Regulators of securities markets across Africa and the Middle East have been urged to accelerate the adoption and institutionalisation of risk -based securities markets regulation model as a means of consolidating the current growth being experienced in markets in the region, so as to avoid instability.
The Chairperson, Africa and Middle East Regional Conference (AMERC) of the International Organisation of Securities Commissions (IOSCO) and Director-General of the Securities and Exchange Commission (SEC) of Nigeria, Ms. Arunma Oteh, gave the advice at the Annual General Meeting (AGM) of AMERC in Dubai, United Arab Emirates.
According to Oteh, the adoption of risk-based model was highly imperative considering the fact that the weakness of compliance-based supervision approach of old contributed to the recent market meltdown.
She remarked that though the momentum of recovery appears slow in some jurisdictions, most markets in the Africa and Middle East region had recorded considerable and sustained recovery.
The renewed investor interest, she noted, could only be sustained through application of objective and effective risk - based regulatory standards.
Tracing the market trends that threw up the urgent imperative of adopting risk-based model of market oversight and regulation, Oteh said: "The global markets had in the two decades before the financial meltdown, recorded significant growth and dynamism.
As a consequence of the growth and expansion, there emerged new markets, new intermediaries and a host of complex financial products and instruments which promoted creative financial engineering and the exploitation of new avenues of financial leveraging that were accompanied by greater risk appetite and improved information technology. During the same period, regulators on their part also saw the need to transit from the traditional emphasis on compliance with laws and rules to a comprehensive approach which dwells on the effective supervision and management of the risks associated with the new realities especially as these relate to the emerging complex institutions."
She said regulators have been seeking ways and methods of identifying, measuring and mitigating the likely risks that might be posed by the advancements in market composition and transactions so as to effectively police the emergent complexities of the market while also ensuring the efficient allocation of supervisory resources.
"The aim being to move away from the rigid rule-based compliance regime to one that relies on the regulators professional assessments and discretions through the adoption of a risk-based supervisory model of market regulation covering issues such as licensing, capital requirements, risk assessment and inspection methodologies," Oteh said.