IOSCO Online Self-Assessment Questionnaire
I. Welcome
Welcome to the IOSCO Online Self-Assessment Questionnaire (Online Questionnaire). The Online Questionnaire is an internet based diagnostic program developed by IOSCO to assist its members in undertaking self-assessments based on the Methodology for Assessing Implementation of the IOSCO Objectives and Principles of Securities Regulation (Methodology).
The Methodology is designed to provide IOSCO's interpretation of the International Organization of Securities Commission's Objectives and Principles of Securities Regulation (Principles) and give guidance on the conduct of a self-assessment or third party assessment of the level of Principles implementation.
II. Background to the IOSCO Principles and Methodology
In 1998, IOSCO adopted the IOSCO Objectives and Principles of Securities Regulation (Principles), which set out a broad general framework for the regulation of securities. In 2003, IOSCO developed the Methodology in order to help members and assessors assess the level to which IOSCO Principles are being implemented by IOSCO members. The Methodology was revised in 2008. Subsequently, the Principles and Methodology were updated and underwent extensive revisions in 2010 and 2011, respectively, to reflect the lessons learned from the global financial crisis. In 2017, the Principles were updated to ensure consistency with revisions made to the Methodology to incorporate IOSCO standards issued since 2010. The current Methodology was adopted by IOSCO in May 2017.
The Methodology draws together the key issues and questions relevant to the implementation of the Principles and provides benchmarks by which the level of implementation can be assessed based on four grades: fully implemented; broadly implemented; partially implemented; and not implemented.
The Methodology has been designed for use in self-assessments by IOSCO members as well as for third-party assessments; for example, assessments conducted by the IMF-World Bank under its Financial Sector Assessment Program and the FSB through its Peer Review Program. The IOSCO Assessment Committee has also established a program of Country Reviews to conduct reviews of self-assessments by IOSCO members.
The Methodology is intended to apply to the securities markets, intermediaries, information service providers such as credit rating agencies and products addressed by the Principles and to take account of the actual configuration of the markets, the stage of their development, and participation therein.
The words "securities markets" are used in the Methodology, as the context permits, to refer compendiously to the various market sectors, including markets for derivatives that are securities. The same interpretative convention applies to the use of the words "securities regulation." The Principles are not, however, specifically tailored to address all issues that are particular to derivatives markets. Accordingly, in determining whether the context permits the application of a Principle to derivatives, assessors should take into account the functional differences between, and the relevant jurisdiction's statutory treatment of, securities and derivatives.
The Methodology does not apply to other markets such as the currency, bullion, or physical commodity markets, for example, except to the extent that securities intermediaries deal for customers in such markets.
III. Purpose of the Online Questionnaire
The main purpose of the Online Questionnaire is to assist jurisdictions in completing a self-assessment, preparing for an assisted self-assessment, or preparing for a third-party assessment or related regulatory developmental work with respect to their securities regulatory regime. It is intended to foster and encourage self-assessments against the Principles by IOSCO members.
The Online Questionnaire makes the Methodology more accessible by providing an easy-to-use, online template for completing a self-assessment. It highlights the Key Questions for each Principle and provides boxes to input the relevant information online. It also includes an automated benchmarking mechanism that identifies whether a Principle is "fully implemented", "broadly implemented", "partly implemented" or "not implemented" based on the responses entered by the user.
The assessment ratings generated by the benchmarking mechanism of the Online Questionnaire should not be relied upon as providing a fully comprehensive and accurate assessment of a jurisdiction's responses. The Key Questions require consideration of numerous complex issues, which cannot be easily reduced to a "yes" or "no" response. Accordingly, the benchmarking mechanism is designed simply to provide users with a general idea of the assessment ratings that may result based on the inputted responses, but does not replace the rigour and judgment of a formal assessment conducted by a third-party assessor.
The Online Questionnaire also allows a self-assessment to be completed over the internet, in multiple sessions, and revised and updated at different points in time. All the information entered online is stored on a secure database for easy future reference.
Information entered by jurisdictions when using the Online Questionnaire is maintained by the General Secretariat on a confidential basis. The data is encrypted and stored in a firewall protected database. Upon notifying the General Secretariat, jurisdictions have the option of sharing and publishing their completed self-assessment through posting on the IOSCO website, either on the members' area or the public section of the website.
IV. Guidance on Completing a Self-Assessment
General guidance
Before using the Online Questionnaire, it is highly recommended that you read the Methodology. In particular, you should carefully review should the Pre-ambles, Scope sections, Introductory Texts, Key Issues, Key Questions and Explanatory Notes under each Principle. Without understanding and appreciating the full context and approach to assessing a particular Principle, you will not be able to use the Online Questionnaire effectively or for the purposes for which it was designed.
The process of reaching a "Yes" or "No" answer to a Key Question should not be approached in a mechanical fashion. A "Yes" or "No" answer should be supported by legislative, regulatory and programmatic evidence and augmented by an explanation describing the status of implementation. Sufficient detail should be provided in order to comprehensively and accurately respond to a Key Question.
Wherever possible, responses should include an explanation of how rules and regulations are applied in practice and the processes used by the regulator. Simply copying applicable legislation, regulations or rules would not be considered a satisfactory response.
Successful use of the Online Questionnaire requires you to take an honest and objective approach to assessing whether your jurisdiction's regulatory regime addresses the Key Questions and Key Issues so as to meet the objectives of the Principles.
Please note that the results of a self-assessment, even one that is conducted as objectively as possible, may differ from the results of an assessment conducted by a third-party assessor. Although the Methodology is designed to provide objectivity, uniform treatment and pragmatic application of the Principles, regulators and assessors still need to use their own judgement when applying the Methodology.
Guidance provided in the Methodology
Detailed guidance on how to use the Methodology and the assessment process can be found in Section F of the Introduction to the Methodology, which has been reproduced below for ease of reference.
The Assessment Process and Assessment Measures
Implementation Intended to Be a Dynamic and Constructive Process for Regulatory Improvement
The assessment is not an end in itself. Rather, assessment should be viewed primarily as a tool for identifying potential gaps, inconsistencies, weaknesses and areas where further powers or authorities may be necessary, and as a basis for framing priorities for enhancements or reforms to existing laws, rules and procedures. This Methodology specifically contemplates that the assessment process will involve a dialogue in which the regulator will explain the details of its market structure, laws, and regulatory program and how, in view thereof, the regulator believes its regulatory program addresses the Key Questions and Key Issues so as to meet the objectives of the Principles.
In this regard, IOSCO has made clear that the Principles are not intended to be a pure checklist and that the regulator and the assessors will need to exercise judgment when using the Methodology as a tool, in particular when Key Questions relating to the sufficiency of a program, of resources, or to the degree of achievement of a certain Principle are being assessed.
Adequacy of Implementation Depends on the Level of Development and Complexity of the Market
There is often no single correct approach to a regulatory issue. Legislation and regulatory structures vary between jurisdictions and reflect local market conditions and historical development. The particular manner in which a jurisdiction implements the objectives and Principles described in this Methodology must have regard to the entire domestic context, including the relevant legal and commercial framework. The assessor needs to be aware of the basic legal structure of a jurisdiction, including its civil, commercial and criminal law.
Consistently, this Methodology should not be interpreted as limiting the specific techniques or actions that may be taken to achieve sound securities regulation, provided that the objectives of the Principles are met. Accordingly, in order to apply this Methodology in a manner that appropriately reflects the nature of the market situation in the jurisdiction being assessed, it will be necessary to provide, or to obtain, a complete and clear description of a jurisdiction's capital markets as part of any assessment. Markets with a single or a few issuers, that are totally domestic in nature, or that are predominantly institutional, will pose different questions and issues as to the sufficiency of application of the Principles, and as to the potential vulnerabilities likely to arise from their non-application, than jurisdictions where there are substantial numbers of retail participants, intermediaries frequently are part of complex groups, issuers are established in other jurisdictions, or the markets have other international or cross-border components.
Thus, a jurisdiction could satisfy an assessor that its approach, while not explicitly described in the Methodology, nonetheless meets the objectives of a particular Principle. Similarly, a jurisdiction could document that the application of a particular approach was not applicable to the particular trading system but that the objectives of market integrity, for example, were achieved through other means. In general, this opportunity to explain is often contained in the Key Questions themselves or in the Explanatory Notes or Scope. Accordingly, in all circumstances assessors must explain the reasons for reaching their conclusions as to whether a Key Question is satisfied, why they reach a "Yes" despite the presence of some deficiencies, why they reach a "Yes" answer based on an alternative means of achieving the objectives set out in the Key Issues and related Key Questions, or why they believe a particular Key Question is not applicable or material in a particular jurisdiction's circumstances.
The regulator should frequently review the particular way in which securities regulation is carried out as markets themselves are in a constant state of development; therefore, the content of a jurisdiction's regulation must also change if it is to continue to facilitate and properly regulate evolving markets.
How to Use the Methodology
This Methodology addresses each Principle in detail. It provides interpretative text to the Principles; sets out the Key Issues addressed by each Principle; establishes the Key Questions relevant to the assessment of how the jurisdiction is addressing the Key Issues; where necessary it provides Explanatory Notes; and also Benchmarks for evaluating the level of implementation.
This Methodology envisions that the assessor will establish bases for testing whether the objective of the Principle is sufficiently met from two perspectives:
- From a legal (or design) perspective, by identifying the powers and authorities conferred on the regulator, the relevant provisions of applicable laws, rules and regulations, and the programs or procedures intended to implement these that form the framework of securities regulation in the jurisdiction.
- From the perspective of the exercise of those powers and authorities in practice, by documenting or otherwise measuring (through statistics, interviews with regulators, regulated firms, and market participants, and other methods) how the powers and responsibilities contained in the laws, rules and regulations are being exercised and whether enforcement of the relevant framework is effective. It is understood that, with respect to judging the effectiveness of the framework from a legal perspective, understanding of the basic legal structure of the jurisdiction is important, and from an empirical perspective, the fact-finding processes need to be carefully designed.
Where firms, products, or transactions are exempted from regulatory requirements or where the regulator has discretion to grant such exemptions, the reason the exemption is conferred and the process by which it is conferred should be transparent, give similar results for similarly situated persons or sets of circumstances, and be explainable in the context of the Principles.
The ability to test implementation will understandably be limited by the scope of the inquiry, the assessor's need to rely in certain respects on statistical and anecdotal information, and the fact that implementation will be as of a point in time and not continuing or periodic. Generally, an assessment of the level of implementation of the Principles assesses only the quality of securities regulation in a jurisdiction. There may be other factors (such as the economic and political climate) that affect consistent delivery of a fair and equitable regulatory system. Any assessment of implementation cannot be expected to provide assurance against a political or economic failure or the possibility that a sound regulatory framework can be circumvented.
Certain Principles should be assessed in conjunction with one another. The Methodology and, more specifically, the benchmarking have been consciously drafted to recognize, evaluate and record gaps and flaws that recur across a number of Principles. In practice, this means that in a number of cases a fundamental deficiency could impact the assessment of several Principles, with the result that a regulator may find its assessment rating has been "downgraded" across a number of these Principles.
This could be particularly the case in the evaluation that assessors make of the effectiveness of supervision. For example, deficiencies in the supervisory program of a regulator could initially impact the grade of Principle 12 but could also affect the grade of one or more other Principles if such deficiencies have had a direct impact on the supervisory program of one or more types of participants (e.g., if they have impacted issuer supervision, CIS supervision, intermediaries' supervision, etc.). Conversely, assessors should determine what, if any impact that deficiencies identified in the supervisory program of one or more types of participants (e.g., issuers, CIS, intermediaries, etc.) may have on their evaluation of the overall effectiveness of the supervisory program of a regulator and, depending on such evaluation, the grade of Principle 12 might also be affected. Another example is lack of resources which could initially impact the grade of Principle 3 but could also impact the grades of one or more other Principles, depending on the effect that resource challenges could have on the supervisory program of one or more types of participants or even on the effectiveness of the overall supervisory program.
However, care should be taken in regard to the application of this "cascading" effect. For example, an inability to cooperate in the context of Principle 6 (a specific standard designed to identify, monitor, mitigate and manage systemic risk) is not intended to adversely affect the broader requirements in Principles 13 to 15. The intention of the Methodology is that any undue severity is avoided.
Assessors using this Methodology should refer to the assessed jurisdiction's responses to the Key Questions as a first step in the conduct of an assessment.
In assigning an assessment rating, the assessor should be aware that the Principles relating to the Regulator, and for Enforcement and for Cooperation1should be considered to be applicable to all jurisdictions, whether or not they have a market. In contrast, the other Principles that relate to regulatory functions may not apply to some jurisdictions.
For example, if a jurisdiction does not operate or permit direct access to a secondary or other market, the Principles for Secondary and Other markets may not apply. However, even in a jurisdiction without its own secondary or own other market, there should be laws that permit the jurisdiction to combat insider trading or other market misconduct originating from its jurisdiction into other jurisdictions.
Assessment Measures
The Methodology sets out clear guidance on the Key Questions that must be answered in the affirmative for a jurisdiction to score a Fully, Broadly or Partly Implemented rating (see below for an explanation on these assessment measures). It is understood that, where a Key Question is applicable, either "Yes" or "No" answers to Key Questions used for testing implementation should be augmented by explanations that explain the status of implementation in the context of a particular jurisdiction and that answers might be qualified to explain any departure from a full "Yes" or full "No" response.
Nonetheless, assessors should consider the materiality of any weaknesses and the applicability to the jurisdiction of the Key Questions when making an assessment of compliance with individual Key Questions. Where a Key Question refers to the existence of specific powers or authorities, the judgment as to implementation will generally be precisely specified, limited only by applicability. However, where a Key Question addresses the sufficiency of resources, or the sufficiency of application of a system of enforcement, or effective achievement of specific regulatory functions, the jurisdiction and the assessor may need to make a judgment as to the sufficiency of the program or related resources or degree of achievement.
Although this Methodology contemplates that judgment must be applied in assigning assessment categories in these circumstances along the spectrum between Partly and Fully Implemented, the reasons for such judgments should be expressed by reference to the Key Questions, the assessment criteria in the Benchmarks and the related objectives of regulation expressed in the Key Issues, and should be documented.
It is also expected that the status of implementation will be tested as at a specific point in time, that is, the time of the assessment. Where changes are planned, the manner in which those changes further implement the Principles, the timetable for their implementation and the reasonableness of the timetable should be reflected in the comments, but should not alter the assignment of an assessment rating.
Where new legislation, programs or procedures have been adopted recently and are untested in their application, the jurisdiction may receive a Fully Implemented status only as to having in place the necessary powers, and/or the design of necessary programs, to effectuate the affected Principle and not as to full implementation of the powers or the program designed to use those powers2. Additionally, failure actually to use the powers, or to apply the program, however well designed, may also implicate an assessment of the existence of the powers.
After having assessed the responses to all the Key Questions of a Principle, the assessors determine the assessment rating according to the Principles' benchmarking. Once this has been established, assessors should see whether this rating is in line with their general appreciation of the regulatory system in relation to the given Principle. If this is not the case, based on clear explanation, the assessors may decide to decrease or increase the assessment rating by one category.
Wherever a regulatory framework is assessed to be Broadly, Partly, or Not Implemented with respect to a particular Principle, recommendations should be proposed for achieving full implementation. Where a jurisdiction has adopted but not yet implemented new legislation or procedures, the assessor may refer to these in its recommendations.
Assessment Categories
Fully Implemented: A Principle will be considered to be Fully Implemented whenever all assessment criteria (as specified in the Benchmark) are generally met without any significant deficiencies.
Broadly Implemented: A Principle will be considered to be Broadly Implemented whenever a jurisdiction's inability to provide affirmative responses to applicable Key Questions for a particular Principle is limited to the Questions excepted under the Principle's Broadly Implemented Benchmark and, in the judgment of the assessor, such exceptions do not substantially affect the overall adequacy of the regulation that the Principle is intended to address.
Partly Implemented: A Principle will be considered to be Partly Implemented whenever the assessment criteria specified under the Partly Implemented Benchmark for that Principle are generally met without any significant deficiencies.
Not Implemented: A Principle will be considered to be Not Implemented whenever major shortcomings are found in adhering to the assessment criteria as specified in the Not Implemented Benchmark.
Not Applicable: A Principle will be considered to be Not Applicable whenever it does not apply given the nature of the securities market in the jurisdiction and relevant structural, legal and institutional considerations. Criteria defining this assessment rating are not indicated for every Principle.
V. Guidance for Drafting Self-Assessment Reponses
The length and detail of your self-assessment will depend on a number of factors, including the number of Principles that are applicable to your jurisdictions, the time and energy you devote to preparing the responses, and the complexity of your regulatory system and/or markets.
Broadly speaking, the responses to a key question can vary from a few paragraphs to several pages in length. For a full self-assessment against all 38 Principles for a jurisdiction with a highly developed market, it would not be unusual for the self-assessment responses to be well over 400 pages in length.
Given the range of regulatory issues contemplated by the Principles, completing a full self-assessment often requires the input from many different individuals within your agency that have the necessary background and expertise to respond to the different key questions. Again, for a full assessment in a developed jurisdiction, it would not be uncommon to involve 30 or more staff members to complete different parts of the self-assessment.
You should also note that the reports published by IOSCO are a valuable source of information on the Principles that underlie effective securities regulation and the Questionnaires and techniques necessary to give effect to these Principles. The Methodology draws upon those reports as a primary source as IOSCO's reports generally provide a more detailed treatment of the particular topic. For convenience, IOSCO has included in the Methodology a bibliography at the end of each of the Sections that references the key reports that are relevant to the issues for those Principle in that Section. You should refer to these reports for additional information and guidance on the types of measures a jurisdiction might be expected to adopt for different Principles.
Finally, certain Principles will need to be assessed in conjunction with one another. The Methodology provides more details in this regard under How to Use the Methodology.
Basic Drafting Tips
| Be clear |
Eliminate ambiguity. Write simply but precisely and, as much as possible, in ordinary language.
Make sure your response answers the key question and provides enough relevant detail. Avoid dumping information or simply cut and pasting your responses from other publicly available information. When describing how your jurisdiction has implemented an IOSCO Principles in practice, describe the regulatory processes you have adopted, including steps involved in those process; Use words consistently when referring to the same idea or thing. |
| Be concise |
Sentences should be as short as clarity and precision will allow. As a general rule, sentences should average no more than 15 to 20 words, and should be no longer than 40 words. Omit words that are redundant or otherwise unnecessary.
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| Organize with the reader in mind |
Organize the response logically. This usually requires the grouping of ideas. Use descriptive headings and subheadings to orient the reader.
Present the big picture before the details. Group related information together. Consider presenting information chronologically, breaking complex parts into simple steps. |
- The Principles for Enforcement and for Cooperation reflect the provisions of the IOSCO Multilateral Memorandum of Understanding concerning Consultation and Cooperation and the Exchange of Information, Report of IOSCO, May 2002 (version revised May 2012), available at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD386.pdf ("IOSCO MMoU") which has become a benchmark among securities regulators at the international level.
- If, however, the regulator's prior program would have been Fully Implemented and the new program would be an enhancement, the jurisdiction should have an opportunity to demonstrate this and should not be penalized for improving its program.