Because many regulators lack the staff skills to fully understand the risks associated with the activities of market participants, they cannot effectively set standards for risk management and internal control.

The inability of securities market regulators to enforce compliance with existing rules and regulations hinders the healthy development of markets, IMF reported.
In many countries, particularly low-income ones, a combination of factors has undermined the capacity of regulators to regulate effectively. These include insufficient legal authority, as well as a lack of resources, skills, and political will. This weak capacity is more acute in areas that are technically complex, such as valuation of assets, risk management practices, and internal controls.
The strength of institutions increases with country income. Thus, while most countries had gaps in regulatory implementation, low-income jurisdictions showed levels of implementation below 50 percent, whereas high-income countries were above 70 percent.
Why Regulation?
Securities markets play a critical role in economic growth and financial stability. They serve as a mechanism for transforming savings into financing for the real sector, offering an alternative to bank financing.
Markets provide the best mechanism for asset pricing. They are also a means for transferring risk and diversifying risk exposure, thus enabling firms to raise capital for new investments. Risk transfer and pricing mechanisms allow financial institutions, such as banks and insurance companies, to manage risk more efficiently. Markets may serve as a cushion against disruption of banking systems, and the more efficient they are, the more they contribute to economic growth.
While the role of securities markets is more evident in industrial countries, these markets are also becoming a source of financing for the larger corporate players in many emerging-market and developing countries.

What Is Being Regulated?
Securities market regulation refers to the regulation of public issuers of securities, secondary markets, asset management products, and market intermediaries (brokers, dealers, advisors).
Regulation is intended to address asymmetries of information between issuers and investors, clients and financial intermediaries (such as brokers and dealers), and between counterparties to transactions. It is also meant to ensure the smooth functioning of trading and clearing and settlement mechanisms to prevent market disruption and foster investor confidence.
Securities market regulation has three core objectives: to protect investors, to ensure that markets are fair, efficient, and transparent, and to reduce systemic risk.
To guide countries in meeting these objectives, the International Organization of Securities Commissions (IOSCO) identified and published 30 principles of securities regulation in 1998. The principles are grouped under the following eight categories:
1. Regulators: Regulators should be suitably empowered, independent, and accountable.
2. Self-Regulation: Self-regulatory organizations (SROs)--such as exchanges, trade associations, and private agencies--should observe standards of fairness and confidentiality and be overseen by regulators.
3. Enforcement of regulation: Regulators should have comprehensive inspection, investigation, surveillance, and enforcement powers.
4. Cooperation in regulation: Regulators should be able to share both public and nonpublic information with domestic and foreign counterparts.
5. Issuers: Issuers should provide full, timely, and accurate disclosure of financial results and other information to investors and observe high accounting and auditing standards.
6. Collective Investment Schemes (CIS): Regulators should set standards for these increasingly popular schemes--notably their legal form and structure, disclosure, and asset valuation practices.
7. Market Intermediaries: Regulators should set minimum entry standards as well as capital and other prudential requirements for intermediaries and establish procedures for dealing with their failure.
8. Secondary Market: Trading systems and securities exchanges require effective regulation and oversight, and trading activities should be transparent.

Deficiencies
In 2003, IOSCO developed a methodology and a rating system to assess the degree of compliance with the 30 principles--fully implemented, broadly implemented, partly implemented, and not implemented.
In studying the IOSCO assessments in 74 countries completed between 1999 and September 2007, the IMF identified four main areas of concern: weak supervisory practices, including inspections; weak enforcement; poor valuation rules for investment funds; and a lack of understanding and oversight by regulators of risk management and internal controls of market intermediaries.

Many social and environmental activists use the term agrofuels instead of biofuels because the focus is on using agriculture to mass produce fuel.

Biofuels have quickly turned from environmental savior to just another mega-scale get-rich quick scheme.
Countries and regions without their own oil reserves to tap now see their farms, peatlands and forests as potential oil fields--shallow but renewable lakes of green oil. However, renewable does not mean sustainable, and in most cases the only green part of biofuel is the wealth they generate, Ipsnews.net reported.
Not surprisingly, given the record high oil prices, worldwide investment in bioenergy reached $21 billion in 2007, according to the UN Environment Programme. The Inter-American Development Bank announced $3 billion for investment in private sector biofuel projects--mainly in Brazil--while the World Bank said it had $10 billion available in 2007.
Meanwhile development assistance for food-producing agriculture had fallen to $3.4 billion in 2004--with the World Bank’s share less than $1 billion , according to the bank’s own World Development Report on Agriculture released in October 2007. And most of this financial assistance was spent on subsidizing use of chemical fertilizers.
“It’s not just the World Bank, regional development agencies, progressive development groups in Europe and many countries are all investing in agrofuels,“ says Anuradha Mittal of the Oakland Institute, a US NGO focused on social and environmental issues.
“I was amazed to see how much land in India has been taken away from poor people to start up new agrofuel operations,“ Mittal said after a recent visit to her home country.“
Many social and environmental activists use the term agrofuels instead of biofuels because the focus is on using agriculture to mass produce fuel.
Agrofuels are “false solutions“ to the critical problem of climate change, and in many cases may simply be making it worse, she says. Worse, because rich countries think they are making real gains in reducing emissions with biofuels while utterly failing to deal with their out-of-control consumption of energy and other resources.
Investors in biofuels can not only make money, they can also get valuable carbon credits under the Clean Development Mechanism (CDM) of the Kyoto climate change treaty. Carbon credits can be used to offset fossil fuel emissions or can be sold on various carbon trading markets.
The CDM is a complicated process that provides funding and certifies carbon credits. It funds solar energy projects and wind power as replacements for coal power in less developed countries.
With biofuels it has been difficult to determine exactly how much a biofuel project would reduce CO2 emissions compared to fossil fuels when emissions involved in growing the crop, transportation and production are included.
As a result only a few small projects that make biodiesel from waste vegetable oil have CDM funding, says Almuth Ernsting of Biofuelwatch, an environmental NGO in Britain. However, a number of large-scale projects including biodiesel project in Brazil and an ethanol project in Mexico may be approved this year.
“The industry says they need CDM funding,“ Ernsting told IPS. “If the CDM funds these kinds of large projects then the carbon markets are likely to finance others.“
If that happens, as seems likely, another wave of biofuel financing will flood the world when there is considerable scientific debate about the environmental benefits of agrofuels, she says. Recent research shows that fertilizers and tilling the soil releases from 30 to 45 percent of all carbon emissions.
Europe’s biodiesel made from Indonesian palm oil was known as early as 2005 to cause deforestation and the draining of peatlands and putting enormous amounts of carbon emissions into the atmosphere.
It has been hard to slow this down and while the European Union has expressed concern, it has held fast to its goal of deriving 10 percent of its transport fuel from plant material, says Ernsting.
“If we’re serious about fighting climate change then a moratorium on agrofuels is needed to allow time to do a proper assessment,“ she asserts.
George Weyerhaesuer, Jr, senior executive at the Weyerhaeuser Company, one of the world’s largest forest products companies, agrees that the risks and benefits of biofuels need to be worked out.
“We need a way to sort this out and then pass along recommendations to the United Nations,“ says Weyerhaeuser who is working with the World Business Council for Sustainable Development (WBCSD) in Geneva, Switzerland. WBCSD is a CEO-led, global association of some 200 companies dealing exclusively with business and sustainable development.
There are lots of fuels, feedstocks, processes and different situational circumstances for biofuels around the world. Some may be okay on a small scale only, while others may work on a larger scale, he told IPS.
So who is going to sort out which biofuel and where? Weyerhaeuser suggests the International Risk Governance Council, an independent organization also based in Geneva whose purpose is to help the understanding and management of global risks.
This little known group has bioenergy as one of its current projects and hopes to eventually “prepare risk governance guidelines and policy options for the production of electricity, heat and transport fuel from biomass“.
However, he opposes a moratorium, saying: “I’m more worried about carbon emissions; some of the biofuels will reduce those.“

Last week, the Indian economic czars faced a crucial test and they failed it. Economic growth is slowing down. Corporate sector sales are growing more than a third slower than last year and business confidence has declined.
According to Outlookindia.com, industrial growth has slowed from 11.6 to 9.2 percent. This has been caused by a contraction of 4.1 percent in the output of consumer durables and 2.1 percent in non-durables. The future looks anything but bright, for non-food credit, which meets the demand for consumer credit and working capital for industry and trade, is also growing at only two thirds of the pace of last year. This is an unmistakable sign that growth will slow down further.
But none of this has made the slightest dent in the thinking of the Reserve Bank of India’s governor, Y.V. Reddy. Even though their review of the economy’s performance in the last nine months revealed these trends, they have persisted in regarding inflation and not recession as their main enemy. According to Reddy, the decline in growth is healthy because it reflects the success of his measures to cool the economy. Despite that, he said with a touch of smugness, “We are still the second fastest growing economy in the world“.
Meanwhile, he argues, we still have an “inflationary overhang of liquidity“. In other words, loosen the monetary reins the slightest, and the demon of inflation shall rise again. So, in the teeth of all the indications of a slowing economy, the RBI has decided to make no changes to its monetary policy. As a result, interest rates too will remain where they were.
Reddy’s obsession with inflation defies understanding. With global demand slackening as the US heads for a recession, where will the impulse come from? Most certainly not from the domestic economy! The liquidity overhang that Reddy keeps harping on has been caused not by the 1.4 percent faster growth of bank deposits this year but by the 9.7 percent drop in the growth of demand for non-food credit.
True, the two together are leaving a lot of cash lying around. But discouraging a faster expansion of credit will only increase the ’overhang’.
Thus Reddy will be able to argue again in March that he must keep a tight rein on money supply because the ’liquidity overhang has grown larger’! This is crackpot economics. Reddy has also described the slowdown in industrial growth as healthy. It is only consumer goods sales that have declined, he tells us; this bespeaks the success of his policies in cooling down the economy.
This is true, but far from invalidating the thesis that the country is headed for recession, it only confirms it. For capital goods have not been affected precisely because Indians have been able to borrow more than $25 billion abroad to finance their fixed investment. And these loans have been obtained at half or less of the rates that prevail in India.
Had they too faced the high interest rates that the construction industry has to pay because it has no access to foreign loans, they too would have drawn in their horns long ago.
The immediate casualty of the RBI’s decision will be the economy. This becomes apparent the moment the country looks at the growth of industrial production. The index of industrial production has been hovering between 262 and 263 for the last seven months (June to December). During the same months of ’06, the index had risen from 225 to 248, a rise of more than 10 percent. If the deceleration continues for another five months, the annual rate of industrial growth will fall below 5 percent and India will be in the grip of recession.

The severe weather conditions that have descended on China’s central and southern regions, devastating as they are, will not have very serious effect on the nation’s economic fundamentals and will not dampen the strong momentum of economic growth, the National Development and Reform Commission told Atimes.com.
This is not just because the direct damages have so far been restricted to the southern disaster zones. Elsewhere, life goes on basically uninterrupted, despite the slight rise in vegetable prices.
China’s sizzling economic locomotive is simply too powerful to be hindered by such an episode. Neither the floods of 1998, nor the SARS (severe acute respiratory syndrome) epidemic of 2003 could derail it. The damage wrought by the snowstorms will also pass, according to the Chinese economic authorities.
It is still too early to accurately gauge the losses and damages. The relief work alone will last into the Lunar New Year. And additional, though comparatively mild, cold fronts are still making their way to the disaster areas. But history is on China’s side. The fact that its economy survived the tests of 1998 and 2003 basically unscratched puts it on the optimistic side.
But this optimism should not prevent it from seeing the disheartening truth on display at the micro level. The effects of the disaster have been debilitating for communities, and continue to pose a serious threat to unprepared local residents.
The short-term negative influences on the economy analysts have predicted seem inevitable. The temporary rise in food prices and the loss in output are already visible. The central task now is to accelerate the recovery in hard-hit areas. This would be the most efficient way to prevent the ripples from being amplified.