Felix Salmon

Charts of the day: Securities regulation and national income

By Felix Salmon
August 14, 2009

Ana Carvajal and Jennifer Elliott of the IMF have a new paper out which takes international data from Iosco, the International Organization of Securities Commissions, and looks at how assiduous regulators are in about 80 different jurisdictions. They’re looking at enforcement, which comprises three Iosco principles:

Principle 8: The regulator should have comprehensive inspection, investigation and surveillance powers.

Principle 9: The regulator should have comprehensive enforcement powers.

Principle 10: The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

They then chart whether these principles get implemented better as countries get richer:



The upshot is that although securities regulators’ legal powers are generally pretty much in place in poorer countries, they’re not effectively implemented there — in order to have any faith in your securities regulator, you basically need to live in a high-income country.

There’s also that interesting dip, in the lower chart: securities regulation is actually less effective in upper middle-income countries than it is in poorer countries. Maybe that’s because the elite in poor countries don’t need to flout securities laws to get rich: they only start playing in domestic markets, and enjoying de facto impunity there, when their countries become that much more developed.

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