:18:11 Speaker 1] is IOSCO has a seat on the Financial Stability Board in Basel, Switzerland, where most of the members are central bankers. And that body discusses many of the threats and financial systems, particularly those that are outside the banking sector. We now call that non bank financial intermediation and the majority of its been called shadow banking. What is IOSCO is role in shaping the views about the risks and concerns in this area.

[0:18:41 Speaker 0] It’s, uh, it’s an evolving one, Scott, I would say. I mean, in the early days when I first started and I asked, so you know, we would we would be outnumbered by far. Market regulators were, you know, two or three and some of the committees and the banking and the Prudential regulators were many multiples of that. So our reaction was we would sit in the corner and, you know, throw temper tantrum and say, Listen to us, listen to us. We know what we’re talking about. And then we realized at some point, you know, that really wasn’t working, and that wasn’t that effective. And so we started to I think changed the approach in a couple of a couple of different ways. Number one we, you know, lobbied, I guess, is a good way to put it, that there should be additional market regulatory representation around the table because there is so much happening in capital markets that is outside of the banking system, that we need more voices, more diverse voices, from emerging markets from other parts of the world to be able to ensure that we’re hearing all viewpoints. So that was one thing that we did to be sure that we were, and we were frankly, we were successful and we expanded three or four times the number of market regulators that now sit around the table with the banking regulator. That’s numbers is not sufficient. You have to bring some substance to the table as well. And so the other thing that we did is we established a group within IOSCO at a board level called the Financial Securities Engagement Group. So the FCC AG, for short is what we call it, and this was a group of market regulators from the U. S. Sec, the CFTC, the FC a Japanese jfs A, which focused solely on systemic risks, financial stability issues from a market regulation perspective. And so what we were trying to do is really bring some substance to the discussion, as opposed to saying you, Prudential regulators, new central banks, you really don’t understand markets. And instead of just saying it, we were coming prepared to demonstrate why the perspectives we were bringing were relevant and important and needed to be heard. And I would say over the course of the last couple of years, there’s been a real sea change in the way that the FSB operates and does its business and has included market regulators virtually from the from the get go And it’s been, it’s been a slow process. But it’s been one that I think has been fairly successful because we can’t just say we know better. We have to prove that we know better and we have to prove it with as much information and data as we can. And data has become an important part of what we try to do in providing information through our work at the FSB. So it’s been multi pronged, I would say approach, but one that I think proving more and more successful and proved to be very, very relevant and helpful during Covid, I would say in particular.

[0:21:45 Speaker 1] So it sounds like most of what IOSCO does with the Financial Stability Board is more educational unless the difference of opinion about what to do about risks Is that a fair statement?

[0:21:58 Speaker 0] Well, not not entirely. I mean, I do think we do play an educational role by all means, but I also think we bring substance to the table. So, for example, like margin, a lot of problems, difficulties or challenges, perhaps is a better way to put it with respect to margin during the financial crisis and during covid. Well, the king of margin in the non bank financial sector really is the European Union and the US CFTC, because we’re talking about derivatives and the derivatives world and we were able to contribute in a very, very significant way to the learning and understanding of how margin actually impacted liquidity during Covid 19. So it wasn’t just educational, but it was also helping to shape what policy thinking is happening around margin when it comes to how the Financial Stability Board is thinking about what they might do as a next step when it comes to margin. So it’s both educational but also substantive. And I’ve seen a shift over my time here that it is more substantive, particularly when it comes to issues around us to management and margin and credit rating agencies in particular. And so it’s it’s, I hope, going to continue to evolve to be more of a of an equilibrium. I don’t think it will ever be completely equilibrium. But I think we’re getting closer because the markets are so interwoven and the banking side is, you know, they they need markets and markets need banks. And so you know, we have to work together in a cohesive way. Do you

[0:23:42 Speaker 1] think that some of the issues or problems at the FSB is that it’s easier for a Prudential regulator to look at problems outside of banking and therefore to defray some of the criticisms and then look at non bank financial intermediation as being the problem? Does that ever play a role? Do you think

[0:24:03 Speaker 0] well, it is always easier to point the finger elsewhere. I mean to see somebody else’s flaws before you see your own. I mean, there’s There’s no doubt in my mind that that’s sort of a natural thing. And I do think that in some respects, you know, banking regulators and Prudential regulators have a mission, and their mission is to save the system. Should the system get tested in a very, very difficult way. And in some respects markets are part of that system and they see sort of where all the where all the possibilities are, where things could go wrong without, you know, dare I say, fully understanding that there are built in mechanisms within markets to help self correct and they don’t always understand what those self correcting mechanisms are. And so all they see is the risks are without the solution part. If I could sort of say it that way and so yes, I think it’s it’s easier to look outside of your own house and see problems than examine what is in your own house that you might want to think about changing and fixing and and and that sort of thing and there’s there’s many examples of that that came, became manifest. I would say during Covid 19 and you know we’re having those conversations which is a good thing. I think we’d like to hear a little bit more about those problems and those conversations. So when Covid 19 began to surface about this time last year, what was I Oscars role in the response? Well, we we played a, I would say, a multifaceted role. I mean, it was it was in the early days, I would say, sort of an information sharing role among our members about what was going on. I mean, what was happening? How are markets functioning? Where were the problems and what were the solutions? So what we what we did very, very early on is we created a repository. That was for I ask all members to put in sort of problems that they were seeing and solutions or approaches. They were taking so one of the things, for example, just to give you an example. I mean, we were seeing a lot of markets put in short selling bands around the world, particularly in Europe, and we were at we were asking our members to to put in, you know, what they were doing. And what were these short selling bands. What were the requirements of the short selling ban, was it? You can only, you know, short three days a week or you couldn’t short at all or whatever the case may be and why they were doing it and what was useful about about that kind of information sharing. It was particularly useful for markets that we’re thinking about putting in a in a short selling ban, thinking that was going to stem the tide of liquidity problems. But they could learn the lessons from those that had instituted the bands and what the implications were for those markets.

[0:27:00 Speaker 1] So on the band’s Clearly, some jurisdictions like the U. S. Had learned some lessons from the global financial crisis and elected not to do it. But some of the Europeans did.

[0:27:10 Speaker 0] What

[0:27:10 Speaker 1] was I asked those advice to those jurisdictions? Did you know? I also say this is a bad idea. Don’t do it and they did it

[0:27:17 Speaker 0] anyway. Or how

[0:27:19 Speaker 1] did those decisions come about

[0:27:20 Speaker 0] what we What we did is we said okay. Several years ago, we came out with some standards and some recommendations on short selling, and basically we said we’re not we’re not going to take a position whether you think it’s good or whether you think it’s bad. That’s jurisdiction specific. And we realised there’s some political implications and what not. But what we did say is, if you are going to implement a short selling ban or other other restrictions when it comes to shorting stocks, look at the IOSCO recommendations and make sure you’re in conformity with what those recommendations are. And that’s really what we ended up doing because we found that if we came out with a strong position one way or the other, we were going to alienate somebody. These were big markets, and there were There was a lot going on at the time, and so we didn’t want to necessarily get in the middle of the of the political quagmire. But that’s just an example of one of the things that was that was in the repository. So so it was information sharing. In the first instance, it was making sure that people understood exactly what was happening in the markets. It was participating in financial stability board meetings in a more fulsome way, so that we were able to share the experience of what was happening in the in the commercial paper market and the CD market, money market funds and and how these markets were actually performing because that’s where the where the market froze was in the short term funding markets. And so that’s where the market regulators really. That’s the sweet spot for for what we were doing. And yet it was important that the bankers to also understand what reactions they should take to help unfreeze these markets. And so it was. It was a lot of information sharing, I would say in the early days, and I would say that it led to some some policy discussions about what we should do, and we haven’t made any firm decisions yet. I think everybody is in agreement that we probably need, and we are. We are looking more closely at money market funds and do we need to make some policy changes about how these markets operate in times of crisis? Do

[0:29:27 Speaker 1] we need to make policy changes to money market funds?

[0:29:30 Speaker 0] I think we probably do, you know, to be honest with you, I don’t think the analysis, our analysis is certainly not done and we’re working very closely with the Financial Stability Board on this as well, but I think you will probably see some changes. You’ve seen the SEC come out with a recent paper consultation paper on potential reforms to money market funds about what they think need to be done to help these markets be even more resilient than they are. And I think you probably see some some some reforms. I wouldn’t say wholesale changes, but I think you’re going to see some tweets about how these markets operate around the edges. But I I want to withhold judgment because we still are are looking at it and fully understanding the data that is coming out of what happened in March and April, particularly of last year. But if I were sort of taking a position today, I would think we’re going to see some change. Let’s talk about reform more

[0:30:28 Speaker 1] generally in the effective

[0:30:29 Speaker 0] reform. There

[0:30:30 Speaker 1] was a big push prior to covid for global regulators to assess what 10 years of post global financial crisis reform looked like, and whether it worked was covid a test of that. How do you think markets performed and do you think reform mostly got it right or any problems in your estimation? Well, I do

[0:30:52 Speaker 0] think Covid was was a test for what policies were put in place after 2000 and eight and 2000 and nine full stop. So I I feel pretty strongly about that. I would say on, you know, from the from the market side the things that we did since the financial crisis, the money market reform recommendations we put in place, the short selling recommendations we put into place, the benchmark regulation principles that we put into place, I would say pretty much withheld the or what stood the test of Koven. I think I would also say if I, you know I can go outside of my comfort zone a little bit. On the banking side, I think there were many of the reforms that were put in place after 2000 and 8, 2000 and nine were useful. I think the banks would stood the Covid crisis in a much better place than they were back in 2000 and 2000 and nine because of the liquidity buffers because of the leverage ratio. I mean they were they were financially in a better place and could dip into those ratios and those capital buffers if asked to and they were asked to and some of the banks did. And I think that, you know, having central clearing. I think that really did help make things much more. I don’t want to say better, but we came out of its standing versus, you know, coming out of the crawling on our knees. And so I do think that by and large, there was some good things that happened back in 2000 and 8, 2000 and nine, you know, wasn’t perfect. No, I wouldn’t say it was perfect by any stretch of the imagination. And are there things that we could do, you know, more and better. And I think that’s what we’re looking at now as to what should we changed? Should the liquidity ratios be changed? Should the capital buffers be changed? I’m not sure that they will be, but I know one thing that we did, for example, in connection with the Basel Committee, is we delayed implementation, for example, of initial margin requirements for another year. And that was in direct response to covid. You know, after the financial crisis, we put in place some requirements when it came to initial margin. We realized Covid was sort of we hope for one off event, and we don’t ever want to see that happen again from a financial or human toll, you know, sort of point of view. But together we decided, you know what a year delay of these requirements is not going to be the end of the world. And so talking about those things and working together through them, you know, I think has been actually a good thing. And so 10 years on, I think we’re in a better place. I think we’re going to come out of this better. But are there things we can do? I think I think we probably will find some areas that we that we can and should improve. Aside from the issues directly raised by the covid prices, Are there any remaining global risks that deserve the attention of international regulators? Well, I mean, I’m a firm believer in trying to reduce market fragmentation. I don’t think market fragmentation is good. From a regulatory point of view. I don’t think it’s good from an industry point of view and I don’t think it’s good from an investor point of view. So we’ve been doing a fair amount of work on market fragmentation, and I think that that work will continue, uh, into 2021 probably into 2022. That’s clearly an issue that I think we have to come to grips with, by all means. That’s one I think the other area is. Can we find a way the standardized data reporting, particularly of derivative transactions, equity transactions so that globally, we’re all operating on the same level of of data, and that’s become critically important in times, you know, in covid. But it was important before covid, and it’s going to be important after Koval. And so whether we could ever reach that that common core, if you will. A standardized data reporting regime would be great, and I don’t know whether we’ll ever get there. But I think that’s an issue that definitely deserves some attention, and I’m hopeful that we’re going to continue to have those discussions globally. But unfortunately, so many things are jurisdiction specific. I’m not sure we’ll ever reach the Holy Grail, but what I think we can do is come up with a core set of data that then jurisdictions can add onto. But that core set of data, I hope, would be enough for regulators to do their their day to day job, but also contribute to the global conversation as well. And that’s I think, something that definitely deserves attention once we get through sort of short term covid issues that we have to continue to deal with. So our

[0:35:47 Speaker 1] next question we hope that you will be able to answer a little more liberally now that you are departing

[0:35:52 Speaker 0] IOSCO.

[0:35:54 Speaker 1] How

[0:35:55 Speaker 0] do you think the

[0:35:56 Speaker 1] leadership change in the U. S. Will affect IOSCO in its priorities, if at all?

[0:36:02 Speaker 0] Well, it is a very interesting question, and I will tell you that it is all person specific and let me just give you what I mean by that I mean, when the when the prior administration came in, I will tell you there was a fair amount of trepidation with respect to who might be appointed as head of the financial regulators in the US, so meaning the Fed, the SEC, the CFTC, particularly the CFTC and SEC, who I deal with on a day to day basis, and I will tell you that we were all, I would say, fairly pleasantly surprised about the quality of the individuals that were appointed by the by the prior administration. And they were. They contributed to the discussions. They were positive and thinking about the key issues that we were grappling with. And they were, You know, I would say, very generally well regarded and contributed substantially. I would say the same thing here. I mean, you know, it’s going to be a person specific about who gets nominated and who gets confirmed as the chair of the SEC and who gets confirmed as the chair of the of the CFTC that is going to really matter. One of the things that we’re spending a great deal of time on right now is around climate and sustainable finance, and we’re moving very expeditiously in that area. It seems to me that the new administration in the United States is very attuned with what IOSCO is trying to do. So I do think that there could be some change depending on the person. It’s difficult to know how that’s going to actually shake out, but I’m hopeful, hopeful that the new administration will be much more globally focused, not just on climate issues. But I would say more, more generally, talk

[0:37:55 Speaker 1] about s G more generally in addition to climate. Specifically, Is this something that iosco has to start up

[0:38:04 Speaker 0] now? Or

[0:38:05 Speaker 1] is it something that you’ve already been working on in the background and maybe just wasn’t elevated during the last four years? Whereas iosco on these issues, what are they doing and how can they contribute specifically going forward?

[0:38:18 Speaker 0] What? We have been working on climate in particular when it comes to S and G. I mean, for the moment now we’ve set aside Yes, and we’ve done a lot of work. We think on governance issues over the years. So we’ve in some respects that governance aside, but it’s always there. I mean, governance is always always an issue. And when you think about environmental of the, you know, the e of E. S G, we’ve decided to focus on climate because that’s probably the most pressing issue at the moment, at least, as, uh, many would agree, and we think so as well. So So I would say, For the past year or 18 months, we have been working on the issue, but it’s been mostly the first six months was mostly, I would say, learning what other people are doing from a regulatory point of view. From the supervisory point of view. Now we’ve we’ve sort of kicked into a higher gear and trying to forge some consensus around what the i. F. R s foundation is doing what the global standard centers in the environmental arena are doing like society. But what we can do is something similar to what we did 20 years ago when the I. F. R. S foundation was set up and I a speed was established where IOSCO came in and actually endorsed what was going on globally when it came to international accounting standards. And our hope is that we can be in a position to do the same thing when it comes to sustainability and sustainability standards. So working together with the I F. R s foundation, working together with the impact group with the global environmental standards centers, we want to we hope to be in a position that we can actually do the same thing, which will give that international imprimatur which we think will be a big, big benefit when it comes to reporting and will help global companies. And the nice thing about it is what were the approach we’re taking is embeds the work of T C F. D. As part of this whole process. So the work of T. C F. D. Was groundbreaking in so many ways, and what we’re trying to do is, I think, take it to the

[0:40:28 Speaker 1] What does that acronym stand for?

[0:40:31 Speaker 0] It’s the I’m sorry. The T C F D. Is the task force on global financial reporting, and it was under the auspices of Michael Bloomberg, but through Mark Carney when he was chairman of the Financial Stability Board. So it’s really a challenging project, but I think one that will bear some fruit, actually, by the end of this year, at least that’s that’s our hope. But we’re also looking at a couple of other issues, like the role of credit rating agencies in the whole area, data providers in this whole area. What about asset managers in the role that they play greenwashing investor protection? So we’re we’ve got work streams on each of these each of these areas, and we’re we will likely publish some consultation papers around guidance in these areas in mid year, mid year this year. So I would say Stay tuned and look for that because those are important pieces of work for us. Can you speak a bit more to what it means for Oscar to actually work on climate in addition to publishing papers, What does that mean in practice? And what tangible outcomes can we expect how they interact with the regulators across the boat? Well, in a practical way, I mean, it means things like issuing guidance, for example, or encouraging emerging markets, for instance, about adopting certain recommendations if they use climate related issues as a way to grow and increase their markets. Just to give you a very tangible practical example. About a year ago or thereabouts, we issued 10 recommendations that were geared towards growth in emerging markets. That said, if you want to, if you have a market growth mandate as the security regulator in your country and you want to use green finance or climate related products to help grow your market, here are 10 recommendations about what you should do to do that. And so it’s trying to be practical about what markets and what regulators can actually do when it comes to climate related issues. And so now in the asset management world, it will be about disclosure in terms of what they should be disclosing to their clients, how they guard against greenwashing and things of that nature, so that it’s a real tangible set of things that they could do that will help them, we think, but also help protect investors, which is a core mandate of IOSCO. And so we’re having those discussions, I would say internationally and when it comes to disclosure related, I think were far ahead of of entities like the Financial Stability Board. I think we’re ahead of organizations like the Basel committee. I think we’re ahead of the insurance regulators, so I mean, we’re trying to be on the front foot when it comes to climate related disclosures, for example, and not always to be responding to things but trying to help set the standard. So Paul, let’s

[0:43:37 Speaker 1] leave the question that I’ve often had and wondered about with these international committees. When you say you’re ahead, you have committees that are working on these issues and they’re coming up with solutions. Does that necessarily mean that the members who are appointed to these committees reflect the views of where they come from. Are they working on their own? Are they trying to convince regulators back home of the changes that need to be made? Or is it the security commissions back home that are looking for leverage and using committees at IOSCO to help their governments affect change? How does all that work?

[0:44:13 Speaker 0] It’s a real mixed bag, Scott, and it’s actually a really good and, I would say somewhat complicated question because in many respects, those that sit around these international tables are trying to do everything that you just said. So in some, in some cases it’s sort of a personal sort of goal. You know, they’re high enough up in the organization that they want to see something happen on coming up with standards for leverage in the asset management industry, and they can really help affect that change In other cases. It’s organizationally where an organization that the representative from the organization actually represents the views of that organization and that’s I would say, happens in a number of cases. In other instances, it’s individuals that are sitting around the table, proposing ideas that they would like to then be able to leverage back home to put in place a standard in their home country that they can point to and say, Look, this is the international standard. We need to do this kind of thing back in X country. And so you see a multitude of perspectives. I would say, when it comes to these international bodies and what we try to do, what Iosco is, get the IOSCO members together to come up with a common position among market regulators. To the extent that we can. Now, that’s not always possible. And sometimes there’s an IOSCO position that might differ slightly from one of the other biological members that may sit around the same table. But that’s okay. I mean, we were maybe 75% aligned and 25% divergent, But that’s clear when we voice our views when it comes to these these forum, And so it’s It’s a very interesting mixed bag, and you sometimes have to work out exactly where the politics are, uh, in these instances, to figure out why is somebody proposing this when you know somebody else is proposing that, and then you try to sort of move. The chest piece is the best you can within your mandate. I mean, you have to be sincere and true to your own mandate, but at the same time, you also have to play a little bit of game. There’s a little bit of gamesmanship that goes on as well. I hate to put it that way, but I think it’s the truth. So, Paul, we

[0:46:32 Speaker 1] have a couple of current event type questions for you. They can be answered either from your own personal view or how I Oscar would deal with them in general.

[0:46:41 Speaker 0] Okay,

[0:46:42 Speaker 1] let’s start with Gamestop. Everybody’s talking about it, and maybe it’s going to die down in terms of public interest. But from a regulatory perspective, there are likely some things that are going to continue and endure in the coming months and year. And do you have any views or thoughts on Gamestop?

[0:46:59 Speaker 0] Yeah, yeah. I mean, you know what that did for me, and I think we will probably look at it at ASCO in some form. I mean, I don’t know for certain, but because it’s so recent is it is it really brought into the into the forefront the mission of what we what we have is market integrity and investor protection and and and and how these things actually crossed through social media. And so, using a social media platform to encourage individual investors to get into the market and do what they did to try to, you know, you know, pin in, squeeze These hedge funds, you know, speaks to virtually everything that we’re all about. And so I think there’s going to be an examination of what happened there and whether there is something that we need to be looking at from a market integrity and, frankly, from an investor protection point of view. And I find what happened there absolutely fascinating, actually in terms of how how things just unfolded and and and sort of the thinking that went behind what people did and how they did it, and and we’ll say so I think we’re going to look at it and in some more detail. So another company that was in the news some months ago and financial, what do you think of the failed I P. O and its registration as a bank now Yeah, well, that that’s That’s an interesting one, that I’ll have to probably give you my personal view, because institutionally, I mean, we don’t have a view on that, but I would say, personally, this is this is geo politics at its finest? If I could sort of put it that way where I do think there was an effort to bring aunt down to size, if I could sort of use the vernacular and that it was getting a little bit to global a little bit too ahead of its skis when it came to the government of China, and I think there was an effort to bring it back under the under the thumb of the of the authorities in Beijing, and I think that’s really what is going on here. It’s really a political issue as opposed to a markets issue, and it’s a good, bad or indifferent. That’s just the reality. And I think now that it’s a bank, it’s definitely under more control of the of the central government, and that will curtail. I think, some of the things that it’s able to do.

[0:49:20 Speaker 1] I don’t tweet very often, but every once in a while, I do and probably their ill time. But Aunt was one where I couldn’t resist tweeting, and my initial thought was when the I p o. Failed it was China, China’s government snatching financial market to feed on the jaws of victory and thinking it was one of the most amazing IPO’s ever to go public and they killed it. And then they have now announced announced that aunt will register as a bank. It looks like to be a bank charter,

[0:49:51 Speaker 0] you

[0:49:51 Speaker 1] know, how will this unfold? Is this good

[0:49:53 Speaker 0] news

[0:49:54 Speaker 1] for markets? Is it bad news for the state owned enterprise Banks is and going to clean up as a regulated bank in China?

[0:50:02 Speaker 0] Yeah, I don’t take it as good news. To be honest, I take it as you know, command and control, and I’m not sure it’s good globally. I’m not sure it’s good, necessarily, even in China again. My personal view on this I could be completely wrong about this, but I I see it as as more of a power play than I see it as something that was done for the good of the marketplace, both domestically and internationally. And I’m not particularly hopeful. To be honest with you, you’re probably a little more sanguine about it than I am. But we’ll see. Speaking of the I p o process stacks, Are these the new way to go public? Are they found? Are they enduring? What are your thoughts? Well, you know, I think they’re they’re a I don’t want to call them a fat because they’re fairly. They’re fairly well established in the US I mean, they’re growing in the U. S. They are getting a lot of attention now in Europe. And I would say that for markets that are looking at approaches to how to how to restart the engine of the markets given, you know, recent events with covid and still some markets are having fully recovered from the great financial crisis, I think these are going to get serious look seriously examined, particularly in Europe. I don’t know so much about whether I think the Asian markets are going to look at Stax, maybe Hong Kong and in in in in some respects. But I’m not ready to say there are fad, but I’m not sure that they’re the answer to a traditional i p o. I think the I P O process can be reformed in in in in ways that will make it more effective and more efficient. But I think SPAC still have a have a little ways to go before they’re either alive or dead. I’m not. I’m not quite sure yet. I think they’re kind of in the middle.

[0:51:55 Speaker 1] So, Paul, you’ve spent a lot of time with us and we really appreciate it. And thanks for all your insights. And before you go, I know you’re wrapping up as the secretary General of IOSCO. Can you just give us some closing thoughts on what’s next for you? And are there anything any accomplishments that particularly proud of and you want to highlight?

[0:52:17 Speaker 0] Well, you know, I I would say that I came to iosco really to do a few things, and I I was conscious of what I wanted to accomplish when I when I got there, and I’m I’m proud to say that I’ve accomplished the things that I set out to do and and probably the most important thing that I wanted to do was was re jigger how iosco goes about setting its strategy and the way it looks at markets holistically. Previously, they used to set out a five year plan, and they would. They would put put out a plan from, say, 2015 to 2020 and they would call that are 2020 strategic direction well, to me. By the time you, you know, printed the document in 2015, it was already irrelevant. And it never made sense to me to plan five years ahead in capital markets because things are so dynamic and things change so frequently and you just can’t predict what’s going to happen a year from now, two years from now, let alone five years from now. So after working with the board and coming up with a new approach, I was able to get the board to sort of rethink that whole way of of going about it. And now we do it on a on a yearly basis. But it’s sort of an ongoing process, I would say, and we re evaluate every year where we are, how markets have developed, what’s sort of the the burgeoning issues that we need to be on top of today, not losing sight of some of the longer term things and so to me, that’s that’s one thing that I have to say. I’m perhaps most proud of that. We’ve we’ve gotten iosco, I think, in the right place as it sets its priorities on a year to year basis now and we’re public about it and we’re accountable for it, and that, I think, is really important. So

[0:54:08 Speaker 1] where are you going now? Are you going to do? Do you have any thoughts?

[0:54:10 Speaker 0] Yeah, I I do. I was recently offered something that I’m going to find, I think really challenging. I’m going to work for, uh, The Chartered Financial Analyst Institute, the CFDA Institute. It’s a new position that’s going to bring together ethics and standards, advocacy and research all in one roof, so that we find the intersections between all of these things that we hope will make the CF a institute a little more effective and more nimble, and I hope a better and bigger organization. So that’s where I’m headed next, and that will be in the coming weeks, and I’m looking forward to it. I think it’s going to be a big challenge to sort of pull all this together, but I like challenges. Iosco was a challenge, and I think this is the next one. So I’m very much looking forward to it. And I hope we can stay in contact and perhaps share some thoughts. And in my new role as time goes by,

[0:55:12 Speaker 1] well, we wish you luck in your new endeavor. And we appreciate your time with us today. Thanks.

[0:55:18 Speaker 0] We hope you enjoyed

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