The disclosure requirements vary between countries. For example, in some countries, the regulatory philosophy on disclosure for issue of securities gives the disciplinary role back to the market participants, encouraging issuers and market intermediaries to provide timely and complete disclosures. The regulators will not seek to evaluate the merits of the issuer, the disclosures required are detailed and complete leaving the investors to decide on the merits of the investment. This philosophy is backed by strong sanctions for improper disclosures and the high probability that violators will be caught and penalised. Market participants, in these jurisdictions, therefore have an incentive to avoid making damaging disclosures in maintaining their own integrity.

The other disclosure model, commonly known as 'merit regulation' requires qualitative and judgemental review by the regulators, involving a detailed scrutiny of the prospectus, the pricing of the issue and other disclosure documents. This system has its merits in protecting investors, especially the retail investors who may not be accustomed to assessing the risks in an investment by perusing a prospectus document. One of the drawbacks of this system is the Iengthy approval period in the merit review process. In deciding the model to adopt regulators must consider the adequacy of sanction powers it has over the violaters, and the level of responsibility by the professionals, issuers, directors and investment banker must be well understood. In emerging markets where public confidence is paramour a faded public listed company could lead to public outcry by retail investors and politicians notwithstanding that full disclosure was made in the prospectus.

During the past 25 years or so, volumes of literature has been churned out that support the hypothesis that financial markets are, in one degree or another, efficient. How efficient is a matter of debate amongst academics and practioners even today. Eugene Fama was amongst the pioneers in finance theory that expounded on the three forms of market efficiency, the weak, semi strong and strong form. In its most basic form, the efficient market hypothesis states that the current price of securities incorporates all relevant and available information. New price sensitive information that comes into the market will be random and is quickly reflected in the stock price. Because the new information is random one cannot predict future price movements from past trends. The behaviour of stock prices therefore resembles a random walk as prices respond to each new random event.

Each of the three levels of market efficiency has been subjected to widespread statistical testing over the years. Empirical evidence suggest that developed capital markets are not efficient in the theoretical sense, though not fully conclusively. Two common anomalies found in the United States are that small cap stocks tend to outperform the S&P 500, and the January effect, a successful timing strategy of buying selective stocks in December and selling for a profit in January. However there are other evidence that support the view that markets are efficient. Professional managers as a group have failed to outperform the markets over a long period of time implying that you cannot beat an efficient market.

As regulators we are not to contend with these or take a position with regard to those on going debates. Our interest is to establish rules for a transparent and efficient market. These rules will require companies to disclose information about their assets and earnings, changes in directors shareholdings and other significant price sensitive information on a timely basis. These information must then be efficiently disseminated to the investing public to allow investors to make timely decisions on their investments.

The third type of regulatory activity is in the areas of enforcement, investigation and prosecution,-a role which quickly comes to mind when people think of " regulation. Securities markets are characterised by systemic risks, the risk that could infect the entire financial system resulting from the collapse of a single institution or a sector of the market. Two examples in the eighties come to mind. The Pan Electric crisis in Malaysia and Singapore in the early eighties and the global effect of Wall Street's October 87 stock market crash. At times, though, the markets have been resilient to the insolvency of a single, large institution. For example, when Drexel, Bumham and Lambert announced on 13th February, 1990, that it was filing for Chapter 11 bankruptcy, the news set off declines in stock and bond prices on Wall Street. Prices of junk bonds subsequently collapsed. There were fears of the spiral effects of counterparty defaults risk amongst Wall Street's investment banks, and many lost money, but the market survived. And, similarly the banking community in Massachussets survived the insolvency of Bank of New England in 1991, largely helped by the national deposits insurance schema.

Systemic risks in the above instances are the results of improper conduct by an individual, Or a group of individuals. The disciplinary role of the regulator must be effective to restrain improper market conduct such as insider trading, market manipulation, improper corporate disclosure or front running. These are issues concerning ethics, and promoting good ethics within the industry becomes a key developmental role.

Good ethics would include honesty, courage, compassion and restraint. We look for integrity as a combination of many of these values. In many ways personal values define a person more than other characteristics such as colour, sex and other physical attributes. Like physical characteristics, ethics are ultimately visible. Unlike physical characteristics, ethics involves conscious choices by individuals. These choices have consequences, sometimes irreversible. Mistakes of character are different from mistakes made resulting in poor business judgement, they determine a whole career. In short ethical lapses ruin careers, tarnish reputations, and diminish public confidence in securities markets Good ethics, however, is good business for those who wish to be around for the long term. And Good ethics are essential for the long term health of the market. When investors perceive that markets are fair and efficient they will give a vote of confidence and not take their money out at the first sign of a bear market.

Let me now say a few words about IOSCO, the International Organisation of Securities Commissions, since many here are members of this organisation. IOSCO provides a major international forum for mutual consultation and collaboration on regulatory issues relevant to the securities business, including the growing cross border business. The organisation's broad aim is to is to help one another develop a safe and sound market system for investor protection and confidence. The member agencies of IOSCO have formalised their objectives as follows:

• Cooperate to improve the regulation of domestic and international markets
• Exchange information on their experiences, and adopt best practices in order to promote the development of national markets
• To provide mutual assistance to ensure the integrity of the markets by a rigorous application of standards and by effective enforcement against offences.