Mexico
Detailed Assessment of Observance of International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation

A detailed assessment on the observance of Mexico’s compliance with International Organization of Securities Commissions objectives and principles of securities regulation is presented. The regimes governing the regulation of issuers, collective investment schemes, and secondary markets, and with respect to cooperation and information sharing, are extensive. The most significant issues regarding full implementation of the Principles fall under the Regulator Principles. Much of the activity on the Bolsa Mexicana de Valores comes from computer-driven program trading orders that are placed to take advantage of price asymmetries between markets.

Abstract

A detailed assessment on the observance of Mexico’s compliance with International Organization of Securities Commissions objectives and principles of securities regulation is presented. The regimes governing the regulation of issuers, collective investment schemes, and secondary markets, and with respect to cooperation and information sharing, are extensive. The most significant issues regarding full implementation of the Principles fall under the Regulator Principles. Much of the activity on the Bolsa Mexicana de Valores comes from computer-driven program trading orders that are placed to take advantage of price asymmetries between markets.

I. Summary, Key Findings, and Recommendations

A. Executive Summary

1. As the supervisor of the securities markets in Mexico, the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, CNBV) has developed a robust supervisory framework that exhibits high levels of implementation of the International Organization of Securities Commissions Objectives and Principles of Securities Regulation (IOSCO Principles) in many areas. The regimes governing the regulation of issuers, collective investment schemes, and secondary markets, and with respect to co-operation and information sharing, are extensive. However, there are gaps in the commission’s enforcement powers and in the capital requirements that apply to securities firms that should be addressed.

2. The most significant issues regarding full implementation of the Principles fall under the Regulator Principles. These issues flow from two sources. First, there is no specific statute governing derivatives (whether exchange traded or over-the-counter (OTC)), nor any other express legislative provisions that govern the regulation of that growing market. This statutory gap results in a lack of assured jurisdiction and powers and the potential for gaps and overlaps among the other authorities involved (the central bank and the Secretariat of Finance and Public Credit (Secretaria de Hacienda y Credito Publico, SHCP)). Second, there are significant weaknesses in the protections afforded members of the Board of Governors and staff and with the resources of the Commission that lead to concerns about its independence and ability to carry out its mandate fully.

B. Introduction

3. The assessment was conducted during the IMF/World Bank Financial Sector Assessment Program (FSAP) mission to Mexico during the period September 7 to September 21, 2011, by Tanis MacLaren, an external technical expert employed for this purpose by the IMF.

4. The assessment was carried out using the 2003 IOSCO Methodology for Assessing Implementation of the IOSCO Principles (the Assessment Methodology). In using the Assessment Methodology, the assessor sought to focus on the substance of the regulatory outcomes of the key requirements under each Principle. In June 2010, IOSCO approved a revision to the IOSCO Principles, which split one existing principle into four and added six completely new Principles. A draft revised methodology was circulated for consultation in May 2011 and the final version was published shortly after the mission’s completion. The final version of the revised Assessment Methodology is expected to be endorsed at the IOSCO annual meeting in 2012. The CNBV agreed to allow the informal assessment of the status of implementation of the newly added Principles, using the guidance provided in the draft revised Assessment Methodology as issued in May 2011. A summary of these discussions is included as an annex to this report.

5. The assessment relies on information from a detailed self assessment submitted by the authorities, as well as extensive interviews with the CNBV staff, a review of legislation, rules and related materials, along with interviews with market participants and other stakeholders.

6. Caution should be applied when comparing the results of this assessment to any previous reviews. This assessment is being done after the recent global systemic financial crisis and therefore the “bar” for these assessments has gone up in terms of the rigor and thoroughness of the reviews, as well as the increased weight being given to the effective implementation of the various key issues and questions. The net result is that this assessment is not comparable to prior evaluations. Any changes in ratings from prior assessments generally do not reflect a decline in the quality or level of regulation; rather they result from increased rigor of the application of the assessment criteria.

7. The assessor is grateful to the staff of the CNBV for their extensive cooperation and assistance in the conduct of this assessment. The staff was informed, forthright and helpful throughout. The assessor would also like to thank the regulated entities, market participants and other stakeholders who generously provided their time and honest insights. The industry participants with whom the assessor met spoke extremely highly of the quality of the staff at the CNBV and this assessor shares those views.

Institutional and market structure—overview

8. The CNBV is a supervisory authority with broad powers to regulate certain aspects of the capital markets in operation in Mexico. The CNBV has regulatory authority over a broad range of securities market participants, including securities firms, self regulatory organizations, securities exchanges, market infrastructure providers (central counterparties and securities depositories), external auditors, public issuers, rating agencies, price vendors, and collective investment schemes. The CNBV also is responsible for the supervision of banks, development banks and agencies, cooperatives, credit unions and other deposit-taking institutions. The CNBV reports to the SHCP.

9. The National Commission for the Protection and Defense of the Users of Financial Services (Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros, CONDUSEF) is the consumer protection agency in the jurisdiction. Its responsibilities include promoting financial education, setting certain consumer protection requirements and receiving and responding to consumer complaints about financial services firms. For example, CONDUSEF requires Mexican financial institutions, including securities firms, to have specialized units dedicated to responding to inquiries and complaints from clients. CONDUSEF lacks the resources and powers to function effectively as a consumer protection authority. It has no power to order a financial services provider to compensate an investor for losses or to arbitrate a dispute. The weakness of this agency is of concern as gaps in the consumer protection regime may have a negative effect on investors and undermine confidence in the system as a whole.

10. The regulator’s responsibilities, powers and authority with respect to the securities market are established by statute. The CNBV was created as a regulator under the National Banking and Securities Commission Law (Ley de la Comisión Nacional Bancaria y de Valores, LCNBV). The LCNBV gives the commission the authority to administer, enforce and give effect to the provisions of the laws related to financial services in the jurisdiction. In the securities markets, the two key laws are the Securities Market Law (Ley del Mercado de Valores, LMV), which was effective as of the end of 2005, and the Investment Companies Law (Ley de Sociedades de Inversion, LSI), which dates from 2001. These laws are supplemented with detailed secondary legislation in specific areas, including the Securities Firms Rules, Issuers Rules and Sociedade de Inversion (SI) Rules.

11. The Commission’s responsibilities, powers and authority with respect to the derivatives market rely on the general authority granted to SHCP, the central bank and the Commission to regulate financial markets and their participants in Mexico. These provisions do not refer to derivatives specifically. The responsibilities and authority for regulation is split in practice among the CNBV, the SHCP and the central bank of Mexico (Banco de Mexico, BoM). All three entities have the authority to issue secondary legislation/rules for this market, which creates opportunities for duplication, overlap and conflict in the provisions that govern.

12. There is one stock exchange (Bolsa Mexicana de Valores, BMV) and one derivatives exchange (MexDer) operating in Mexico under permissions granted by the Federal Government. New offerings of securities to the public in the jurisdiction must be made via a prospectus and the securities must be listed on the BMV. Trading in equities or listed derivatives is required to take place on the exchanges. Trading in some fixed income instruments and most derivatives takes place over-the-counter, often through electronic facilities operated by authorized inter-dealer brokers. The BMV, MexDer, the central securities depository (Indeval) and the central counterparties (CCV and Asigna) are all part of the BMV Group, a public company self-listed on the BMV. The BMV is a member of the World Federation of Exchanges.

13. The BMV has a very low number of domestic listings and the liquidity of these is limited for all but the very largest companies. There has been virtually no growth in the number of domestic listings over the past five years, while market capitalization has increased 30 percent and trading volumes were up 131 percent. There are a fairly large number of family controlled private companies that would be prime targets for listing. However, the consensus among the regulators and market participants is that they have alternative sources of funding that are more attractive as these do not entail the public disclosure obligations that come with public listing. Trading is concentrated in the largest issuers, with the five most active issues making up 68 percent of total traded value in 2011.1 Only about 30–40 stocks are considered liquid.2

14. Most of the growth in listings at the BMV has been in foreign equities, and some exchange traded funds (ETFs). These instruments are listed and traded on the International quotation system (Sistema Internacional de Cotizaciones, SIC). Securities eligible for trading on the SIC are ones that have not been publically offered via a prospectus in Mexico; are not listed in the National Securities Registry (Registro Nacional de Valores (, RNV); and are listed on a foreign securities market recognized by the CNBV or whose issuers have otherwise been approved for listing by the CNBV. The CNBV has recognized several foreign stock markets as having comparable standards, such as disclosure rules. These exchanges include NASDAQ, the New York Stock Exchange, the London Stock Exchange, the TMX Group Inc., and the Deutsche Börse AG. Unlike domestic listings in which any investor may participate, only qualified investors (institutions and high net worth individuals) may purchase securities listed on the SIC. Trades executed through the SIC settle through Indeval and are subject to the same operational rules and regulations as other trades executed on the domestic side of the BMV. The number of listings on the SIC has increased by more than 200 percent over the last five years, with the largest growth in exchange traded funds (ETFs)—up 471 percent. As for the domestic market, the trading on the SIC is highly concentrated in the five most active listings, with these ETFs making up 58 percent of the total traded value in 2011.3

Table 1.

Mexico: Trading on BMV

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Source: CNBV.
Table 2.

Mexico: BMV Market Size and Trading Data

(In U.S. dollars)

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Source: CNBV.

15. Much of the activity on the BMV comes from computer-driven program trading orders that are placed to take advantage of price asymmetries between markets. According to the BMV, up to 90 percent of total orders in the market represent orders driven by computer trading algorithms. Most are cancelled before the order is filled. The ratio of orders to trades is about 20 to 1. The BMV has added significant systems capacity in recent years to handle the volume of orders. Its trading rules and the related CNBV Securities Firms Rules have recently undergone significant changes to: modernize the provisions regarding trading; permit direct market access to institutional investors through member brokers; and facilitate cross trading.

16. Growth of listings and trading on MexDer has been mixed. The market has experienced growth in the number of listed options (up 450 percent) and options trading volumes (up 36 percent) over the past five years, while the number of listed futures and trading volume has declined (11 percent and 85 percent, respectively). The values of exchange-traded instruments show a similar pattern: options trading values are up 83 percent and futures are down 85 percent. The overall decline on the futures side is largely because of a decline in listing and trading of interest rate related instruments. MexDer officials indicated virtually all trading on the exchange represents trades by institutional investors or proprietary trading by the members.

17. The BMV recently established an order routing agreement with the Chicago Mercantile Exchange (CME) that expands the access of Mexican market participants to a wider array of products. Most of the listings on the CME are now available to Mexican participants through local MexDer members. Trades are cleared through MexDer clearing members and settled in Mexico through Asigna, the central counterparty, which also collects and holds margin for these trades.

Table 3.

Mexico: Exchange Traded Derivatives—Number of Contracts Listed

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Source: CNBV.
Table 4.

Mexico: Exchange Traded Derivatives—Annual Trading Volume

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Source: CNBV.
Table 5.

Mexico: Exchange Traded Derivatives—Annual Trading Value

(In U.S. dollars)

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Source: CNBV.

18. As with the stock and derivatives markets, the growth in the collective investment scheme (SI) market has been slow. The number of SIs has grown only marginally over the past five years (9 percent). Assets under management have grown much faster—up almost 60 percent over the same period. Most of the growth, both in the number of funds and assets under management, is in equity funds, chiefly owing to their greater flexibility. Debt funds may only invest in debt instruments, while equity funds only have to have 20 percent invested in equities. In fact, most equity funds are operated as balanced funds, with a varying percentage of the funds invested in each type of securities. In the two years since the crisis, SIs have seen increased flows of funds. Various market participants attributed this growth to the fact that investors in SIs lost less money during the crisis than those who invested directly in the markets.

Table 6.

Mexico: Collective Investment Schemes

(Sociedades de Inversion)

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19. The Mexican system makes limited use of self-regulatory organizations (SROs) in carrying out the oversight of market participants. The exchanges and central counterparties are automatically classified as SROs under the LMV. There are two other SROs recognized by the CNBV and by the Association of Independent Investment Advisors (Asociacion Mexicana de Asesores Independientes de Inversiones, AMAII), a voluntary association of independent investment advisors and the Mexican Association of Securities Intermediaries (Asociacion Mexicana de Intermediarios Bursatiles, AMIB), an association to which securities brokers and SI operators and distributors must belong. These two associations operate more as trade associations than SROs. The regulatory functions the SROs carry out vary by SRO and run from virtually none for AMAII and AMIB through to MexDer that conducts regular examinations of its members.

20. There are a relatively small number of authorized market intermediaries operating in Mexico and the numbers are static. Market intermediaries include brokerage firms, credit institutions, SI operators, pension fund managers and SI distributors (whether independent companies or financial institutions acting as distributors). Brokerage firms must comply with the provisions of the LMV; the other entities must comply with the specific legislation governing their respective activities, such as the LSI. Credit institutions and brokerage houses may carry on similar capital market activities. Certain of the rules that govern securities market activities are written to apply to both types of institutions. However, some securities markets rules presently apply only to brokerage houses.

Table 7.

Mexico: Number of Authorized Firms 1/

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Source: CNBV.

Not including banks or securities firms authorized to distribute SIs.

21. Further, there are five inter-dealer brokers (Sociedades que administran sistemas para facilitar operaciones con valores) operating in Mexico. These entities are authorized by the Commission to provide services and facilities for OTC trading in securities—mostly debt and derivatives—only to credit institutions and brokerage houses. They may also provide price information to anyone on the instruments that trade through their facilities. They do not deal in listed equity securities and are not licensed as intermediaries under the LMV.

22. Mexico’s financial system is small and very concentrated. The system is dominated by large financial conglomerates, which include all types of market intermediaries. Several of the conglomerates are among the largest public companies in the country. These financial groups control or manage about 73 percent of all financial assets. This structure creates some potential capital markets regulatory issues, particularly ones related to conflicts of interest and consumer protection more broadly. In this environment, strong consumer protection requirements are essential to maintain confidence in the market and for market development. Market participants, regardless of their institutional character should be subject to equivalent rules when carrying on similar activities.

23. The number of staff at the CNBV has declined and turnover at the senior level is high. Staff salaries have been frozen for almost a decade, resulting in a decline in compensation of about 40 percent on a real basis, while at the same time demands on Commission staff have increased. Salary levels are now well below comparable positions in the private sector. This has had a predictably negative effect on attracting and retaining experienced and skilled staff. As a result, many experienced staff, particularly at senior levels, have left the CNBV for the private sector. This loss in expertise and institutional memory is an important problem that needs to be addressed before it hampers the CNBV’s effectiveness in carrying out its mandate.

Table 8.

Mexico: Staffing at the CNBV

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Source: CNBV.

24. There has been an effort within the CNBV to codify the circumstances in which its discretion will be exercised. The aim is to reduce the opportunities for challenges to its authority and the application of political influence. Clarity and transparency with respect to Commission policies is admirable. However, this does have the potential effect of limiting its flexibility to deal with novel situations and may be incompatible with effective regulation of fast-moving capital markets.

Preconditions for effective securities regulation

25. The preconditions for effective supervision (a stable macroeconomic environment, sound legal and accounting framework, and effectiveness of procedures for the efficient resolution of problems in the securities market) appear to be in place in the jurisdiction. As in many jurisdictions, the bankruptcy of market intermediaries is governed by the same legislation that governs any other corporate bankruptcy and it operates very slowly. While client assets held at the central depository are protected, it is not clear how the default procedures of the central counterparties would work in the event of a brokerage firm or large financial conglomerate bankruptcy.

C. Main Findings

26. Principles 1–5, Principles relating to the regulator: The CNBV has clear statutory authority over and responsibility for the securities markets. Its authority with respect to derivatives markets is less clear-cut and needs to be rectified by the passage of express legislation. The rules governing certain market activities may differ depending on the type of institution engaging in the activity. The operational independence of the agency is compromised by a lack of resources, the fact that 75 percent of the Board of Governors are appointed by the SHCP and may be dismissed without cause at any time, and the lack of statutory immunity for the Commission, its Board and staff members. Persons affected by decisions of the Commission are afforded a full range of protections, including the right to be heard, to written reasons and to rights of appeal. The laws should be amended to permit the conduct of surprise inspections of any regulated entity and to provide additional powers for the Commission with respect to enforcement matters, including enhanced transparency and the ability to settle matters. Staff is very professional and subject to detailed conduct rules. Market participants uniformly praised the quality and openness of CNBV staff.

27. Principles 6–7, Principles relating to self-regulation: The Mexican system makes limited use of self-regulatory organizations (SROs) in carrying out the oversight of market participants. The regulatory functions the SROs carry out vary by SRO and run from virtually none to full rule-making and conducting regular examinations of its members. In all cases, the CNBV retains full authority to oversee SRO members. There is an appropriate SRO supervision program in place that varies by the nature of the SRO in question. The exchanges and central counterparties are subject to regular on-site inspections and their rules are subject to prior review and approval. MexDer has a compliance officer who is in charge of the surveillance of its members.

28. Principles 8–10, Principles relating to enforcement of securities regulation: The Commission has broad inspection, investigation and surveillance powers, but lacks the power to conduct inspections of regulated entities without notice. It has powers to investigate and take action against anyone who breaches the laws it administers. If there is evidence of possible illegal conduct, investigation inspections may be conducted with same day notice. The Commission carries on active inspection and enforcement programs. Both on-site and off-site reviews are performed of regulated entities. Market surveillance is performed at the exchanges and at the CNBV in parallel. There are some gaps in enforcement powers that should be filled and the sanctions available across the laws administered by the Commission should be brought into alignment. Fine levels should be reviewed to ensure they are consistent and high enough to be effective deterrents. The provisions restricting disclosure of investigations and enforcement actions should be revised to permit fuller and earlier publication of information.

29. Principles 11–13, Principles for cooperation in regulation: The Commission has the ability and capacity to share information and cooperate with regulators, both domestically and internationally, subject to the general requirement that there be an MOU in place. It can share confidential information with any other country through an MOU. It is a signatory to the IOSCO Multilateral MOU and to many bilateral MOUs with its counterparts in key jurisdictions, such as Argentina; Brazil; Canada; El Salvador; Panamá; Peru; the United States; United Kingdom; and Venezuela, as well as Germany; the Netherlands; and Spain, and various other European countries.

30. Principles 14–16, Principles for Issuers: Extensive requirements are in place for offering and continuing disclosure documents for securities. The disclosure provided for trading instruments listed on MexDer include details of the terms of the contracts and the mechanics of trading, but no disclosure of the risks of leverage. New issues of securities (debt, equity, or collective investment schemes) to the public in Mexico are required to be offered via prospectus and listed on the BMV and are subject to the exchange’s listing standards, in addition to the requirements set out in the LMV and the Issuers Rules. Both the BMV and the CNBV conduct reviews of the prospectus of the issuer. Continuing disclosure documents are made public through the facilities of the exchange and the Commission. Investors are treated equitably with respect to voting, access to information and the ability to participate in any takeover bid. Full information must be provided for any takeover bid. Information is publicly available regarding shareholdings of directors, officers and other insiders of the corporation but the threshold triggering reports of changes in ownership is high and should be lowered. Accounting and auditing standards are in place, and auditors are subject to oversight by the CNBV and detailed independence standards apply. By the beginning of 2012, public issuers will have to prepare their financial statements using International Financial Reporting Standards (IFRS) and be audited using International Standards of Audit (ISA). The publication of annual audited financial statements could be more timely and the access to information about shareholder meetings should be enhanced by requiring electronic publication of the materials. If and when MexDer develops a retail client base, additional disclosure regarding the risks of leverage should be provided to clients.

31. Principles 17–20, Principles for collective investment schemes: The framework for regulation of SIs is largely compliant with the Principles. All SIs and their operators and distributors are subject to authorization and reporting requirements. All funds offered to the public must be registered with the CNBV, which process includes the review of a detailed prospectus. Funds must be established as corporations, with assets segregated from those of the operator and distributor. All SIs and their operators and distributors are subject to both off-site and on-site supervision. Any asset of an SI that can be held at a central depository must be so held. The central depository for securities is independent of the SIs. The fund’s securities and its assets are subject to valuation by authorized third party service providers (valuation companies and price vendors) that are required to be independent of the fund and its operator. Continuous disclosure of information and prices is provided through the fund or its distributor’s website. In addition, prices must be reported daily through the BMV’s system. The CNBV has the authority to suspend new placements, but no authority to order a fund to suspend or resume redemptions.

32. Principles 21–24, Principles for market intermediaries: A framework is in place for licensing and to apply on-going requirements for market intermediaries. Applicants are subject to detailed reviews before being authorized. There are initial and ongoing risk-based capital requirements that are based on a simplified version of Basel II and that address market, credit, and operational risk. Liquidity is subject to separate testing but no specific capital requirements apply. Requirements regarding capital calculations and prompt (early) reporting of deficiencies by market intermediaries should be more rigorous. Market intermediaries are required to have extensive systems of risk management and internal controls in place. Client assets must be held in segregated accounts at central depositories. Intermediaries are required to know their clients and make suitable recommendations for those clients. The rules regarding conflicts of interest need improvement and the rules regarding conduct of business should be made consistent across all types of intermediaries. There is no specific written plan in place to address the failure of a broker; however, the law gives the CNBV broad powers to take action against a failing firm and require it to reduce its business, raise capital and give notice to its clients. As in most countries, the bankruptcy of many types of authorized firms, such as brokerage firms and SI operators, would be governed the general bankruptcy laws, which may not be capable of dealing with the demands of a market participant failure.

33. Principles 25–30, Principles for the Secondary Markets: Exchanges are subject to authorization by the SHCP with the advice of the CNBV (and the BOM with respect to derivatives). Alternative trading systems for listed instruments are not permitted. The MexDer and central clearinghouses are subject to minimum capital requirements set by the authorities via MexDer’s Mandatory Rules. The SHCP may set capital requirements for the stock exchange, but has not yet done so. Market surveillance is performed at the exchanges and the CNBV in parallel. The CNBV has a comprehensive oversight system for exchange supervision that includes on-site examinations and off-site reviews of rules and other matters. The Commission may suspend the operations of a stock exchange and the SHCP has the authority to revoke the authorization of any exchange. There is both pre-trade and post-trade transparency of prices of shares in real time, but not for fixed income securities. The rules against market abusive transactions are extensive and there are mechanisms in place to detect and take action against improper conduct. Trades on both BMV and MexDer are cleared and settled through central counterparties that have detailed and transparent provisions designed to protect the markets against a default by any participant.

Table 9.

Mexico: Summary Implementation of the IOSCO Principles—Detailed Assessments

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D. Recommended Action Plan and Authorities’ Response

Recommended action plan

Table 10.

Mexico: Recommended Action Plan to Improve Implementation of the IOSCO Principles

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Authorities’ response to the assessment (CNBV)

34. Mexican financial authorities agreed, in general, with the conclusions, observations, and recommendations of the assessment regarding the implementation of IOSCO Principles in the Mexican financial sector. Most of the written comments provided by these authorities on the preliminary draft were included in the final report. Authorities consider that the exercise represented a good opportunity to discuss both strengths and weaknesses on securities markets, as well as to draw attention to main issues that should be addressed in the future. Authorities believe that the evaluation of the principles is fair and objective.

35. The authorities found the IOSCO report both comprehensive and useful. Also, they believe that assessors’ advice and proposals will become part of their agenda for the upcoming years, and that the assessment identifies improvements that should be implemented in order to enhance the performance and development of securities markets. The report properly addresses main concerns, which are shared by authorities. On this behalf, they agree that two relevant weaknesses of Mexican securities market are its reduced number of listings and its low level of liquidity and, as a consequence, they welcome advice on how to move forward. Also, they agree that high concentration of portfolios might raise concerns, although they consider that this should not be seen as a problem unique to the securities market, but that should be considered as a characteristic of the Mexican economy as a whole. Authorities also share the assessors’ point of view regarding that some enhancements should be made to CNBV’s powers to publish information regarding investigations and sanctions in order to improve transparency and strengthen market discipline.

36. While they acknowledge that Mexico lacks a Law to regulate the domestic derivatives market, they believe that most of the recommendations suggested in the report might be implemented through secondary regulation, due to the fact that the SHCP, Banxico, and CNBV have broad powers to do so.

37. Regarding the assessment on Principle 14 (there should be full, timely, and accurate disclosure of financial results and other information that is material to investors’ decisions) they believe that Mexico complies with most of the standards of this principle. In fact, compliance with this particular principle is similar to that observed in the most developed markets. Therefore, authorities are of the opinion that this principle should be assessed as Broadly Implemented (BI).

II. Detailed Assessment

38. The assessment of the country’s observance of each individual Principle is made by assigning to it one of the following assessment categories: fully implemented, broadly implemented, partly implemented, not implemented, and not applicable. The Assessment Methodology provides a set of assessment criteria to be met in respect of each Principle to achieve the designated benchmarks. The Assessment Methodology recognizes that the means of implementation may vary depending on the domestic context, structure, and stage of development of the country’s capital market and acknowledges that regulatory authorities may implement the Principles in many different ways.

  • A Principle is considered fully implemented when all assessment criteria specified for that Principle are generally met without any significant deficiencies.

  • A Principle is considered broadly implemented when the exceptions to meeting the assessment criteria specified for that Principle are limited to those specified under the broadly implemented benchmark for that Principle and do not substantially affect the overall adequacy of the regulation that the Principle is intended to address.

  • A Principle is considered partly implemented when the assessment criteria specified under the partly implemented benchmark for that Principle are generally met without any significant deficiencies.

  • A Principle is considered not implemented when major shortcomings (as specified in the not implemented benchmark for that Principle) are found in adhering to the assessment criteria specified for that Principle.

  • A Principle is considered not applicable when it does not apply because of the nature of the country’s securities market and relevant structural, legal and institutional considerations.

Table 11.

Mexico: Detailed Assessment of Implementation of the IOSCO Principles

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