Latin American Capital Markets

INTERNETTECHNOLOGY AND THE DEVELOPMENT OF SECURITIES MARKETS 85Internet Service ProvidersISPs are in the business of connecting people to the Internet through dial-up telephoneconnections, digital subscriber lines (DSLs), co-axle cable, or other means.Once connected, an ISP subscriber's computer becomes part of the Internet, allowingit to access information available on websites and to interact with other connectedparties via e-mail, chat rooms, and bulletin boards.Because of the growing use of the Internet to commit securities fraud and manipulatemarkets for securities, regulators increasingly need to obtain information fromISPs about subscribers and their communications. Fraud-related "spam" (unsolicitedbulk e-mail sent to thousands of Internet addresses at once) frequently is routedthrough e-mail addresses located in other jurisdictions. When the misconduct emanatesfrom another jurisdiction, securities regulators often must cooperate with their foreigncounterparts to obtain the necessary information. Successful cooperation therefore dependson whether regulators have access to information maintained by ISPs.In order to determine if securities fraud has taken place and who has committedthe fraud, regulators frequently need access to subscriber data as well as trafficdata. However, not all ISPs maintain subscriber data and/or traffic data, and manyISPs that do maintain such information keep it for short periods of time. Therefore,regulators are confronted with the challenge of ensuring that ISPs maintain subscriberdata and certain traffic data and that such data are made available to regulators whennecessary.To do so, regulators may pursue one or more of several options, including(IOSCO200I):• Engaging in a dialogue with ISPs and ISP associations to identify the type ofinformation regulators frequently require to investigate fraud and seeking thevoluntary assistance of ISPs to collect and retain this type of information• Pursuing legislative or regulatory initiatives that oblige ISPs to maintain recordsrelevant to the investigation and prosecution of securities fraud via the Internet• Seeking statutory powers enabling the regulator to compel relevant datafrom ISPs and to share such information with foreign counterparts• Seeking amendments to privacy laws that allow regulators investigating Internetfraud to access data maintained by ISPs• Exploring the possibility of invoking the assistance of another domestic authoritythat can compel relevant data from ISPs in the context of a foreignor domestic investigation of illegal securities activitiesCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub