Financial Sector Assessment Program Update: Detailed Assessment on the Implementation of the IOSCO Objectives and Principles of Securities Regulation

The Detailed Assessment report on Mexico’s implementation of the International Organization of Securities Commissions Objectives and Principles of Securities Regulation is analyzed. The Mexican securities market is dominated by daily trading in short-term government debt securities, primarily through repo transactions among banks, brokers, institutions, and private investors. The 2001 Financial Sector Assessment Program noted significant structural issues in the Mexican repo market, and recommended government action to create a standard master agreement for repo transactions.


The Detailed Assessment report on Mexico’s implementation of the International Organization of Securities Commissions Objectives and Principles of Securities Regulation is analyzed. The Mexican securities market is dominated by daily trading in short-term government debt securities, primarily through repo transactions among banks, brokers, institutions, and private investors. The 2001 Financial Sector Assessment Program noted significant structural issues in the Mexican repo market, and recommended government action to create a standard master agreement for repo transactions.

I. IOSCO Objectives and Principles of Securities Regulation

A. General

1. This is an assessment of the National Banking and Securities Commission (CNBV), and other relevant regulatory agencies and self-regulatory organizations (SRO). This assessment is an update of an earlier assessment prepared in 2001. Both assessments were performed as one component of an assessment of the Mexican financial system under the Financial Sector Assessment Program (FSAP) conducted jointly by the International Monetary Fund (IMF) and the World Bank. Both assessments were prepared by Mr. Jonathan Katz (consultant, formerly with the U.S. Securities and Exchange Commission).

B. Information and Methodology Used for Assessment

2. This assessment was prepared in accordance with the guidance contained in the IOSCO Assessment Methodology Guidelines (December 2003 version). Material contained in the 2001 IOSCO Assessment Report was used when applicable. This assessment was based primarily upon interviews conducted between February 22 and March 6, 2006 with employees of the CNBV, officials of other Mexican government agencies, representatives of the pertinent SROs in Mexico and persons knowledgeable about the Mexican financial services industry and capital markets and regulatory system. These interviews were augmented by appropriate reference materials and discussions with other members of the FSAP mission team.

C. Institutional and Macroprudential Setting, Market Structure

The debt market

3. The Mexican securities market is dominated by daily trading in short-term government debt securities, primarily through repo transactions among banks, brokers, institutions, and private investors. This trading, which occurs in the over-the-counter market, represents over 97 percent of the daily trading volume and approximately 60 percent of this trading is through repo transactions.1 Virtually all of the trading occurs electronically, and a substantial proportion occurs through the Integrated Financial Services (SIF), an interdealer broker partially owned by the Mexican Stock Exchange. The Institute for the Deposit of Securities (INDEVAL) clears and settles debt market trading, including repos of longer than two days, on a bilateral netting basis.

4. The 2001 FSAP noted significant structural issues in the Mexican repo market and recommended government action to create a standard master agreement for repo transactions, to formalize recordation, clearance, and settlement of underlying collateral and to expand the institutions permitted to engage in repo transactions. In 2003 the Bank of Mexico (BOM), which has primary regulatory authority over the repo market (and actively uses overnight repo-style transactions with member banks to manage money supply and credit), issued a new regulation requiring the use of a standard master agreement (for repos longer than three days), permitted securities lending and permitted corporate bonds to be traded in the repo market. Some restrictions still exist. For example mutual funds are only permitted to engage in repos as the recipient not the lender of the security. Also, because INDEVAL clears and settles on a T+2 cycle, repos of one- or two-day durations are still processed bilaterally. As a result collateral assignment may not be perfected and the transaction may not be subject to the standard master agreement.

5. In its December 2005 Selected Issues Paper on Mexico, the IMF concluded that “The development of Mexico’s government securities markets, and its positive impact on the rest of the financial sector, has been rapid in recent years. The country boasts an extended yield curve in the local government debt market, with maturities up to 20 years issued at a fixed rate. Although the size of the local bond market is still smaller (in relation to GDP) than in some other emerging markets, the liquidity of the debt market (public and private), as indicated by a high turnover ratio (695 percent in 2004), also reflects the important role these instruments play in the functioning of the Mexican financial market, as opposed to a much lower turnover in countries where they act mainly as a safe investment vehicle for the local banks.”2

6. In comparison, the corporate debt market in Mexico continues to be small, approximately 2 percent of GDP in 2003-043 and to a large extent it is available only to the largest Mexican companies having investment grade ratings. Mexican pension plans,4 are the principal investors in investment-grade corporate debt, although it represents only a very small portion of these pension portfolios.

7. An important legal change in 2001 positively affected the corporate debt market. The Ley del Mercado de Valores (LMV) created a new form of debt security, Certificado Bursátil (CB), that could be issued without shareholder action and that could contain payment guarantees back by asset funds and other characteristics of a structured note. The flexibility of the notes and the inclusion of credit enhancements made the notes popular with corporate issuers and sub-sovereign entities, such as the Mexican states and state-owned Mexican companies. In 2002, there were 10 offerings of long term CBs by state entities for approximately US$500 million and in 2005 the offerings had grown to 21 offerings for more than US$7.3 billion. Similarly, in 2002 there were 59 long term corporate CB issues which raised nearly US$3.4 billion and in 2005 a small increase to 62 corporate offerings raised more than US$6.6 billion.5

8. Additionally, Reuters operates an electronic system for spot transactions in government securities and the Bolsa operates, jointly with Garvans, a trading system for overnight repos in government securities, the SIF. These systems are not registered as an exchange but as an interdealer broker.6

Equity Market—The Bolsa Mexicana de Valores (The Bolsa)

9. The Mexican Stock Exchange (Bolsa Mexicana de Valores, BMV or Bolsa) is a member-owned-for-profit institution. From 1995 through 2001, activity on the Bolsa declined and stagnated. The number of listed companies decreased from 190 in 1993 to 168 in 2001.7 Following a series of compulsory delistings by the CNBV the number of listings declined to 132 (155 listed stocks) in 2005. The average daily value of the stocks traded in the Bolsa declined from US$249 million in 1993 (an average daily trading volume of 112 stocks) to US$238 million in 2001 (an average daily trading volume of 125 million stocks) and the total market capitalization of listed companies dropped from US$201 billion in 1993 to US$127 billion in 2001.

10. In recent years the overall Mexican economy has rebounded and trading activity on the Bolsa has grown as well. The primary equity market index (Indice de Precios y Cotizaciones, IPC) rose nearly 46.5 percent in 2004 and nearly 44 percent in 2005. However, its daily trading volume remains highly concentrated in a very small number of issuers. Four stocks comprise approximately 50 percent of the IPC-Telmex, AMX, Walmex, and Cemex. Total market capitalization of the Bolsa has grown from US$104 billion in December 2002 to US$236 billion at the end of 2005.8 The Bolsa estimates that 45 percent of the market is foreign owned.

11. The Bolsa equity market is entirely electronic, with no specialists or market makers. There is an electronic central limit order book, visible to member firms, but not to other traders, who only see the best bid and offer and accompanying size and the last reported trade. Informally, it is believed that member firms often provide full book visibility to some customers.

12. Securities listed on the Bolsa are divided into two categories, with separate trading procedures. There are 90 stocks traded through the continuous market system. These are the securities with the larger free floats and greater daily activity. There are 53 less liquid stocks traded through the continuous auction process. Stocks are included in this group if they have fewer than eight million free float shares or less than 12 percent of capitalized shares are free floating, if there are fewer than 100 investors or if there have been fewer than 36 trades in the stock in a six-month period. When an order is received for a continuous auction stock, the order must be exposed, for price improvement, to an open auction for a one-hour period. The Bolsa explained that this procedure was adopted to reduce the number of trading halts occurring because of a trade occurring more than 15 percent above or below the last previous trade. The Bolsa estimates that this new procedure has significantly improved the price quality of executions and the number of trading halts has declined by roughly 80 percent.

13. The seven largest cap Mexican stocks are dually listed in the United States of America (U.S.A.) and the bulk of daily trading occurs in the U.S.A. As a result arbitrage opportunities exist between the markets and the Bolsa believes that this is another significant amount of daily volume. Because this trading tends to be computer generated program trading, the orders are often cancelled because the trade could not be executed in the time required to obtain the beneficial arbitrage. At times, the volume of automated orders, and cancelled orders has taxed the capacity of the Bolsa’s systems. The Bolsa reports that, as a result, it has substantially expanded order processing capacity in the past year to approximately 10 times current peak order volume.

14. Consistent with overall positive developments in the Mexican economy, there has been a gradual increase in the number of securities (both equity and debt) offerings in Mexico. During the past two years, more than 50 debt offerings have been issued. In Mexico the initial underwriter’s distribution to the underwriting syndicate occurs on the Bolsa, with debt securities then distributed OTC.

15. However, Mexico’s equity market remains relatively small and illiquid, and is not a major source of financing for most companies. Of the eight largest economies in the Americas, Mexico has the second smallest stock market, relative to GDP. The free float is limited and trading volumes are also low. The stock market displays a high level of concentration, with the top 10 companies representing close to 70 percent of market capitalization. Ownership of listed firms is also highly concentrated, and listed firms traditionally issued different types of nonfungible shares in order to avoid dilution of corporate control, which fragmented the securities market and reduced liquidity. Legal reforms enacted since 2001 have significantly restricted the ability of companies to issue multiple classes of securities and CNBV regulations, codified in recent legal reforms, have prohibited acquirers via tender offers or mergers from paying a premium for shares with greater voting power.

16. Larger companies have increasingly preferred to list on international markets. This has usually taken the form of cross listings in the U.S. market, through American Depositary Receipts (ADRs). In 2000, almost half of listed firms had a foreign listing or had raised capital abroad, and trading in foreign stock markets exceeded domestic trading. Outstanding ADRs reached US$48.9 billion in May 2005, equivalent to more than 20 percent of Mexican market capitalization.

17. In 2003 the Bolsa created the Mercado Global (MG) to permit domestic trading in approximately 200 foreign-listed equities, including 12 foreign exchange-traded funds (ETF’s). An investor may submit an order for one of these securities to a Bolsa firm, which then purchases the share in the foreign market in a largely riskless-principal capacity. The transaction is exposed for 20 seconds on the Bolsa system for price competition and then transacted. If a superior bid or offer appears in that 20 second window, it is entitled to 5 percent of the trade. The executed trade is cleared through INDEVAL which maintains a foreign custodian arrangement for the designated securities via the Deutsche Bank. Foreign shares sold through the MG are not subject to Mexican capital gains tax and any dividends received on a share purchased through the MG are taxed at a low 10 percent income tax rate. Trading in foreign unlisted shares on the MG represents 10-30 percent of daily trading volume. A substantial segment of this trading is by AFOREs trading in foreign ETF’s, as the pension funds are not permitted to purchase individual equities. INDEVAL reports that its custodian account at the Deutsche Bank contains more than US$2 billion in securities.

The derivatives market—mercado mexicano de derivados (MexDer)

18. MexDer began operations in December 1998 as the national derivatives market. It is a privately-owned market, with the Bolsa owning 78 percent. Initially an open-outcry market, its futures market became fully electronic in March 2000 and in March 2004 it began operation of a fully electronic options market. MexDer offers futures on foreign currency exchange rates, the IPC, five fixed income products and on five individual equities (Cemex CPO, Femsa UBD, Gcarso A1, Telmex L, and Amx L). There are listed options on the IPC, two individual stocks (Amx L, Naftrac 02) and on two foreign exchange traded funds (ETF)—the NASDAQ 100 index (QQQ) and the iShares SP500 Index (IVV). MexDer reports that it is now the fifth largest futures market in the world. Trading activity is highly concentrated in its interest rate futures product, more than 90 percent of daily trading volume.

19. The main users of the derivatives exchange has been its four clearing members. Each is a legal trust created and owned by a major bank. Foreign investors are increasingly active participants, and recent regulatory changes now permit foreign brokers to trade though an omnibus account with a clearing member, without having to register as a securities firm with the SHCP (which must be notified and may veto a relationship). Private pension funds are now permitted to invest a limited percentage of assets in derivatives and mutual funds are seeking similar authority.


20. Mutual funds (sociedades de inversión) have grown substantially since the 2001 reform to the Ley de Sociedades de Inversión. Thirty-four licensed mutual fund operators (23 are owned by other financial institutions and 11 are independent) manage 425 funds, with US$47 billion in total assets and over 1 million investors, as of 2005. The industry has grown 72 percent in asset size since 2001. Mutual fund assets are overwhelmingly invested in debt over equity. Mutual funds are prohibited from investing in derivatives (although such authority is likely in 2006).

21. The private pension system in Mexico has seen similarly dramatic growth since it was created in 1997. By October 2004, AFOREs were managing pensions for 32.9 million people. Of these, 60 percent of the number of registered accounts were concentrated in the five largest AFOREs. AFOREs may invest in investment grade debt, a limited amount of futures contracts (allocations determined by the BOM regulations) and indices of funds of equity securities. They may not invest in individual equity securities.

22. There is also a well-established pool of individual high net worth investors in Mexico, estimated at over 50,000 accounts with combined assets of more than US$60 billion. In addition, foreign investors are a major presence in the Mexican markets. The Bolsa estimates that 45 percent of listed equities are owned by foreigners, primarily institutional investors

II. Description of Regulatory Structure and Practices

A. The Securities Regulatory Environment

23. Mexico has a complex regulatory structure involving several government agencies with distinct responsibilities but interlocking supervisory structures and numerous legal responsibilities to consult prior to taking action.

24. The National Banking and Securities Commission (CNBV) was created in 1995 by the National Banking and Securities Commission Law (LCNBV), which merged the previously independent National Banking Commission and National Securities Commission. The CNBV is headed by a 10-member Board of Governors. Five members, including the President of the Commission, are appointed by the Secretary of Finance and Public Credit (SHCP), three members are appointed by the BOM, and the pension regulator (CONSAR) and the insurance regulator (CNSF) each appoint one member. The SHCP has broad supervisory responsibility over the CNBV, such as setting its annual budget, the final authority over legal interpretations of the relevant laws and final authority over referral of matters to the Ministry of Justice for criminal action. The SHCP has final responsibility for approval of exchange licenses, derivative firms and banks, with a duty to consult with the CNBV and the BOM. Until 2005 it had similar responsibility for licensing securities firms. The BOM has final authority over matters involving the government debt market and over matters dealing with the extension of credit.

25. COFEMER is a Mexican agency created in 2001 with advisory responsibility over governmental regulations. All CNBV regulations are subject to review by COFEMER, which has the responsibility to publish proposals in its web site and oversee the public comment process. CONDUSEF is a government agency with broad authority to act as an informal ombudsman for involved in consumer disputes. It does not possess enforcement authority.

B. Self-Regulatory Organizations9

26. There are several private entities that have been designated self-regulatory organizations under Mexican law. These include the Bolsa, the Mexican stock exchange; MexDer, the derivatives exchange; AMIB, the organization of securities firms; AMAII, the association of independent investment advisers; INDEVAL, the national securities depository and its subsidiary the CCV, the central counterparty for equity clearance and settlement, and ASIGNA, the central counterparty for clearance and settlement on MexDer.

27. The Bolsa performs limited regulatory functions. Its surveillance function is limited to staff monitoring trading activity and imposing trading halts when a stock moves more than 15 percent within a day or when there is the possibility that an issuer has not disclosed material information. It also reviews the prospectuses of all new listings in conjunction with the CNBV to ensure that listing standards are met. Because the Bolsa does not have the authority to compel testimony or disclosure of information by its members or its members’ employees, it is unable to conduct investigations. Accordingly, it does not take disciplinary actions against member firms or their employees. All suspicious activity is referred to the CNBV. MexDer, which is owned by the Bolsa, performs analogous functions in the futures market.

28. AMIB conducts licensing exams for employees of securities firms, mutual funds, and bank employees who are involved in selling securities. It adopts regulations for securities firms concerning internal operations, such as compliance and risk management functions and receives and monitors member firms compliance with CNBV capital requirements. It has the authority to fine its members for failure to file required reports or for filing incorrect reports.

29. AMAII is a voluntary organization. It has 25 members (out of 45 registered independent advisers) who have agreed to be inspected periodically. AMAII has contracted with a big four accounting firm to perform eight inspections annually.

30. INDEVAL, the securities depository, performs some self-regulatory functions, primarily pertaining to monitoring the securities positions of its members and requiring additional reserves for firms with increases in failed transactions. However, it has no disciplinary authority. INDEVAL owns and operates the CCV, the central counterparty for equities clearance and settlement. The CNBV periodically audits INDEVAL and CCV.

C. Mexican Legal Framework for Securities Markets

31. The 1934 Mexican Corporation Law (LSM) and 1975 Securities Market Law (LMV) form the framework for securities regulation. The LMV was substantially amended in April 2001 and a New Securities Market Law was issued in December 2005. This has significantly expanded the authority of the CNBV to perform its key regulatory responsibilities. The CNBV has broad authority to adopt regulations and procedures to implement the requirements of the law. Specialized divisions of the CNBV regulate bank and securities activities.

32. IOSCO has identified three core objectives of securities regulation: (i) the protection of investors; (ii) ensuring that markets are fair, efficient, and transparent; and (iii) the reduction of systemic risk. The Mexican regulatory system is designed to address each of these objectives. However, as described more fully below, certain legal limitations impeded the ability of the regulators in these areas. In March 2001, when the first assessment was performed five such limitations were discussed with the CNBV:

  • The scope of the CNBV’s enforcement authority, its ability to publicize its actions and thereby promote investor confidence in the securities markets and deter misconduct by others;

  • Promoting market efficiency and reduced regulatory overhead by introducing greater flexibility in the regulatory structure;

  • Enhancing public confidence in regulation by adopting procedures to ensure public input into the regulatory process and to enhance procedural due process in the disciplinary process;

  • Enhancing minority shareholder rights through improved corporate governance standards and easier access to the courts to protect these rights; and

  • Difficulty obtaining assistance from overseas regulators when pursuing investigations of possible Mexican securities law violations due to an inability to provide reciprocal assistance to foreign regulators because of Mexican bank secrecy laws.

33. In 2001 CNBV and SHCP officials were in agreement with the need for greater legal authority in these areas and proposed legal reforms to the Mexican Congress. In April 2001, Congress enacted a series of legal reforms designed to address each of these core areas. These changes expanded the authority of the CNBV to conduct investigations and to publicly disclose disciplinary actions, to share information with other government regulators and with foreign regulators, to enact secondary regulations to protect minority shareholder rights and to shift from a merit-based to a disclosure-based system of securities offering review. The law also mandated changes in public listed company governance, such as creation of an audit subcommittee of a company’s Board of Directors, mandatory minimum percentage of independent directors on a company Board, and specific rights of representation for minority shareholders with 10 percent holdings and the right to initiate private litigation by holders of 20 percent interests. The law governing mutual funds was also amended to require fundamental changes in the legal structure of mutual funds that were designed to expand competition and to increase fund investor protections by requiring the separation of certain operational functions.

34. These changes and their impact are referenced in the comments to the applicable principles. In the 2001 assessment it was noted that, as a result of these changes in the law, a future assessment may find greater implementation of substantially all of the IOSCO principles. This assessment confirms that hypothesis.

35. Following passage of the 2001 amendments, the CNBV used these legal reforms to significantly expand its activities. It addressed some of the concerns over its operational transparency by revising, updating, and comprehensively codifying many discrete secondary regulations into unified regulations. It utilized its information sharing authority and was approved to become a signatory to the IOSCO multilateral agreement on information sharing. It began publicizing basic information on completed disciplinary actions. Consistent with other newly enacted law, it began systematically soliciting public and industry input in the development of secondary regulations, both through informal communication and through formal publication for notice and comment of regulatory proposals through COFEMER’s web site. In the area of minority shareholder rights it adopted a secondary regulation on tender offers that required price equality for different classes of securities, even with different voting rights.

36. In 2004, President Fox, at the request of the SHCP and the CNBV, proposed to Congress further reforms of the Mexican securities law, the LMV. In December 2005 a New Securities Market Law was enacted, to be effective in June 2006. The changes brought by the new Law can be grouped into three broad categories:

  • Further expansion of the CNBV’s authority;

  • Substantial changes in the corporate governance of publicly listed companies;

  • Creation of two new corporate vehicles, designed to facilitate the ability of small and medium-sized companies to raise capital and transition to public listed company status.

37. The new law transfers the authority to license securities firms from the SHCP to the CNBV and the CNBV may now issue limited function brokerage licenses. Also the CNBV will have the authority to appoint special administrators to manage failing securities firms and, if necessary, revoke a firm’s license. The CNBV was given additional enforcement powers. It now has the power to investigate and sanction attorneys, auditing firms and external auditors, and corporate officers and Board members responsible for securities law violations and refer such misconduct to the Ministry of Justice for criminal action. The new law also clarified what is prohibited insider trading and manipulative activities in the derivatives market.

38. The 2001 amendments to the LMV made fundamental changes in the responsibilities of listed companies that were designed to increase the rights of minority investors. The boards of listed companies were required to include at least 25 percent of independent directors. An audit subcommittee of the board was required, to be composed of a majority of independent directors and chaired by an independent director. Companies were required to have a comisario, an internal reviewer and certifier of the external audit report. Shareholders controlling 10 percent of the company stock were given the right to appoint a second comisario. At each annual general meeting, the comisario was required to deliver a report on the accuracy, adequacy, and rationality of financial and other information presented to the board, including an opinion on whether the financial statements were prepared in accordance with Mexican accounting standards. While these persons were not required to be licensed accountants, in practice they were typically an accountant at the firm that performed the external auditor. Under Mexican law, they were subject to personal civil or criminal liability for failure to perform their duties, although enforcement was rare. Investors with 20 percent of a company stock were also authorized to bring a private lawsuit against a company for violation of Mexican law. Finally, the CNBV was given the authority to adopt a secondary regulation on tender offers.

39. The December 2005 legal reforms further expanded the minority shareholder protections of the 2001 law. The CNBV secondary regulation on tender offer enacted in 2003 (described in principle 14) was codified into law. Audit committees are now required to be composed of 100 percent independent directors. The law created the title of company Director General (comparable to an American CEO) and explicitly delineated the responsibilities of the CEO and the company Board. The CEO was made responsible for the company’s books, records and accounting process and the Board, through the Audit Committee, was given responsibility for review of the external audit and the duties previously assigned to the comisario. This function was eliminated for publicly listed companies. Of great significance, the law created the concept of a single economic unit. The Board’s responsibilities extended to any company subsidiary or affiliate that is part of a company single economic unit. The audit committee now has the power to require appearances by all company employees to discuss accounting and auditing questions, including employees of these subsidiaries.

40. The 2005 law also, for the first time, specifies that company board members and officers have fiduciary duties to the company and its shareholders, a duty of due care and a duty of loyalty. Board members are specifically prohibited under the law from the following:

  • Cannot authorize related party transactions without full disclosure and formal actions;

  • Cannot vote if a conflict of interest exists;

  • Must disclose any conflicts;

  • Cannot use privileged information;

  • Cannot take advantage of company assets or corporate activities without authorization.

41. Violation of these duties can be punished in civil litigation brought by the company or a minority shareholder owning 5 percent, a reduction from the 2001 law (although private derivative litigation in Mexico continues to be rare). A private action can be resolved through a negotiated settlement, with the explicit approval of the company Board. The CNBV can bring an action under the law to suspend or bar an officer or a director for up to five years.

42. The third substantive area of the 2005 legal reform created two new corporate vehicles, SAPI and SAPI B corporations. These entities are designed to make it easier for small and medium private companies to raise capital and make the transition to public listed company status.

  • A SAPI corporation will be able to issue securities to institutional investors and qualified investors in private transactions, without having to register with the CNBV or on the National Corporate Registry. In addition to having no disclosure obligations, a SAPI will not be subject to the corporate governance and auditing requirements that apply to listed companies, and there will be no restrictions on the types of securities it may offer or special features it can attach to a security.

  • A SAPI B corporation will be a three-year transitional status for a SAPI corporation interested in becoming a listed public company. During the three-year period a SAPI B will have special listing status on the Bolsa while it implements a plan to fully conform to the legal obligations of listed companies.

D. Findings of the 2001 FSAP Assessment

43. The 2001 Assessment noted several areas where regulatory improvement was warranted:

  • The debt market suffered from the lack of a standard master agreement for repo transactions.

  • The CNBV required additional legal authority to implement its enforcement responsibilities, including full subpoena authority and broader sanctioning authority.

  • The CNBV regulatory process would benefit from greater transparency and the opportunity for public and industry comment.

  • The CNBV would have greater visibility and effectiveness as a regulatory authority if it was permitted to fully disclose and publicize its enforcement actions.

  • Greater legal protection of minority shareholders was necessary and the minimum thresholds for private legal action had to be lowered.

  • International best practices for corporate governance should be adopted, particularly concerning transfers of control, and limitations on officer and director self-dealing.

  • International standards for sharing information with foreign regulators and with other domestic regulatory authorities should be adopted.

44. As discussed in the detailed assessment below, substantial progress has been made in all of the areas identified in the 2001 assessment.

III. Principle-by-Principle Assessment

Table 1.

Principle-by-Principle Assessment of Observance of the IOSCO Objectives and Principles of Securities Regulation

article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
article image
Table 2.

Summary Implementation of the IOSCO Objectives and Principles of Securities Regulation

article image

IV. Recommended Actions and Authorities’ Response to the Assessment

Recommended actions

Table 3.

Recommended Plan of Actions to Improve Implementation of the IOSCO Objectives and Principles of Securities Regulation

article image
article image

Authorities’ response

43. The authorities noted that the assessment of compliance with the IOSCO Objectives and Principles for Securities Regulation provides an adequate evaluation of the implementation by the National Banking and Securities Commission (CNBV) of the Principles. They were confident that the New Securities Market law will constitute a very sound framework upon which we will continue our efforts towards the development of the securities markets.

44. As in the case of banking, the authorities considered that the broad challenge ahead remains the achievement of an autonomous status for the CNBV. Although a significant reallocation of powers among financial authorities has already taken place in the securities field, the CNBV enphasized that it must maintain its efforts in bringing proposals to the legislative branch that will ensure an independent supervisor in accordance with international best practices.


Source, INDEVAL.


Selected Issues Paper, Mexico, paragraph 4, IMF, December 2005.


Source, Economist Intelligence Unit county profile report, page 33, February 2006.


AFOREs (Administradoras de Fondos para el Retiro) are private pension funds administrators. SIEFOREs are private pension funds.


Source, SHCP and BMV. In Mexico, all subsovereign debt offerings must be registered with and reviewed by the CNBV.


In Mexico, interdealer brokers are not considered market intermediaries.


Source, Bolsa Mexicana de Valores, Anuario Bursátil. The listed companies include those in the service, industrial, and commercial sectors, as well as listed financial institutions.


Source, Bolsa Mexicana de Valores, Indicador Bursátil, December 2005.


In addition to the powers enjoyed by self-regulatory organizations, the CNBV maintains regulatory oversight over those sectors.


In this case, the new Law envisages that oversight should be undertaken by the relevant SRO.


Based on the principle of reciprocity.


Even though in new funds, as stated above, the fund operator can appoint the Board of Directors, being the fund’s sole shareholder, its members should be elected by the investors themselves.


This time limit was established in the Circular Única for Market Intermediaries in 2004.