Latin American Capital Markets

INTERNETTECHNOLOGY AND THE DEVELOPMENT OF SECURITIES MARKETS 75status of firms and individuals is also available via these regulators' websites. 10 Thesesources of information can be of substantial assistance to a foreign regulator developingan investigative record in a matter involving cross-border misconduct.Impact of the Internet on Securities RegulationThe Internet is changing the way market participants communicate and do business.However, Internet communication and business may not fit neatly within the parametersof statutes, regulations, and directives originally intended for an environmentbased on telephone and paperThe three fundamental objectives of securities regulation are to protect investors,to ensure that markets are fair and efficient, and to reduce systemic risk(IOSCO 1998a). The success and health of securities markets depend on protectinginvestors against misleading, manipulative, or fraudulent practices. Regulatory requirementsthat provide the best protection against fraudulent and manipulative practicesare those that call for providing investors with full, timely, and clear disclosure of informationmaterial. Market fairness is also fundamental to protecting investors. Unfairtreatment of investors ultimately leads to a loss in investor confidence and underminesthe strength of the market Finally, although regulators cannot be expected toprevent the financial failure of market intermediaries, regulation should aim to reducethe risk of failure.To this end, market intermediaries should be subject to adequateand ongoing capital and other prudential requirements.In promoting or responding to securities activity via the Internet, regulatorsneed, in the first instance, to determine whether their current regulatory frameworkadequately addresses Internet use. Most securities regulators have been able to addressthe securities industry's use of the Internet without needing to revise their regulatoryregimes. Indeed, these regulators simply clarify the application of existing domesticregulatory requirements to Internet activity through guidance and interpretivereleases.Some overarching observations can be made about the manner in which regulatorsin developed markets have applied existing regulatory requirements to Inter-10 See, for example, http://www.sec.gov/edgar/searchedgar/webusers.htm (the U.S. SEC's "EDGAR" online database);http://www.asic.gov.au/asic/asic_srchlodg.nsf (the Australian Securities and Investments Commission's online database);http://www.cob.fr/frset.asp7rbrcpsophie (the French Commission des Operations de Bourse's "SOPHIE" database);and http://www.bafin.de/datenbanken.htm (the German Bundesanstalt fur Finanzdienstleistungsaufsicht's database).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub