Latin American Capital Markets

INTERNETTECHNOLOGY AND THE DEVELOPMENT OF SECURITIES MARKETS 77things:• The offer targets residents of the regulator's jurisdiction.• The offerer accepts orders from or provides services to residents of the regulator'sjurisdiction.• The offerer uses e-mail or other media to push the information to residentsof the regulator's jurisdiction.Conversely, regulators could find the second test was not met if, among other• The offerer clearly states to whom the Internet offer is directed, rather thanappearing to extend the offer into any jurisdiction.• The offeror provides a statement on its website listing the jurisdictions inwhich it is (or is not) authorized to offer or sell its securities or services.• The offeror takes precautions that are reasonably designed to prevent salesto residents in the regulator's jurisdiction, screening addresses and other residencyinformation of respondents (IOSCO 1998b).Going Forward: Addressing Regulatory Challenges Posed by the InternetThe Internet has had a significant influence on securities trading, and the most recentregulatory challenges with which regulators have had to grapple are a measure of themedium's impact. In 2001, IOSCO examined a number of these challenges, includingsystem capacity, resilience, and security; liability for Internet communications; Internetdiscussion sites; and the role of ISPs with respect to combating Internet fraud (IOSCO2001).As market participants increasingly use the Internet to route orders andplace trades, the technological capacity, resilience, and security of online brokeragesystems become of greater moment. Online brokers need to ensure that increasedvolume or periodic spikes in message traffic do not overwhelm their systems. As Internetservers reach their maximum capacity, investors may encounter delays in accessingonline brokers, and brokers may have difficulty routing customer orders to thedesignated market for execution in a timely manner Accordingly, it may be opportuneand relevant for regulators to consider assessing online brokers' interest in ensuringthe technological adequacy of their Internet-based trading systems.As websites progressively become the medium of choice for communicatingwith investors, and as Internet use becomes more prevalent, issuers and intermediarieshave raised a number of questions regarding the scope of their liability for In-Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub