By Our Correspondent

Lagos (INVESTADVOCATE)-Arunma Oteh, the Chairperson, Africa and Middle East Region of the International Organisation of Securities Commissions (IOSCO) has advised the Region to improve its Risk Based Supervision.

This is contained in a Statement Monday by Yakubu Olaleye, Head, Media Nigeria’s Securities and Exchange Commission (SEC) and made available to www.investadvocateng.com in Lagos Nigeria.

The advice came in her address at the ongoing Annual General Meeting (AGM) of the Region at the Dubai International Financial Centre, DIFC, Dubai, United Arab Emirates (UAE).

The theme of the AGM is “Risk – Based Supervision as a Global Agenda”

“The adoption of and Institutionalisation of Risk – based Securities Market Regulation Model will be a means of consolidating the current growth being experienced in Markets in the Region and avoiding instability” she said.

According to her, the rationale for the adoption of risk – based model as residing in the weaknesses in the compliance –based supervision approach of old, which (weaknesses) were highlighted by the recent Market Meltdown.

“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 can only be sustained through application of objective and effective risk – based regulatory standards. Tracing the Market trends which threw up the urgent imperative of adopting risk based model of Market oversight and regulation” she said.

She affirmed that 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” she said.

Oteh further affirmed that 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 relates to the emerging complex institutions.

“The need to effectively police the emergent complexities of the Market while also ensuring the efficient allocation of supervisory resources, led Regulators to seek ways and methods of identifying, measuring and mitigating the likely risks that may be posed by the advancements in Market Composition and transactions.

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” she said.

She said notwithstanding the envisaged potency of the new approach to ensure regulatory efficiency; it’s not to merely focus on the size of Institutions but to leverage case studies within the region to appreciate the emerging supervision and risk issues.

According to the Statement, a survey has been conducted and concluded at the event on the top risk issues affecting Securities Market jurisdictions which amply demonstrated that a commonality of risk issues exist in the region. These include issues around Corporate Governance, Capacity, Contagion, Technology, Concentration Risk, Enforcement, Political Influence, Continuity, Key Person(s) Risk and Market Development – related issues.