Oecd legal Instruments

I.D. 
Stock market regulation should support effective corporate governance. 
Stock markets can play a meaningful role in enhancing corporate governance by establishing and enforcing 
requirements that promote effective corporate governance by their listed issuers. Also, stock markets provide 
facilities by which investors can express interest or disinterest in a particular issuer’s governance by allowing 
them to buy or sell the issuer’s securities, as appropriate. The quality of stock exchanges’ rules for listing 
and for governing trading on their facilities is therefore an important element of the corporate governance 
framework. 
What traditionally were called “stock exchanges” today come in a variety of shapes and forms. Most of the 
large stock exchanges are now profit maximising and themselves publicly traded joint stock companies that 
operate in competition with other profit maximising stock exchanges and trading venues. Regardless of the 
particular structure of the stock market, policy makers and regulators should assess the proper role of stock 
exchanges and trading venues in terms of standard setting, supervision and enforcement of corporate 
governance rules. This requires an analysis of how the particular business models of stock exchanges affect 
the incentives and ability to carry out these functions. 
I.E. 
Supervisory, regulatory and enforcement authorities should have the authority, autonomy, 
integrity, resources and capacity to fulfil their duties in a professional and objective manner. 
Moreover, their rulings should be timely, transparent and fully explained. 
Supervisory, regulatory and enforcement responsibilities should be vested with bodies that are operationally 
independent and accountable in the exercise of their functions and responsibilities, have adequate powers, 
proper resources, and the capacity to perform their functions and exercise their powers, including with 
respect to corporate governance. Many jurisdictions have addressed the issue of political independence of 
the securities supervisor through the creation of a formal governing body (a board, council or commission) 
OECD/LEGAL/0413
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whose members are given fixed terms of appointment. Some jurisdictions also stagger appointments and 
make them independent from the political calendar to further enhance independence. Some jurisdictions 
have sought to reduce potential conflicts of interest by introducing policies to restrict post-employment 
movement to industry through mandatory time gaps or cooling-off periods. Such restrictions should take into 
consideration the regulators’ ability to attract senior staff with relevant experience. These bodies should be 
able to pursue their functions without conflicts of interest and their decisions should be subject to judicial or 
administrative review. At the same time, supervisory staff should be adequately protected against the costs 
related to defending their actions and/or omissions made while discharging their duties in good faith. 
To guard against conflicts of interest (including the potential for political or business interference in 
supervisory and enforcement processes), operational independence may be reinforced by autonomy over 
budgetary and human resource management decisions. Such autonomy should be coupled with high ethical 
standards and accountability mechanisms, including timely, transparent and fully explained decisions that 
are open to public and judicial scrutiny. When the number of corporate events and the volume of disclosures 
increase, the resources of supervisory, regulatory and enforcement authorities may come under strain. As a 
result, they will have a significant demand for fully qualified staff to provide effective oversight and 
investigative capacity which will require adequate funding. Many jurisdictions impose levies on supervised 
entities in combination with, or as an alternative to, government funding. This may support greater financial 
autonomy from governments to carry out their mandates, while structuring such fees to avoid impeding 
supervisory independence from regulated industry participants and providing adequate transparency on the 
criteria adopted to set the fees. The ability to attract staff on competitive terms is also important to enhance 
the quality and independence of supervision and enforcement.