Wednesday, November 18, 2009

Australia's ASIC To Boost Securitization Market Disclosure

Posted in the Wall Street Journal:

Australia's securities regulator is in the process of designing a range of disclosure and transparency rules to inject confidence into the domestic securitization market and ensure regulatory oversight moves in step with global peers, an official said Wednesday.

The measures are part of a concerted global push to restore faith in securitization markets and reduce the kind of exposures which brought the global financial system to a shuddering halt in 2007 as investors fled structured products.

Regulators in Australia are following the lead of recommendations from the G-20 group of nations and the International Organization of Securities Commissions.

In particular, the Australian Securities and Investments Commission is consulting with other domestic regulatory and industry groups, such as the Treasury, on introducing firmer rules on disclosure, investor suitability, international coordination and harmonization.

"This we believe is fundamental for investors to be able to understand and properly manage the risks of structured finance products and securitized products," ASIC Commissioner Greg Medcraft said in a speech.

Selling the core differences between the quality of Australia's asset backed mortgage market and offshore markets are also key, though cross border rules will need to be in sync, Medcraft said.

"The securitization market is a global market and Australia's regulatory framework needs to be consistent with the U.S. and the EU," he said.

On the principles issued by IOSC, ASIC will look to implement a range of measures to boost transparency and will factor in economic and regulatory features of the domestic market

"ASIC is in dialogue with the Australian Securitization Forum and is waiting for a release of best practice guidelines before concluding what steps we consider necessary to enhance disclosure and transparency in the Australian market," Medcraft added.

Investor suitability for structured products is also high on the agenda.

"The main area of concern is where an investor is classed as wholesale but has the skills set and sophistication more akin to a retail investor," Medcraft said.

The regulator is also examining post trade transparency in the corporate bond market as a whole.

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