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					IOSCO Internet Report III (2003)                             Annex 3
List of significant regulations, developments and websites

                               REPORT ON


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IOSCO Internet Report III (2003)                                                                                         Annex 3
List of significant regulations, developments and websites

Table of contents
  Australia ........................................................................................................................ 3
     1.     Internet-related regulations, policy and guidance ......................................................... 3
     2.    New developments.................................................................................................. 7
     3.    List of websites ..................................................................................................... 11
  Brazil ........................................................................................................................... 13
     1.    New developments................................................................................................ 13
     2.    List of websites ..................................................................................................... 14
  Canada........................................................................................................................ 14
     1.    Internet-related regulations, policy and guidance ........................................................ 14
     2.    New Developments ............................................................................................... 15
     3.    List of Websites .................................................................................................... 19
  Germany...................................................................................................................... 20
     1.    Internet-related regulations, policy and guidance ........................................................ 20
     2.    New developments................................................................................................ 23
     3     List of websites ..................................................................................................... 25
  France ......................................................................................................................... 26
     1.    Internet-related regulations, policy and guidance ........................................................ 26
     2.    New developments................................................................................................ 27
     3.    List of websites ..................................................................................................... 28
  Italy.............................................................................................................................. 29
     1.    New developments................................................................................................ 29
  Malaysia ...................................................................................................................... 29
     1.    Internet-related regulations, policy and guidance ........................................................ 29
     2.    New developments................................................................................................ 31
     3.    List of websites ..................................................................................................... 32
  Netherlands ................................................................................................................. 33
     1.    Internet-related regulations, policy and guidance. ....................................................... 33
     2.    New developments................................................................................................ 34
     3.    List of websites ..................................................................................................... 36
  Portugal ....................................................................................................................... 37
     1.    Internet-related regulations, policy and guidance ........................................................ 37
     2.    New developments................................................................................................ 38
     3.    List of websites ..................................................................................................... 39
  Singapore .................................................................................................................... 39
     1.    Internet-related regulations, policy and guidance ........................................................ 39
     2.    New developments................................................................................................ 41
  Spain ........................................................................................................................... 42
     1.    New developments................................................................................................ 42
     3.    List of Websites .................................................................................................... 45
  Switserland .................................................................................................................. 47
     1.    Internet Related Regulations, Policy and Guidance ........ Erro! Marcador não definido.
  United Kingdom ........................................................................................................... 47
     1.    Internet Related Regulations, Policy and Guidance ..................................................... 47
     2.    New developments................................................................................................ 49
  United States of America (CFTC) ................................................................................ 51
     1.    Internet Related Regulations, Policy and Guidance ..................................................... 51
     2.    New Developments ............................................................................................... 52
     3.    List of websites ..................................................................................................... 55
  United States of America (SEC) .................................................................................. 56
     1.    Internet-related regulations, policy and guidance ........................................................ 56

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List of significant regulations, developments and websites


1.         Internet-related regulations, policy and guidance

Generally, technologies that support the rapid, inexpensive and widespread dissemination of information
should be welcomed for regulators for whom disclosure is a tool. Therefore, there are clearly
opportunities as well as risks in the development of e-commerce in the financial services sector. For
ASIC, a crucial element in dealing successfully with e-commerce issues has been to adopt a systematic,
whole-of-organisation, approach. Otherwise, there is a risk that regulatory and supervisory adjustments
to address e-commerce may be delivered piecemeal.

Therefore, co-ordinating approaches to e-commerce issues is essential, because it enables all parts of
the organisation to understand the context in which emerging e-commerce issues are being dealt with
and maximises individual and organisational learning. For more information on these comments see
Claessens, Glassner and Klingebiel (2001) "E-Finance in Emerging Markets: Is leapfrogging possible?"
(2001) located at

Understanding the e-environment:

To respond effectively to e-commerce it is critical for regulators – and often lawmakers – to monitor
developments closely and ensure they understand what is happening and what trends and
developments might affect what happens in the future. ASIC has, since the mid 1990s, sought to
systematically maintain contact on e-commerce issues with the regulated community and consumers
and with developers of new technology and industry experts. ASIC has published a series of discussion
papers and speeches, held conferences, roundtables and hosts regular bi-lateral meetings with industry
participants. Examples of this type of activity are located on the e-commerce pages of the ASIC website,
which are located at:

Making the regime medium neutral:

Facilitating e-commerce from a legal and policy perspective can be difficult. If legislation or policy is too
prescriptive, it risks being quickly out of date and may hamper rather than assist. Alternatively, if
legislation is too general, it may not give sufficient certainty and predictability. In Australia, a systematic
effort has been made to ensure corporations laws and financial service laws are medium neutral, and
fully reflect that things are increasingly done electronically as well as by traditional paper methods – see
the Electronic Transactions Act 1999, the Company Law review Act 1998, the Corporate Law Economic
Reform Program (CLERP) and the planned legislation to facilitate, among other things, greater
shareholder participation through electronic means.

To this end, ASIC's policy work has also sought to be technology neutral. It began as a way of
facilitating what the law otherwise made difficult or impossible (such as PS 107 that dealt with electronic
prospectuses). But it now deals much more explicitly with some of the areas of risk in e-commerce
activity, like chatrooms or online advice. See the discussion of ASIC policy and guidance materials in
Annex I below.

Adapting regulatory and enforcement practices to the e-environment:

Increased e-commerce activity means ASIC must have an effective electronic presence. This requires
ASIC to be able to conduct surveillance activities electronically as well as by more traditional methods. It
also means ASIC needs the capability to gather electronic evidence and present it in administrative or
judicial processes that are not always receptive to new forms of evidence. For ASIC, this has involved
the development of new surveillance tools that can identify, among the huge amount of data available
on the Internet, misconduct in which ASIC has an interest. Some examples of these tools include:

     o     an online search tool for sites that are non-compliant with Australian law. ASIC uses this tool
           when it participates in international Internet surf days to detect internet-based misconduct on a
           global scale. For more information on these comments see ASIC media release 02/292 located
           pendocument; and

     o     an online monitoring tool to assess, in real time, interactive chatsite services. For more
           information on these comments see ASIC media release 02/27 located at

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Transacting electronically:

ASIC also facilitates electronic interaction between the regulated community and the general public in a
variety of ways. ASIC believes that it is important that regulators seek to take up the opportunities to do
their "business" better by being active adopters of the technology that drives e-commerce activity. For
example, using the Internet or other publicly accessible electronic technologies, ASIC can:

    o     allow people to form corporations and keep public corporate information up to date;

    o     allow members of the public to search public corporate and regulatory information;

    o     receive applications for, and issue, licenses from financial service providers;

    o     receive and respond to inquiries and complaints; and

    o     provide lists of recently lodged prospectuses and electronic access to them.

Uptake of these services has been high, as is use of ASIC's website generally. In 2001, the ASIC
website provided for over 8.4 million free and paid company searches, accepted the lodgment of over 1
million documents and facilitated the electronic registration of over 55,000 companies: see Other services include ASIC's eLicensing tool for applicants who seek to obtain
an Australian financial services (AFS) licence electronically: seen the relevant information located at
ASIC's website at The website also contains materials relevant to our EXAD
service, developed with insolvency practitioners, which enables liquidators to lodge documents with
ASIC electronically: for more information on these comments see the ASIC website for more

Consumer and investor education:

ASIC also uses the Internet as a means of educating consumers and helping them to become better-
informed users of financial products and services. Indeed, ASIC has established a special purpose
website – separate from its main regulatory website – as a way of communicating with consumers
looking to us for information or help. For more information on these comments see, and

The cross border context:

Although not solely targeted to electronic activity, ASIC's work on facilitating cross border financial
services does deserve attention because it potentially involves most of the areas listed above. Also, it
raises the very difficult question about the interaction between national regulatory regimes that are
sometimes similar but never the same; or are very different indeed. Some of the key questions that arise
in this area include:

    o     when might regulators assert jurisdiction for activity that is entering their country through the

    o     how activity that takes place in more than one jurisdiction is to be regulated, and in particular
          how a regulator in a "host" country can take account of the regulation that takes place in the
          financial service provider or product issuer's home jurisdiction. In many cases, this means not
          just acknowledging home country regulation but seeking to use it for domestic purposes;

    o     since it is inevitable that all regimes will differ in some ways – reflecting domestic cultural and
          political priorities – how regulators will assess whether other regimes result in outcomes
          sufficiently similar to their own to mean they can recognise their effect for domestic purposes;

    o     how much cross border activity will drive the need for national regimes to converge, and how
          this might take place.

    o     Australia, like many other countries, is grappling with these issues. Specific activities include:

    o     the establishment of trading links between the Australian Stock Exchange and the Singapore
          Stock Exchange (which involved some degree of mutual recognition of the Australian and
          Singapore regimes);

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    o     the development of a set of principles to guide our future work in bilateral cross border
          arrangements (publish in November 2002 and discussed below in Annex I); and

    o     a variety of new policy initiatives directed toward cross border market activity, collective
          investment activity and offers of financial products (also discussed below in Annex I).

List of significant Internet-related regulations, policy and guidance

ASIC continues in its aim to ensure that industry and consumers can conduct business electronically
when appropriate. In continuing to work towards this goal, ASIC has released numerous relevant policy
initiatives to the financial services provided over the Internet as well as cross-border financial services.
For more information on these comments see the ASIC homepage at

Policy materials:

Prior to the Financial Services Reform Act 2001 (Cth) ("FSRA"):

Since 1996 ASIC has released a series of policies that are particularly relevant to the provision of
financial products and services via the Internet. These include:

PS 107 Electronic Prospectuses (1996) – subject to the prospectus provisions of the law, this PS allows
for electronic provision of prospectuses. In 1999 ASIC amended PS 107 to allow hosts of Internet
websites to act as service providers and publish third parties’ electronic prospectuses on their websites;

PS 118 Investment Advisory Services (1997) – sets out ASIC's guidance and enforcement policy for
those people who wish to give investment advice on the Internet, in the media and in computer software
and books;

PS 141 Offers of Securities on the Internet (1999) – regulates offers, invitations and advertisements for
securities made via the Internet and available in Australia. PS 141 also sets out arrangements for when
ASIC will work with regulators in other jurisdictions – this is consistent with the first iteration of the
IOSCO Internet Task Force Report in 1998. Notably, PS 169 (see below) provides that PS 141 should
also be applied to all financial products, not just securities.

PS 150 Electronic Applications and Dealer Personalised Applications (2000) – sets out where relief is
available so that electronic applications for securities need not use the forms or processes required for
paper applications;

PS 152 Lodgment of Disclosure Documents (2000) – encourages issuers to place offer documents on a

IPS 162 Internet Discussion Sites (2000) – specifies standards of behaviour that, if complied with, allows
IDS operators to operate without the requirement to hold an AFS licence. There has not been any
significant work on IDS since the release of IPS 162, instead the issues connected to IDS are being
considered within the broader context of our dealing with FSRA, pending finalisation of this work IPS
162 remains in force as the best guide and benchmark for IDS in Australia; and

IR 01/08 Electronic Applications for Life Insurance and Superannuation Products (2001) – envisages the
acceptance of electronic applications by life and superannuation provided certain measures are met
which replace the functions of paper-based signatures. This proposal is in line with the approach already
taken with electronic applications for securities such as shares and debentures.

Post FSRA:

The FSRA commenced on 11 March 2002 and amends the Corporations Act 2001. The effect of these
amendments is that the Corporations Act hereafter contemplates and enables electronic financial
advice, transactions, disclosures and records. In response to this Act, ASIC released a package of
policy statements, some of which also operate in relation to electronic interactions. See, for example:

PS 164 Licensing: Organisational Capacities (2001) – explains that an application for an AFS licence
can be made via the Internet. It also raises for consideration compliance measures for licensees
relevant to the use of electronic tools;

PS 167 Licensing: Discretionary Powers and Transition (2001) – indicates how ASIC applies pre-FSR
licensing policies (including those that relate to the Internet) post-FSR commencement;

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PS 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) (2001) discusses
point of sale disclosure under the FSR regime and includes a discussion of matters relevant to
disclosure regardless of the medium through which it is provided; and

PS 169 Disclosure: Discretionary Powers and Transition (2001) indicates how ASIC applies pre-FSR
disclosure policies (including those that relate to the Internet) post-FSR commencement.

PS 172 Australian market licenses: Australian operators (2002) – explains that where a third party
provides a facility that permits a market for securities or derivatives that third party must have a market
operators licence. However, PS 172.17 states that a 'facility' is "any form of infrastructure. However, this
does not mean that a person operates a financial market merely because they operate an electronic
means of communication or an Internet service provider". Therefore, under this policy ASIC asserts that
a portal or other third-party order-routing provider will not constitute a financial market merely because it
is a step in a process that results in the eventual making ore acceptance of offers or invitations. The test
will be whether the medium carries other traffic.

Other guidance:

Principles for cross border financial services regulation: Making the regulatory regime work in a cross
border environment (November 2002) – these Principles guide out policy and decision-making on all
aspects of cross border financial services regulation. The stanchions of these Principles are our
equivalence test – which seeks to assess the equivalence of an overseas regulatory regime with our
own regulation – and our requirement for effective co-operation arrangements with overseas regulatory
authorities. ASIC has released a series of policy proposal papers that demonstrate how ASIC will apply
these Principles in the regulation of cross border financial services: see IR 02/26 and IR 02/31.

CLERP 9 (2002) – the Commonwealth Government released the latest chapter of its Corporate Law
Economic Reform Program, which is known as CLERP 9. The paper is called 'Corporate disclosure:
strengthening the financial reporting framework' and it seeks to deal with, among other issues, improved
shareholder participation by electronic means (see the Treasury's CLERP 9 website: This work builds on the
earlier work by Prof Boros (see below) and ASIC's work through its chairmanship of the Corporate
Governance Roundtable. Particular areas of interest include electronic (proxy) voting, web-casting and
electronic communications and document delivery between shareholders and companies.

ASIC also released a guidance paper on Licensing: The Scope of the Licensing Regime: Financial
Product Advice and Dealing – an ASIC guide (2001)

Surveys of online trading websites (2000 & 2001) – ASIC has released a survey of online trading
websites. The survey did not detect any systemic industry-wide problems but it did identify complaint
handling and disclosure related issues that industry needed to address. ASIC also produced a Good
Disclosure template and encouraged online trading site operators to assess their sites against it. A
subsequent survey in 2001 stated that after a brief review of 25 websites offering online trading it was
noted that several sites continued to rely on trading and execution services provided by other entities,
such as HP JDV (Hartley Poynton).

Multimedia prospectuses and other offer documents (1999) – this paper examined the possibility of
including multimedia material in prospectuses and other offer documents. The paper was written in
collaboration with Professor Elizabeth Boros of Monash University (at that time, Dr Boros, of the Centre
for Corporate Law and Securities Regulation, The University of Melbourne).

Online corporations (1999) – Professor Elizabeth Boros of Monash University (at that time, Dr Boros, of
the Centre for Corporate Law and Securities Regulation, The University of Melbourne) also prepared a
discussion paper that considers the online corporation. In particular, it considered the electronic delivery
of documents, electronic voting and company meetings and the electronic lodgment of documents with
ASIC. ASIC has subsequently reviewed these issues in its consideration of the CLERP 9 proposals (see

Other guidance materials:

Revised Electronic Funds Transfer (EFT) Code of Practice (2001) – ASIC's consumer protection
function in relation to financial services gives ASIC responsibility for the Electronic Funds Transfer (EFT)
Code of Conduct. ASIC has revised the EFT Code to cover all forms of electronic funds transfers,
including online services – originally the EFT Code was limited to ATM and EFTPOS transactions. The
revised EFT Code commenced in April 2002. Notably, ASIC is currently preparing a discussion paper

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List of significant regulations, developments and websites

that proposes the development of a chapter within the EFT Code to deal particularly with account
aggregation services.

2.         New developments

Spotting developments and trends:

Predicting the future of e-commerce remains problematic, not least because data is hard to collect, and
even harder to compare across countries and financial services. Industry analysts acknowledge it is
difficult to predict the future growth of e-commerce: whether it will continue to be PC based or move
towards mobile phones or interactive digital television; whether established financial institutions will
account for a larger or smaller share of it; and whether it will lead to greater or less concentration: for
more information on these comments see Sato and Hawkins "Electronic finance: An overview of the
issues" in the BIS Papers No 7 "Electronic Finance: A new perspective and challenge" (2001).

Claessens, Glassner and Klingebiel – "E-Finance in Emerging Markets: Is leapfrogging possible?"
(2001) located at – attempt to predict
what the immediate future might look like for online banking and brokerage services, they suggest that:

     o     by 2005, the share of online banking could rise from 8.5% to 50% in industrial countries, and
           from 1% to 10% in emerging markets;

     o     with better connectivity, online banking transactions could rise even further, to 20% in emerging
           markets by 2005;

     o     online transactions could account for 80% of all brokerage transactions in industrial countries
           by 2005, up from 28% today, and for 15% in emerging markets, up from 1.5%;

     o     with a better enabling environment in emerging markets, the share of online brokerage could
           even hit 40% by 2005.

Others sound a cautionary note, saying business itself is not positioned to take advantage of e-finance
opportunities. A recent Deloitte's study – Deloitte Consulting Report "Financial Services – The
emergence of e-Marketplaces" (2001) located at – comments that few
organisations have addressed the potential for radical operational, functional, organisational and
financial transformations that could be achieved.

Of the predictions that have failed, one of the best examples is that that traditional banks and
brokerages are dinosaurs and that the Internet will drive them into extinction. The reality is very different:
for more information see see Bekier "Return of the Incumbents", Treasury Management 2001, InfoRich,
Sydney (2001) and Annex II below.

Developments and predictions:

Nevertheless, there has been a range of developments by financial services providers in their use of the
Internet and e-commerce to promote their business. Some of these developments include:

     o     the consolidation expected in the industry over the coming year as result of weak equity
           markets and tighter margins;

     o     price wars are a thing of the past and fees/brokerage has stabilised and average cost of an
           online trade is now $25 - $30;

     o     the mix of players in the industry of smaller brokers offering online services and those which
           are supported by overseas entities and local banks;

     o     the premium products/financial services are seen to be the differentiating factor (research,
           technical analysis capabilities, wealth mgt products);

     o     CommSec, Westpac Broking, E*Trade, National Online Trading and TD Waterhouse dominate
           the local Australian market;

     o     a survey conducted by Internet brokers note a trend for retail clients to hold onto their shares
           for longer and that the focus is to manage their portfolio rather than chasing quick profits.

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For more information on these developments and predictions see Whyte's article "In Line for More
Online Consolidation" (31/12/2002) and Mitchell and Whyte's article "Uncertain times test investor's
faith" (10/01/03) from the Australian Financial Review.

New developments

General comments:

The following banking and broking examples illustrate the successes that have occurred as a result of e-
commerce integration:

Online banking:

Studies comparing new Internet-only banks against new branch banks show that the Internet-only banks
have been substantially less profitable. They generate lower business volumes and any savings
generated by lower physical overheads appear to be offset by other types of non-interest expenditure,
notably marketing to new customers. Whilst Internet-only banking could prove to be a viable business in
the future, the current wisdom is that the combination of Internet delivery channel with focused bank
branches ("clicks and mortar approach") will prevail, at least in the medium term. As public trust is so
crucial to banking, an established brand name is clearly important and many customers wish to be able
to do some banking physically. Therefore, it is the market incumbents that seem to have succeeded in
making the most of the opportunities presented by e-commerce. For more information on these
comments see Sato and Hawkins "Electronic finance: An overview of the issues" in the BIS Papers No 7
"Electronic Finance: A new perspective and challenge" (2001).

Online broking:

Retail online broking is another success story. The rapid uptake of Internet-based broking facilities has
reduced costs (in many cases dramatically), shortened settlement schedules, and customers can now
access more information cheaply from the Internet and have wider access to global markets. Online
trading now accounts for over half of retail stock trades in the United States and a new category of
investors – online day traders – has emerged. This has been associated with the unbundling of
research, advice and transaction services by brokers. Evidence suggests that Internet brokers have had
great success in attracting business from other trading channels, encouraging an increasing interest in
share ownership and facilitating more active trading by retail investors.

A recent OECD report states that "on recent evidence, some 25 to 35 per cent of households' share
trades currently takes place via online brokerages, and in the furthest developed markets the
percentage is above 50 per cent". A recent IOSCO study indicates that the number of online brokerage
accounts has reached 19 million in the United States and million in Europe. For more information on
these comments see Sato and Hawkins "Electronic finance: An overview of the issues" in the BIS
Papers No 7 "Electronic Finance: A new perspective and challenge" (2001) and Christiansen "Electronic
Finance: Economics and Institutional Factors" OECD Occasional Paper No 2 (2001) located at

Global securities market:

Many large institutions now involved in e-commerce were active via subsidiaries in foreign markets
before the developments in e-commerce. But the Internet has now made the notion of a single global
securities market possible. Physical locations no longer dictate an investor's ability to trade financial
products, and there are emerging signs that the trend may be towards universal exchanges with a
relatively few operators. For more information on these comments see Christiansen "Electronic Finance:
Economics and Institutional Factors" OECD Occasional Paper No 2 (2001) located at

There are now many electronic financial exchanges (e-exchanges). Older securities exchanges have
updated their underlying infrastructure, their fundamental operating models, and in many cases their
ownership and governance arrangements. One industry analyst has predicted that "of the e-exchanges
already developed or in development, many will be out of business in the next 2 to 3 years [because]
increased global reach and multi-product range will be the key characteristics of surviving e-exchanges":
for more information on these comments see Deloitte Consulting Report "Financial Services – The
emergence of e-Marketplaces" (2001).

ASIC also expect an increase in linkage arrangements between markets in different countries. This is
likely to be especially true in countries whose national markets may not be large enough to compete
with global markets without such links. This is the strategy being pursued by the ASX in Australia: for

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more information on these comments see Segal "Market Demutualisation and Cross Border Alliances:
The Australian experience" (2002).

Other developments:

Financial portals – portals link organisations, products and services in ways that were previously
inconceivable. There is convergence of financial services participants and the methods of delivery they
offer. Portals, software firms, brokers and other online entities are competing for the front-end control of
the consumer. In the future, investors will likely be able to consolidate financial products from multiple
vendors under one virtual roof. This blurs the distinction between traditional and new financial players
and their regulatory obligations.

Other e-payment products – such as e-money, have had differing results: for example, in Scandinavian
countries, the use of e-money is quite high, and in these countries e-cards have complemented or
replaced existing financial services. However, non-cash payments, more generally, are finding their
footing in the areas of micro-payments, electronic funds transfers and credit transactions. Examples of
these services include the peer-2-peer (P2P) e-payment services offered by PayPal located at or Thiri located at

Current state of play:

Many opportunities remain to be taken up in adapting information technology to the financial sector, but
equally it remains hard to sort the potential winners from the losers. Also, there is increasing competition
in the market for financial products and services, from new entrants outside today's financial sector,
between existing incumbents, and across national borders. Incumbent players with already large
customer bases have advantages in rolling out new products and services, but this may blur as different
business combinations emerge.

ASIC consider that some of the main factors that continue to drive the future development of e-
commerce are likely to include:

    o     evolving client attitudes (and thereby increasing demand);

    o     new technologies; and

    o     cross border market arrangements (although we need to recognise that in many cases this will
          be inhibited by domestic concerns about maintaining national markets especially for domestic
          capital raising purposes).

Regulatory issues relating to developments in Internet use and the range of regulatory responses

For ASIC, there are two different forces that require a regulatory response, they are:

    o     the need to facilitate industry e-commerce because of the benefits that can flow from its
          adoption; and

    o     the need to identify and manage risks that it brings with it.

These forces do not necessarily conflict because in the long-term e-commerce business will succeed
only if it wins the confidence of its customers, and that confidence depends in large part on its being
perceived as a safe way to do business.

Regulatory themes:

There are numerous benefits to e-commerce that ASIC recognises and seeks to do what it can to
ensure they are realised. Primarily, e-commerce offers lower costs and greater competition in financial
services, including lower intermediation fees and commissions. It also offers opportunities for countries
with less developed financial systems to catch up, even if their basic financial infrastructure is weak.
However, the commentary that follows focuses on some of the risks associated with e-commerce, most
of these risks are not new, but e-commerce has intensified them. They include:

Systemic stability risks – this risk stems from the fact that e-commerce facilitates interconnections;
between institutions, different sectors of the finance sector, between the finance sector and the non-
finance sector, and across national borders. For example, the use of electronic technology means that
risk can flow across borders very quickly and one country's problems can easily become another's. The
current focus internationally on clearing and settlement in financial markets is a good example of this
area of risk. It has meant in many countries that those institutions responsible for overall systemic

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stability – normally central banks – are taking a much greater interest in clearing and settlement of
securities and futures markets, although in many cases this has been the traditional responsibility of
securities regulators.

That is the case in Australia, where the Reserve Bank of Australia has a formal role in the regulation of
clearing and settlement facilities. Some of the work of the international regulatory community has been
driven in part by this set of issues. A taskforce between members of the Committee on Payment and
Settlement Systems of the central banks of the G10 and the Technical Committee of IOSCO recently
published Core Principles for Systematically Important Payment Systems and recommendations for
securities settlement systems. These recommendations identify minimum standards that securities
settlement systems should meet, and are designed to cover all types of securities, whether issued in
industrialised or developing economies, or for domestic or cross border issues. Further work in this area
is progressing and the national authorities responsible for the oversight of securities settlement systems
are expected to assess whether markets in their jurisdiction have implemented the recommendations
and to develop action plans for implementation, where necessary.

Institutional stability risks - this risk focuses on the impact that e-commerce has on individual institutions.
For example, banks and brokerages are now very heavily dependent on information technology systems
and this means that the role and extent of outsourcing of functions is much more of an issue. This raises
the question not only of how well that outsourcing is managed (discussed below), but whether banking
supervisors should prohibit outsourcing of some "core" functions.

Conduct risks - there are a large variety of conduct issues associated with e-commerce, some new and
some variations of risks that have always been part of the regulation of conduct in the financial services
sector. Generally, most misconduct that has emerged in the e-environment has a counterpart in the non-
electronic world, but the emergence of e-commerce has in many cases made abusive conduct cheaper,
more efficient, and better able to access large numbers of victims. Areas of these types of conduct risk
might include:
     o money laundering;
     o information mining in contravention of privacy and other public policies;
     o identity fraud;
     o "pump and dump" schemes;
     o hacking;
     o straight through processing (STP) and other mechanisms that allow market users to interact
         more directly with central markets, which may threaten the ability of market operators and
         regulators to supervise market activity effectively;
     o the risk to the operation of national regulatory regimes in an environment that involves
         increased cross border flows of financial product, services and markets; and
     o difficult liability and responsibility questions for regulatory authorities, industry and consumers
         to consider in the future, for example investors use of intelligent agents belonging to financial
         services providers.

Emergent issue – outsourcing:

According to ComputerWorld, the benefit of pay-as-you-go IT services combined with the plateau of
some economic activity has prompted many banks and brokerages to outsource their back-office
systems and business processes. For example, in the United States J P Morgan Chase & Co. recently
signed a $US5 billion outsourcing deal with IBM over its data processing infrastructure. For more
information on these comments see the ComputerWorld article "Banks pick up pace of IT outsourcing"
located at their website at:

The move towards outsourcing may create new risks such as those connected to data collection,
storage, retrieval and access. In Australia, reflecting the growing importance of outsourcing in the
financial services industry, the Australian Prudential Regulation Authority (APRA) released a new
"Prudential standard on outsourcing by Authorised Deposit-Taking Institutions (ADI's)" in 2002. For
ASIC, our interest extends, in part, to ensuring we are aware of who the providers of financial services
are and that such providers are responsible for the services they offer. Notably, while not strictly related
to outsourcing, PS 172 (discussed below) states ASIC's policy that a portal or other third-party order-
routing provider will not necessarily constitute a financial market merely because it is a step in a process
that results in the eventual making or acceptance of offers or invitations. For more information on
outsourcing as an emerging trend and the issues that may accompany its growth, see APRA's media
release at

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Enforcement and ISP's:

ASIC chairs a multi-agency working group contributing to the consultation process towards the
development of a Cybercrime Code of Practice by the Internet Industry Association of Australia (IIA).
The IIA has been developing its Cybercrime Code of Practice to provide guidance to its Internet Service
Provider (ISP) members on issues associated with assisting law enforcement agencies, including:
evidence handling guidelines, data retention practices, reporting of crimes and information and
intelligence sharing. The pertinence of cybercrime has developed since September 11, 2001 and
renewed the focus on national security and critical information infrastructure protection. For more
information on the IIA's draft Cybercrime Code of Practice visit their website at

3.         List of websites

There have been some exempt markets approved under the old law, but because these were not
included in the previous iterations of this list of websites they have not been included. However, a record
of these can be accessed through the ASIC Digest under the subject area heading "Ministerial Orders".

 Market intermediaries                                 Australian     Securities and     Investments
                                                       Commission (ASIC) – general website located @

                                                       Australian Securities & Investments Commission
                                                       (ASIC) – consumer website located @

                                                       Registered securities dealers, futures brokers,
                                                       futures advisors, life insurance brokers, general;
                                                       insurance brokers and foreign insurance brokers
                                                       can be located @

 Investment advisors                                   Registered investment advisors can be located @

 Collective investment schemes                         Located @

 Markets                                               Australian Stock Exchange (ASX) website located

                                                       ASX Futures Exchange (ASXF)               accessed
                                                       principally through the ASX website

                                                       Sydney Futures Exchange (SFE) website located

                                                       Bendigo Stock Exchange (BSX) website located

                                                       Stock Exchange of Newcastle (NSX) located @

Annex IV – Review of the work of other international for a and committees relating to the Internet

Most inter-government financial sector bodies and international regulatory organisations have been
paying close attention to e-finance developments. The following material is extracted from the ASIC
paper "E-Finance: Trends and Regulatory Responses", available on the ASIC website.

"…many observers are concerned about the short-run challenges that those rapid advances in
technology pose for financial institutions and markets and for policymakers.. securities markets in
general, and equity markets in particular, have undergone dramatic changes in the way market

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participants obtain information, communicate with one another, and execute and settle deals." US
Federal Reserve Chairman Alan Greenspan.

International institutions:

IMF - recent IMF work has centered on the global effects of information technology developments. In
IMF "International Capital Markets" (2001) located at – the IMF looked at the changes that
have occurred in the financial services industry as a result of advances in technology, deregulation and
globalisation. This report notes that these changes have reduced margins in traditional banking
activities, led to increased mergers between banks and between banks and non-banking financial
institutions, both domestically and internationally. It also notes that:
the forces of consolidation are having a profound impact on the operation of securities exchanges, as
well as brokerages and other financial services industries;
the automation of trading systems combined with the growth of online trading has lead to declines in
trading costs, increases in turnover, globalisation of trading and settlement systems' operations, and
major reform in the structure and governance of securities exchanges;
online trading, in both mature and emerging markets, brings with it lower transaction costs, faster
execution and an expanded investor base; and
online trading, brings the potential for increased volatility and speculation in some markets, as well as
possible harm to liquidity, market makers and advisory services.

Finally, the IMF report identified the protection of local financial service providers while allowing
domestic markets to benefit from technological advances as a key challenge.

World Bank - the World Bank Financial Sector has published a number of discussion papers on
efinance. The focus of much of this work is the banking industry, and discussion focuses on issues that
are also being addressed by BIS (see below).

Bank for International Settlements/Basle Committee on Banking Supervision - the Electronic Banking
Group (EBG) of the Basle Committee on Banking Supervision (which is itself part of the Bank for
International Settlements) has been working on e-commerce issues: as noted in the 2001 iteration of
IOSCO's "Securities Activity on the Internet". The EBG focus on developing and sharing sound
supervisory guidance and risk management principles and enhancing cross-border co-ordination among
bank supervisors for e-banking activities. The Group has identified operational risks related to the
increased use of technology and systems, including the greater reliance on outside vendors, legal and
reputation risks, and conflicts that may be introduced by the electronic delivery of financial services as
important risks.

The Basle Committee is generally optimistic that the risks associated with the unprecedented rate of
change driven by technological and customer service innovation, the ubiquitous and global nature of
open electronic networks, the integration of e-banking applications with computer systems, and the
increasing dependence of banks on third parties, will be managed appropriately by banking institutions.
It recognises that whilst these risks may not be new, existing risk management principles must be
tailored, adapted and sometimes expanded to address the specific risk management challenges created
by e-banking: for more information on these comments see BIS "Risk Management principles for
Electronic Banking" (2001).

The Basle Committee has also issued a number of papers addressing cross border banking issues,
including sound supervisory practices for "home" and "host" country banking supervisors. It has
explored the cross border supervisory issues and challenges related to e-banking, and it highlights the
need for international cooperation among supervisors to address these issues. In February this year, the
BIS Working Group of the Committee on the Global Financial System published a paper looking at the
way in which innovations in information technology have changed the way economic activity is carried
out and organised, which has implications for the financial system: for more information on these
comments see BIS "Risk Management Issues and Cross-Border Supervisory Considerations arising
from E-Banking Developments" (2000).

International Association of Insurance Supervisors - the IAIS recommend a set principles on the
supervision of insurance offered over the internet that deal with consistency of approach; transparency
and disclosure; and international regulatory cooperation. These principles note that supervision of such
practices should be consistent with that of insurance activities through other media. They also
emphasise the importance of international co-operation between supervisors. Ultimately the protection
of the policyholder remains one of the most important tasks of the supervisor, regardless of the medium
through which insurance is sold. For more information on these comments see IAIS "Principles of
Supervision of Insurance Activities on the Internet" (2000) located at

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European Union - the EU is considering the Distance Marketing of Financial Services Directive, the
Electronic Commerce Directive, the Electronic Signatures Directive, and the Data Protection Directive.
The European Commission has also put forward a Financial Services Action Plan that intends to create
an integrated European market in financial services by 2005. The key provisions of this plan seek to
address a program of convergence covering contractual and non-contractual rules including rules on the
marketing of financial services, targeted measures to encourage cross border redress and online
payment mechanisms and the facilitation and enhancement of supervisory co-operation. For more
information on these comments see Deloitte & Touche "Regulating Online Financial Services" (2001)
located at

1.         New developments
On December 23 2002, the Brazilian Securities Commission issued Instruction 380, regulating the
activities of Brazilian online brokers. The following are the key points of the new regulation.

A minimum set of operational information must be published by online brokers in their websites

This includes: Detailed instructions on how to trade securities online; information related to transaction
and brokerage costs; procedures followed by the online broker in order execution; characteristics of the
security system used by the online broker; electronic forms used to inform the investor that his order
was received and executed by the online broker; information about traded securities and the exchange;
information on order routing arrangements; connection details to the broker website and links to CVM´s

Online brokers include in their sites a section dedicated to investor education

Containing the following points: Description of the framework and operation of self regulatory
organisations (SROs) and clearing houses; securities available for online transactions; market risks
(specially in derivatives markets); electronic systems and Internet operational risks; information about
the possibility of the existence of simultaneous offerings in the open outcry and the electronic trading
systems, and interference between them.

Website capacity

The brokers must measure capacity through the following indicators:
    o time between the reception of an order sent by customer to the broker and the respective
    o time between the reception of a message sent by the exchange to the broker informing
        whether the customer’s order was or not registered in the order book and the confirmation by
        the broker to her customer;
    o and the time between the reception of a message sent by the exchange to the broker
        confirming the accomplishment or cancellation of a business involving a supply that have
        already been registered.

Brokers must vouch for the safety and privacy of the communication with its customers

Audit trail of electronic bulletin boards and chat rooms

Those brokers whose websites provide media for the exchange of information between customers must
keep records of all messages and Internet Protocol numbers of the computers from which those
messages originated. Brokers must also keep for 5 years records in magnetic media of all transactions.

Publication of price sensitive information through the websites

Semi-annual external auditing

The SRO must audit the capacity indicators informed by the brokers and check compliance to minimum
performance standards. The SRO must also audit the website content, checking compliance to the
information and investor education rules mentioned above.

Alternative communication channels for customers

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The brokers must provide their customers with alternative communication channels for transactions with
derivatives and special auction procedures triggered by abnormal volumes or price swings (as defined in
CVM Instruction 168).

2.         List of websites

Market Intermediaries:             A complete list of Brazilian online brokers can be found in the following
Collective           Investment    As of November 2002, 470 investment clubs are active, with a total of
Schemes:                           139,372 investors. Total assets sum 1,306 million Brazilian reais
                                   (US$365 million). Detailed information about investment clubs can be
                                   found at broker’s websites.
Markets:                           São Paulo Stock Exchange:
                                   Brazilian Futures Exchange:
                                   Brazilian Organized OTC Market:
Clearings:                         Brazilian Clearing Corporation:
                                   Brazilian Chamber of Settlement and Custody:

Alberta Securities Commission (ASC)
British Columbia Securities Commission (BCSC)
Commission des valeurs mobiliéres du Québec (CVMQ)
Ontario Securities Commission (OSC)
Toronto Stock Exchange (TSX)

1.            Internet-related regulations, policy and guidance

National Policy 11-201 Delivery of Documents by Electronic Means
NP 11-201 sets out general principles of how documents required to be delivered under Canadian
securities law can be delivered electronically. On January 7, 2003, the Commission made amendments
to National Policy 11-201 Delivery of Documents by Electronic Means. The amendments came into
force on February 14, 2003. The purpose of the amendments is to facilitate the use by market
participants of electronic technologies in the area of proxy delivery by providing interpretive guidance on
relevant securities law requirements.

Ontario Securities Commission Bulletin (2002) 25 OSCB 5364.

Avis 11-201 relatif à la transmission de documents par voie électronique

National Policy 47-201 - Trading in Securities using the Internet
and Other Electronic Means
NP 47-201 provides the Canadian Securities Adminstrators’ or CSA's views on certain issues relating to
the use of electronic media in the distribution of securities. It discusses the jurisdictional issues that arise
when a document is posted on the Internet, and sets out that an offering document accessible by
residents of Canada will constitute a trade and/or offering in Canada unless the offering document
identifies the jurisdictions for which the document is intended and reasonable steps are taken not to
transact with Canadian residents where the offering is not intended to be sold. NP 47-201 also provides
guidance on jurisdictional issues relating to 43 trading activities through the use of electronic media. It
further sets out CSA's recommendations regarding procedures for the posting of roadshows on the

Ontario Securities Commission Bulletin (1999) 22 OSCB 8170
(French Version)

Instruction canadienne n° 47-201 Les opérations sur titres à l'aide d'Internet et d'autres moyens

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B.C.V.M.Q. vol. 30 n°50

Day Trading: The Position of the Commission des valeurs mobilières du Québec
Dated February 1, 2000, this press release states the CVMQ's requirements for the offering of day
trading services. These requirements include financial and information disclosure aspects, in addition to
additional supervision aspects by the Commission.
B.C.V.M.Q. vol. 31 n°5

Investing and the Internet: How to Avoid Cyber-Fraud
This is a brochure intended for the retail investors that advises on how to be prudent when using the
Internet for investing.
(French Version)

Le placement et Internet : Comment déjouer les cyber-fraudeurs

Trading Securities and Providing Advice Respecting Securities on the Internet
Notice reminding securities market participants that B. C. Securities Act registration and disclosure
requirements apply to persons using Internet as any other medium of communication.

BCSC Weekly Summary Edition Number 97:09 pp. 1-4;

Regulators Warn Investors to be wary of Online Investment Tips
Canadian securities regulators warned investors of the perils and risks associated with acting on
investment tips from the Internet during the RRSP season. In recent years, financial news websites,
chat rooms and bulletin boards have sprung up to feed the investing public's desire for instantaneous
news and easy access to financial information. To avoid cyber-fraud, investors should be alert to signs
of fraud.
BCSC Weekly Summary 02:08 .

Electronic Communications Disclosure Guidelines
This Toronto Stock Exchange document reviews a number of issues that a company must consider
when it goes on-line. The Policy states that information disclosed electronically should be viewed as an
extension of its formal corporate disclosure record. Guidelines cover 44 subjects like designing a
website, establishing an internal e-mail policy, and disseminating information over the Internet by listed

2.          New Developments

Continued internet usage by market participants

A 1998 Ernst & Young Banking and Technology Report estimated that the internet and PC banking
transactions will increase by 292 per cent over the next three years in Canada. Also a 1999 Statistics
Canada survey found 42 per cent of Canadian households have at least one regular Internet user and of
these, 28 per cent use the Internet for online banking services, up from 20 per cent in 1997. The Internet
banking channel provides a growing list of credit and investment services, such as securities purchases.
Currently there are 11 Canadian dealers that identify themselves as online brokerages including the five
big Canadian-owned dealers.

A study in the October 2000 issue of Canadian Facts, shows that 19 per cent of the people with Internet
access research investments or track their portfolios on-line. Of Canadians with discount brokerage
accounts, 47 per cent use on-line trading as compared to 24 per cent in 1999. Overall, 4 per cent of
Canadians were online investors in 20002.

In 2002 the Consumer Council of Canada reported the following results from an investor education
survey to the Ontario Securities Commission:

    Published January 28, 2002.
    Canadian Facts, October 2000 issue.
    This is based on a total study sample of 400.

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Best ways to be provided with investment knowledge:
Through the internet                50%
Through seminars                    48
Newspapers                          38
Financial magazines                 35
Mail                                32

The likelihood of participating in web based programs to increase investment knowledge:
Very likely                           22%
Somewhat likely                       35
Not very likely                       16
Not at all likely                     25
Don't know                            2

The internet is:
A current source of investment education                        15%
A preferred source of investment education                      6
Trusted most                                                    1
Trusted least                                                   3

          Internet Trading

A TSE study conducted in the spring of 2000 found that 62 per cent of investors have Internet access at
home or work and 25 per cent of investors spend more than three hours per week reviewing investment
material on-line. Also the same study revealed that 27 per cent of those who had traded in the past year
said they had used the Internet to do some of their transactions. There is strong competition among the
on-line dealers. Each dealer tries to offer the best possible services to its clients while adding new
features to their products. For instance, one dealer became the first to offer fixed-income products and
another focused on online research, especially for mutual funds. The following sets out information
regarding online trading activity.

 Period of Time                                       Quarterly Change in Online Trading Activity (%)
 April – June 1999                                    27.08
 July – September 1999                                -8.8
 October – December 1999                              86.48
 January – March 2000                                 135.31

Source: Investors Economics

          Direct/online IPOs

According to a study conducted by the Canadian Business Magazine staff4, Canada’s 11 online brokers
are offering online access to public offerings of new shares. One dealer alone made 89 public offerings
available online to its customers in the first eight months of 2000. Another offered eight IPOs for the
same eight months.

          Alternative Trading Systems (“ATSs”)

An ATS is an alternative marketplace that allows securities to be traded electronically over the Internet,
through websites or via terminal-based applications. ATSs do not require listing agreements and
provide a guarantee of a two-sided market on a continuous basis. ATSs also set requirements
governing subscriber conduct. Securities tradable on ATSs include exchange traded securities, foreign
exchange traded securities, corporate debt securities and government debt securities.

There are several electronic ATS operating in Canada, including:

CanDeal -
CBID Markets Inc. -
Bloomberg Trade book -
Archipelago -

Other developments

              Canadian Business Magazine.

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Every website on the Internet offers hyperlinks connecting the user directly with other websites
containing similar information or other sources of information that the user may use. For instance
Canadian exchanges’ websites offers links to investment related associations, exchanges, information
and services investors may use.


Most intermediaries offering on line services also offer some wireless services, for cell phones.

             Day Trading Firms

There have been a small number of dealers who have identified their business as day trading firms.
These firms require limited relief from suitability in some jurisdictions. In addition the Commission des
Valeurs Mobilières du Québec (“CVMQ”) has provided special guidelines to deal with issues relating to
investor protection. These include disclosure of information (brochures, publicity etc. must mention the
highly speculative nature of day trading) and technical courses for systems utilization. The CVMQ also
requires that clients be experienced investors, and that there is a minimum amount that must always be
in any client account for trading to be permitted. CVMQ also requires that loans between clients are
forbidden and margin requirements must be strictly followed. The registrant may not grant a loan
representing more that 50% of the account value.

             Bulletin Boards

There appears to be continued interest in the operation of bulletin boards to post quotes or indications of
interest for the purchase and sale of securities. The operation of such bulletin boards has historically
been classified as an act in furtherance of a trade, which requires registration in most jurisdictions in
Canada. Due to the requirement to register not many have been established at this time.

             Portals for Financial Services

Securities regulatory authorities in Canada have received inquiries about portals which advertise and/or
hyperlink to other financial services including access to services relating to securities transactions.
Regulatory treatment would depend upon the actual services that are made available through the
portals and how they are made available. Relief from registration was provided to a system operating a
facility for dealers “book-building” activities In The Matter of CanIssue Inc. (July 3, 2001).

Developments with regard to the use of Internet by regulators


Currently in Canada there are 13 securities regulators, some operating their own websites while others
provide information under their provincial or territorial government website. In addition, the CSA have
also recently established a website5. While each website has its own informational structure, they share
common elements that include:

       o     regulator’s profile (who is the regulator and what it does, news and events, publications
             available free or by subscription, how to contact the regulator and frequently asked questions);

       o     investor education (what investing means, what the investors should read in order to keep
             themselves informed, types of investments available, tools and akids area on various topics);

       o     rules and regulation governing the trading of securities in the province (for example,
             rulemaking, notices, orders, accounting issues, compliance issues and the respective
             provincial Securities Act and Regulations). All these rules and regulations are accessible and
             can be downloaded from the websites. Moreover, all new rules, regulations, policies that are
             under consideration and published for comments in many of the jurisdictions and are posted on
             the respective regulator website for awareness and easy access; and

       o     enforcement issues (scheduled proceedings, notices of hearings, statements of allegations and
             other current issues) Some websites also contain application forms, such as Applications to
             Register as a Dealer, Adviser or Underwriter. For some securities regulators this section
             contains multiple searchable databases such as insider trading, cease trading orders or issuers

    For a listing of Canadian regulator’s websites, see Annex IIV, Part 4.

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             in default. There are also securities regulators that have a dedicated area for filing complaints

       System for Electronic Document Analysis and Retrieval (“SEDAR”)
SEDAR is the system used for electronically filing documents (prospectuses, financial statements, etc.)
relating to public companies (reporting issuers) with the Canadian securities regulatory authorities
(commissions and exchanges). The requirement to file documents through SEDAR began on January 1,
1997, and is now mandatory for all domestic reporting issuers in Canada. These rules have been
established by the Canadian Securities Administrators ("CSA"), and are carried out by each provincial
securities regulatory authority. The CSA has appointed CDS INC. ("CDS") (a subsidiary of The
Canadian Depository for Securities Limited) as the filing service contractor for the SEDAR system. In
that role, CDS administers and operates the system, provides assistance to the filing community, and
works with both the regulators and the filers to plan future enhancements to the system.

Foreign reporting issuers may either file through SEDAR or in paper format. The SEDAR system
currently consists of two parts – the SEDAR application (through which documents are filed) and the
SEDAR website (through which publicly available documents are available to the public the day after
they are filed in the SEDAR application). The SEDAR system enables industry to file securities
documents and remit filing fees electronically -- saving time and money. The SEDAR system allows
users to gain immediate and intelligent access to public company and mutual fund information in the
public domain, and provides an important communications link among issuers, filers and the securities
regulatory authorities.

             System for Electronic Disclosure by Insiders (SEDI)

SEDI will be launched beginning May 5, 2003. SEDI is the insider trade reporting system to be available
over the Internet at It replaces paper-based reporting of insider trading data for insiders of
SEDI issuers. SEDI requires insiders to file electronically their insider reports, and issuers to file
electronically certain information, over the Internet, using the SEDI web site. The public will also be able
to search for and look at public information filed on SEDI over the same web site.

SEDI issuers are required to register and provide information related to their outstanding securities in
the period between May 5 and May 30, 2003. SEDI issuers are reporting issuers, other than mutual
funds, that file disclosure documents in electronic format through SEDAR - essentially all Canadian
public companies. Any firm that becomes a reporting issuer on or after May 30, 2003 will have three
business days to file its SEDI issuer profile supplement. As of June 9, 2003, insider trade reports to all
Canadian securities jurisdictions will be made via SEDI, eliminating paper-based reporting systems for
virtually all insider trades.

Canadian securities administrators staff notice 55-309
Launch of the System for Electronic Disclosure by Insiders (SEDI) and Other Insider Reporting Matters

             National Registration Database (“NRD”) Project

The NRD is a web-based registration system that permits electronic filing of the registration forms by all
registrants, and is accessible to regulators, registrants and, to a limited extent, the public. The NRD
system supports the filing, updating, processing, approving and tracking of registrants in Canada. The
NRD system also reduces the amount of effort for the applicant, jurisdictions and SRO’s, since common
registration information is captured and processed once and stored in a single location. It reduces the
cumulative information technology and business processing effort required by the jurisdictions to carry
out the registration of applicants. NRD was launched on March 31, 2003. NRD is used in all
jurisdictions of the CSA except Quebec.

             The Investment Dealers Association of Canada (“IDA”) and Mutual Fund Dealers Association
             of Canada (“MFDA”)

The main sections of the IDA website7 are:
    o information about the IDA, its role on the Canadian markets, its organization and contact
    o investor information, including how to register a complaint against a member;

    See Annex IIV, Part 4 for the website address.

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       o     industry issues and statistics (it offers information about IDA publications and research on
             different issues and also gives statistical data), requirements for the membership in the IDA
             (contains information guide, application forms, frequently asked questions); This section has a
             membership list that offers information about member firms: name, address, phone numbers
             and website (where applicable);
       o     regulatory updates;
       o     enforcement (includes information on the disciplinary process and how to make a complaint);
       o     media, events and speeches.
The MFDA were recognized as an SRO on February 7, 2001.

The main sections of the MFDA website are:
    o Information about the MFDA and its objectives
    o Regulation
    o Membership
    o Enforcement
    o Media Centre
    o SRO Recognition

       Canadian Exchanges

The Toronto Stock Exchange (TSX)

The TSX Group of companies collectively manages all aspects of Canada's senior and junior capital
markets, and provides Canadian trading and data to the global financial community.

The TSX provides an efficient, liquid market for senior equities. Listed companies on the senior
exchange represent a broad range of businesses from across Canada, the United States and other
countries. The TSX Venture exchange, formerly known as the CDNX, is Canada's venture capital
marketplace. It provides emerging companies with access to capital, while offering investors a well
regulated market for making venture investments.

The Montreal Exchange (Mx)

Known as the Canadian Derivatives Exchange®, the Montréal Exchange is a business corporation that
is a for-profit company belonging to its shareholders. The Exchange offers both individual and
institutional investors a wide range of equity, interest rate and index derivatives. It also offers clearing
services through its corporation, the Canadian Derivatives Clearing Corporation (CDCC). The Exchange
is recognized by the Commission des valeurs mobilières du Québec (CVMQ) as a self-regulatory

3.           List of Websites

    Market Intermediaries:            List of authorized investment firms
    Investment Advisers:
    Collective        Investment      List of members, funds managed and statistics:


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    Markets:                          Securities Regulators:


                                      System for Electronic Document Analysis and Retrieval:

                                      Recognized Exchanges:


L:\Projects\Corp_Fin\IOSCO\Internet Task Force - Annex Update\IOSCO - Annex Update (revised May
5 03).doc

1.          Internet-related regulations, policy and guidance

In Germany, securities supervision is conducted by the Bundesanstalt für Finanzdienstleistungsaufsicht,
the Federal Financial Supervisory Authority or for short: BaFin, which was established on 1 May 2002.
The functions of the former offices for banking supervision (Bundesaufsichtsamt für das Kreditwesen -
BAKred), insurance supervision (Bundesaufsichtsamt für das Versicherungswesen - BAV) and
securities supervision (Bundesaufsichtsamt für den Wertpapierhandel - BAWe) have been combined in
a single regulator that supervises banks, financial services institutions and insurance undertakings
across the entire financial market and comprises all the key functions of consumer protection and
solvency supervision.
BaFin and/or its predecessors have issued the following statements concerning the Internet:

Securities Supervision, Asset Management:

BaFin has issued the following general statements that contain guidelines relating to the use of the
Internet in the financial sector:

Guideline on the rules of conduct

 Hereinafter referred to as BaFin, even if the publication in question was made when BaFin’s predecessors still

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Guideline pursuant to section 35 (6) of the Securities Trading Act (WpHG) on the details concerning
sections 31 and 32 of the WpHG relating to the commission business, proprietary trading on behalf of a
third party, and agency business of investment services institutions, of 23 August 2001, (German
version available for download on BaFin’s homepage at: “Rechtliche Grundlagen und
Schreiben” “Richtlinien”).

This guideline contains rules governing the information which investment services enterprises must
furnish to their customers in providing investment services. Among others, BaFin has determined
provisions on day trading, requiring the enterprises to inform their customers of the particular risks
involved therein. Information concerning the following aspects must be provided in particular:
     o customers may suffer immediate losses as a result of day trading;
     o customers may lose their entire capital;
     o customers may be obliged to furnish further capital if they wish to engage in futures
         transactions resulting in losses which exceed the margin provided by them;
     o if day trading transactions are financed trough loans, customers are obliged to repay the loan
         irrespective of the results of the transaction;
     o in their attempts at achieving profits by means of day trading, customers compete with
         professional customers owning sound capital bases;
     o day trading requires comprehensive knowledge of securities markets, trading strategies and
         derivative instruments;
     o close proximity to other investors in the trading rooms may impact on one’s own behaviour.

Organisational requirements for online banks, letter to several online banking providers and discount
brokers, February 24, 2000.
(German and English versions available for download on BaFin’s homepage at:
“Wertpapieraufsicht/Asset Management”, “English” "Press Releases & Publications").

BaFin sent a letter to several online banking providers and discount brokers to ascertain whether they
are prepared to cope with investors’ soaring demand for securities. They were reminded of their
obligation to maintain and use effectively the resources and procedures required for the proper conduct
of the investment service they offer. The letter included a questionnaire the answers to which were
intended to provide an indication as to the arrangements made by the companies with regard to system
capacities, availability, personnel numbers and the dealing with complaints.

Organisational duties of investment services enterprises (Guideline on the details concerning section 33
paragraph (1) WpHG), October 25, 1999 (available on BaFin’s homepage at: „Rechtliche
Grundlagen und Schreiben“, “Richtlinien”).

This guideline contains provisions governing the organisational duties to be fulfilled by investment
services enterprises. According to these rules, investment services enterprises are required to provide
the means and establish the procedures necessary for the proper conduct if investment services and
non-core investment services, including precautionary measures enabling the enterprise in the case of
system default to keep irregularities and delays in the execution or transmission of orders as low as

Securities analysis, notification of BaFin concerning the interpretation of section 34b WpHG, 7 March,
2003, (available on BaFin’s homepage at: „Rechtliche Grundlagen und Schreiben"

BaFin presented a notification interpreting the new legal provisions governing the analysis of securities,
in particular the requirements concerning the preparation of a securities analysis as well as the
disclosure of any existing conflict of interest. According to the notification disclosure of conflicts of
interests in connection with the analysis of securities may be effected on the Internet via a link if such
link is place in a high-lighted form at the beginning of the securities research.

Announcement: Internet offers require a prospectus, 21 September, 1999, (German and English
versions available on BaFin’s homepage at: “Wertpapieraufsicht/Asset Management”
“English” "Laws & Regulation", as a download version in German and in English)

The announcement contains, inter alia, rules governing the offer of securities on the Internet. A public
offer is deemed to be made if the offer addresses investors in Germany. It is of no relevance where the
offeror has its registered office or where the server is placed from which the data can be downloaded.
Depository and publication requirements are not obligatory when it is made clear that investors in
Germany are excluded from subscription. This can be realised by using a disclaimer.

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List of significant regulations, developments and websites

Annual Verifications of Credit Institutions, p. 10 of the Annual Report for 1997 (German version available
BaFin’s homepage at: “Wertpapieraufsicht/Asset Management” "Jahresberichte",
"Jahresbericht 1997")

BaFin stated that within the context of conducting the annual audit of firms supervised by the BaFin, it
examines the institutions’ use of the Internet with respect to their compliance with the rules of conduct. It
is of particular interest whether orders can be placed over the Internet, whether the rules of conduct are
complied with in this connection, and what safety measures are being taken.

Public Offerings over the Internet, p. 14 et seq. of the Annual Report for 1997 (German version available
on BaFin’s homepage at: “Wertpapieraufsicht/Asset Management” "Jahresberichte",
"Jahresbericht 1997")

In 1997, the first public placement of securities over the Internet took place which directly addressed
German private investors. BaFin states that in respect of a public offering of securities in Germany over
the Internet, the ordinary prospectus requirements (e.g. with regard to depositing the prospectus with
BaFin and publication thereof) apply for the issuer/ offeror in the same way as for public offerings in
Germany made in any other (electronic or print) medium. Furthermore, if the offeror uses the internet for
the public offer, the prospectus has also to be made available in an electronic version (e.g. pdf-format)
on the internet. The offeror is requested to inform BaFin on which URL and from what time on this
electronic file can be read and downloaded.
An offer is considered to be a public offer if it is directed, via the media, at the general public or an
unlimited number of investors. An offer is not regarded as a public offer in Germany if it is addressed
only to a limited number of specific German (private or institutional) investors, all of which are known to
the issuer/ offeror in person. In BaFin’s view, an offer over the Internet is deemed a public offer in
Germany if either German investors are expressly targeted by the offer e.g. by using the German
language, or if German investors are not expressly excluded from the offer.

Rules and Principles for Investor Protection, p. 10 of the Annual Report for 1996 (German version
available on BaFin’s homepage at: “Wertpapieraufsicht/Asset Management”
"Jahresberichte", "Jahresbericht 1996)

BaFin stated that the general rules and principles for investor protection apply also with regard to offers
of investment services on the Internet, and that the protection of investors must be ensured irrespective
of the medium used. In particular, the ordinary legal requirements with regard to the rules of conduct
and organisation/ compliance apply irrespective of the kind of (electronic or print) medium used.

Public Offers on the Internet, p. 12 et seq. of the Annual Report for 1996 (German version available on
BaFin’s homepage at: “Wertpapieraufsicht/Asset Management” "Jahresberichte",
"Jahresbericht 1996”)

BaFin stated that with regard to public offerings the usual prospectus requirements (e.g. with regard to
depositing the prospectus with BaFin and publication thereof) apply, irrespective of the medium used
(newspaper advertisements, mailings, structured sales [Strukturvertrieb], telephone or Internet). In
BaFin’s view the fact that some of these offerings are labelled "Private Placements" makes no difference
in this regard if in fact these offers are addressed to the general public and therefore constitute public
offers under German law.

Banking Sector
BaFin has issued the following general statements with regard to the use of the Internet in the banking

Day trading centre: subject to licensing, press release November 16, 1999, (German version available
on BaFin’s homepage at: “Bankenaufsicht” "Pressemitteilung")

BaFin points out that as a rule, a license is required for the operation of day trading centres.

Guideline: "Marketing of Foreign Collective Investment Schemes on the Internet" of 2 June 1998
(German and English version available on BaFin’s homepage at: “Bankenaufsicht”
“Rechtsnormen und Schreiben)

The guideline deals with the question as to when marketing of foreign funds over the Internet constitutes
an illegal offer in Germany. The provisions of the Foreign Investment Act (Auslandinvestment-Gesetz)
prohibit a foreign collective investment scheme from marketing its shares in Germany without prior
notification of BaFin. Even though BaFin does present its approach on the marketing of foreign funds

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List of significant regulations, developments and websites

over the Internet, it points out that it states only its current practice which still needs to be tested in
practice and may be adjusted for the actual case.

BaFin will not consider Internet sites in a foreign language that are clearly not directed towards German
investors (e.g. no German addresses or special information, disclaimers) to be a public offering or an
advertisement in Germany, whereas Internet sites in the German language will generally be considered
a public offering in Germany. Exceptions might, however, be possible for sites which are clearly directed
only towards investors in other German speaking nations. Unsolicited e-mails to a bulk of recipients in
Germany will be considered by BaFin a public offering in Germany, even if the e-mails, because of their
language and content, appear not to be aimed at German investors. If an e-mail is sent to a bulletin
board/ newsgroup, BaFin states that it will need to look at the content of the mail and the target group of
the board/ newsgroup.

For advertisements the general rules of the Foreign Investment Act are applicable. If shares can be
ordered online, the rules of the Foreign Investment Act have to be followed, e.g. the investor must be
offered the prospectus and the last reports before completing the sale. BaFin considers it to be sufficient
if the investor has the possibility to download the prospectus and the reports, unless the investor
explicitly requests to receive a printed copy of the documents.

Customer Identification Rules: No. 10 respectively no. 12 of the Guidelines of BaFin concerning
measures to be taken by credit institutions or financial services institutions to combat and prevent
money laundering of 30 March 1998 and 30 December 1997 (German version available on BaFin’s
homepage at: “Bankenaufsicht” “Rechtsnormen und Schreiben”)

In view of the growing use of new technologies in banking business (home banking, telebanking as well
as Internet banking), BaFin has drawn up special regulations concerning customer identification when
establishing business relationships in direct banking. For this purpose the guidelines concerning
"measures to be taken by credit institutions to combat and prevent money laundering" were revised with
effect from 1 January 1997 (see Annex 7). The former method of verifying the customer's identity by
sending account opening documentation by registered mail with personal acknowledgement of receipt
has been replaced by a specific postal identification procedure developed by Deutsche Post AG in co-
operation with BaFin, in which the identity of customers is established on behalf of the relevant credit
institution and in accordance with the requirements applying to banks by counter service on the
premises of Deutsche Post AG or in the course of mail delivery ("PostIdent Service"). In addition to the
employees of Deutsche Post AG, notaries public and other banks are authorised a.o. to establish
identity on behalf of the institution obliged to identify the customer. An identical regulation was included
in the Guidelines of BaFin concerning measures to be taken by financial services institutions to combat
and prevent money laundering of 30 December 1997.

2.         New developments

The use of the Internet in Germany has increased significantly since the 1998 Report. A survey
commissioned by the Research Institute Forsa revealed that in the fourth quarter of 2002, for the first
time more than 50 % (51,6 % to be exact) of the German population had access to the Internet. In 2002
the number of Internet users rose by 5.4 million. The fact that another 5.4 million people are considering
to go online in the near future shows that total Internet usage will continue to increase.

Electronic shopping in particular is becoming more and more popular while economic and stock market
use as well as equity trading on the Internet play a more minor role. The proportion of Internet users
effecting their banking transactions online has remained flat at 45 %. More than 20 million accounts in
Germany are online accounts, 45 % of which are maintained with private-sector banks.

However, significant differences can be seen in the attitude of Germans towards electronic banking:
One out of two Germans welcomes the trend towards electronic banking: 48 % welcome the fact that an
increasing number of banking services are available online, while 45 % find this trend rather critical and
another 7 % are neither pro nor con. Acceptance is significantly higher among males at 51 % than
among females (44 %). Whereas almost three quarters of persons under 25 prefer electronic banking
services, the percentage reaches less than one third among persons older than 60. There is also a clear
correlation between one’s attitude to electronic banking and formal education: 53 % of those having
lower school-leaving qualifications, but only 37 % of persons having passed A-levels (Hochschulreife)
dislike electronic banking. Considering different professions, the largest group of persons favouring
electronic banking is comprised of self-employed persons.

Issuers increasingly use virtual underwriting banks for their initial public offerings (electronic-only
offerings). Some underwriting banks offer the shares exclusively via the Internet. The deals between
underwriting banks and their customers are settled through the customers’ key relationship banks.

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List of significant regulations, developments and websites

In addition, more and more securities services enterprises establish alternative trading systems on the
Internet, offering their customers electronic off-exchange securities trading. The majority of ATS in
Germany are still closed systems, and not generally accessible to the public through the Internet.
Typically clients are institutional investors, securities houses, banks, and online brokers.

In the German exchange business, the Deutsche Börse AG offers on its website basic information about
the companies, and all documents the issuers are obliged to publish for the investors’ information which
they require for investment decisions and for general purposes.

The Exchange rules require issuers in the Prime Standard Segment to transmit their annual and
quarterly reports to Deutsche Börse AG in electronic form at the same time as these reports are
published. Deutsche Börse AG makes the reports available on the Internet as per their date of
publication. This applies also to notifications submitted by the issuer concerning changes in the rights
arising from the shares and to the companies’ ad hoc announcements as well as publications of
directors’ dealings. In addition, the issuer shall prepare and maintain immediately after the admission of
the shares to the exchange and thereafter at the beginning of each financial year a corporate action
timetable in German and in English. The issuer receives a code for changing his data on the website,
which enables and obliges him to maintain the company data himself. Systems administrators of
Deutsche Börse AG’s admission board verify the issuers’ compliance with their duties to submit and
make available the relevant data.

Reports and announcements on the Internet often contain hyperlinks connecting the user directly with
subscription forms or with companies offering subscription. Hyperlinks are also increasingly found on the
Internet sites of information services. Given the fact that such hyperlinks frequently lead the user directly
to the issuer, enabling him to subscribe to the securities via the Internet, there is a certain danger that
potential offerors of securities might act like simple information providers.

There has also been a pronounced increase in the percentage of Internet services offered by traditional
intermediaries over the last few years. Apart from an ever greater extent of Internet services being
offered by established intermediaries, recent years have also seen the emergence of special Internet
banks which act exclusively on the Internet and do not operate branches or a call centre.
Significant changes have occurred in day trading and direct brokerage after the 1998 Report was
published. Revolutionary developments in the order routing capacities of financial services providers
and the exchanges and not least of the Internet led to an environment that made day trading for retail
investors attractive. Day trading firms enable their customers not only to get immediate and real-time
access to securities and derivatives markets but also to buy and sell financial instruments as often as
they want during one trading session. A growing number of online banks have been established over the
last few years. Customers of online banks carry out up to 70 % of their securities transactions through
the Internet. The industry is making efforts to increase this proportion even further.

 New developments with regard to the use of Internet by regulators
For the purpose of investor protection, the Internet is today the most promising means of informing
investors about the regulations and guidelines dealing with issues of investor protection.

Therefore, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), the Federal Financial
Supervisory Authority of Germany, has established its own homepage on the Internet (,
providing investors with information about the functioning of securities supervision and the relevant legal
provisions in Germany. All laws and regulations falling within the responsibility of BaFin are accessible
and can be downloaded from BaFin’s homepage.
Furthermore, BaFin has installed pages on its website providing answers to frequently asked questions,
where it warns of typical dangers involved in securities trading in Germany and outside the German

Information is provided upon:
     o how to identify dubious offers;
     o what to observe before taking an investment decision;
     o what BaFin can do for investors; and
     o ways to obtain further information on investor protection.

Information that serves the improvement of transparency is also published on BaFin’s website,
sometimes in aggregate form. For instance, interested investors may access a database containing
holdings of voting rights in companies listed in official trading where such holdings exceed or fall below
certain thresholds. BaFin also provides a database with directors’ dealings publications. In addition, the
website contains a list of licensed financial service providers which provides a quick and easy way for
investors to ascertain whether a securities service provider has been granted the necessary license and
is subject to supervision or not.

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List of significant regulations, developments and websites

BaFin has published the following databases on its website:

              •   Major Holdings of Voting Rights in Officially Listed Companies
              •   Directors Dealings' publications
              •   Announcements to launch public tender offers
              •   Announcements of the intention to gain control in a takeover procedure
              •   Offering documents for takeover bids
              •   Minimum consideration for public tender offers
              •   Sales Prospectuses deposited with BaFin
              •   List of published authorizations for Annual General Meetings for the acquisition of own
              •   List of licensed credit institutions
              •   List of licensed investment companies
              •   List of licensed financial services institutions
              •   List of licensed branches of enterprises domiciled in another state of the EU and EEA
              •   List of licensed representative offices
              •   List of excepted enterprises pursuant to Section 2 (4) of the Banking Act
              •   List of foreign investment units licensed to be distributed in Germany
              •   List of licensed pension funds
              •   List of licensed insurance companies
              •   List of certified products for retirement provision.

BaFin publishes draft legislation, for instance planned guidelines interpreting legal provisions on its
Internet website. Interested investors are thus offered the opportunity to comment on such drafts via the
Internet. The ability to play an active role in the elaboration of future rules and provisions increase
investors’ awareness of the provisions set up for their protection.

Another step towards higher transparency and easier access to information on stock corporations has
been the creation of the electronic Federal Gazette As of 01 January 2003,
announcements from stock corporations and commercial partnerships limited by shares, which are
required by law or by their articles of association to issue announcements, must be made in the
electronic Federal Gazette.
This concerns announcements set out in the Stock Corporation Act (Aktiengesetz) such as invitations
for annual general meetings or personnel changes in the companies’ main bodies, as well as the annual
declaration of the board of management and the supervisory board that the company has complied with
the recommendations of the “Regierungskommission Deutscher Corporate Governance Kodex“
(commission dealing with the German corporate governance code) and/or which recommendations were
not complied with.
Also published in the electronic Federal Gazette are major changes to qualified participating interests in
stock corporations pursuant the Securities Trading Act (Wertpapierhandelsgesetz), as well as
announcements under the conversion law (Umwandlungsgesetz) to the extent that they concern a stock
corporation or commercial partnership limited by shares.

3         List of websites

       Market             Licensed credit     institutions   and   financial   service   institutions:

       Investment         As far as "investment advice" is the only service offered it is not
       Advisers:          supervised in Germany. If it is offered in connection with other
                          investment services:

       Collective         Collective Investment Schemes:

       Markets:           Regulated Markets in the EEC:
                          Supervisory Authorities of the Federal States:
                          Exchanges: Berlin:
                          Bremen: www boerse bremen de

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List of significant regulations, developments and websites

                            European Energy Exchange:
                            Commodity Exchange Hanover:
                            Clearing Houses Clearstream:

1.         Internet-related regulations, policy and guidance

The COB is an independent administrative authority that oversees the protection of savings that are
invested in financial instruments and all other investments offered to the public, the investor disclosure
and the proper functioning of financial markets. Also, the COB has exclusive power in the regulation of
asset management. The COB was founded by the Ordinance (Executive Order) of September 28, 1967
(now in the Monetary and Financial Code).


On November 15, 2001, the Daily Security Law was passed in France, and its article 29 created two
new articles in the Post & Telecommunication Code, compelling telecommunication providers, such as
Internet Service Providers, to retain certain types of data for the purpose of jurisdictional investigations.

The Modifying Financial Law for 2001, passed on December 28, 2001, modified article L.621-10 of the
Monetary & Financial Code, which defines the powers granted to the COB’s investigators during the
course of an investigation. With this modification the COB’s investigators’ powers to obtain copy of any
document or information were confirmed, as they are now entitled to request the data retained by
telecommunication providers.


For every operation they want to carry out, issuers must file out a prospectus, including all relevant
information regarding the issuer and the operation, which is then submitted to the COB in order to obtain
a visa. Issuers may also file out annually a “document de référence” (roughly equivalent in its principle to
the American SEC 10K form). This allows a company that would like to carry out a financial operation
the following months to submit a simpler prospectus and to obtain a visa in only two market days.

A database, called SOPHIE, containing all the electronically available prospectuses and “documents de
référence” is freely accessible on the COB’s website. In November 2001, 90 % of the documents (either
prospectuses or “documents de référence”) submitted for approval to the COB or filled in 2001 were
available in the SOPHIE database. The COB decided therefore to make the electronic availability of
such documents a compulsory requirement: Regulation 2002-1 and Regulation 2002-4 were issued at
the beginning of 2002.
Regulation 2002-1 modified articles of three current COB regulations, article 4 of Regulation 95-01 ,
                                11                                  12
article 10-2 of Regulation 98-01 and article 12 of Regulation 98-08 , compelling the issuers to send
an electronic version of their prospectus to the Commission for the purpose of updating the online
SOPHIE database.

Likewise, article 13 of Regulation 2002-4, relating to public tender offers for financial instruments traded
on a regulated market, specifies that the public tender offer document, prepared by the bidder and the
target company, jointly or not, is made available to the public through the COB’s website as soon as it is
approved by the COB.

            Regulation relating to the information to be disclosed when operations are to be conducted on the Nouveau
Marché (New Market).
            Regulation relating to the information to be disclosed upon the admission of financial instruments to the
listing of a regulated market and upon the issuance of financial instruments of which admission to listing of a
regulated market is request.
            Regulation relating to public offering of financial instruments.

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List of significant regulations, developments and websites

Previously, the COB had adopted three guidelines regarding the use of the Internet in various aspects of
the securities area. Recommendation 98-05 describes the obligations of listed companies regarding the
disclosure of information on their website, in order to respect Regulation 98-07, relating to the disclosure
of information.

Recommendation 99-02 addresses the various issues related to the promotion and selling of CIS or
mandated management services through the Internet, such as compliance with the rules of conduct
related to asset management services, “know-your-client” obligations and client’s consultation of
compulsory documents.

Finally, Recommendation 2000-02 reminds issuers and investors alike that market abuses (such as
insider dealing, dissemination of false information or price manipulation) carried out on the Internet can
be enforced under current regulation, that in some cases, hypertext links can be considered as
solicitation .

2.         New developments

According to the survey conducted monthly by MEDIAMETRIE, 20.1 million people aged 11 years old
and over accessed the Web in January 2003, including all places of access (from home, work,
school…). This represents 40% of the French population aged 11 and over.

The main development regarding the Internet in France is the rapid growth of broadband access
(+250% for ADSL access and +50% for cable access in 2002). In December 2002, the AFA 14 estimated
that its members had 8,925,000 individual subscribers, including 1,456,000 broadband account (out of
an estimated total of 1.7 million accounts in France).

Regarding the securities activity, there are 7.1 million individual stockholders in France (+1 million from
2001) . However, only 22% of that population is considered to be “active investors”(i.e. someone who
executed more than three trades during the trimester before the survey).

According to that same survey, 12% of individual stockholders use the Internet for investment purposes
(+10% since 2001). Yet the use of the Internet has evolved since 2000:

                                                               Percentage of users
                                                               May 2002       May 2001           May 2000
Consulting stock prices                                        67%            85%                78%
Retrieving information on listed companies                     52%            61%                64%
Checking personal securities account                           80%            80%                59%
Searching for buy/sell advice on specific investments          46%            51%                51%
Carrying out trades electronically                             49%            58%                36%
(note: users surveyed could make multiple choices)

Though the rise in the number of individual stockholders can be explained by the listing of former state-
owned companies (ASF, Crédit Agricole) between May 2001 and May 2002, these investors are the less
active. The evolution of the Internet use is mainly due to the plummeting market and the subsequent
losses investors suffered after the explosion of the Internet-bubble.

Online brokerage

After a period of rapid growth, the French online brokerage industry has now entered a phase of
consolidation in order to face the activity reduction of Internet investors. While in December 2000 it was
estimated that 20 to 25% of the orders transmitted to the Paris stock exchange were routed by online
brokers, the figure is only 13,35% for December 2002 . Even if the number of accounts continued to
increase (680,650 accounts in December 2002), the number of trades per year fell from an average of
18 trades in 2001 to 9.6 in 2002.

Along with the merger and acquisition movement, online brokers are now offering more and more
services (real-time quotation, investment tools…) and financial products (derivatives, CIS) in order to
attract and keep clients.

           For more information and detailed description of the three recommendations issued by the COB, please
refer to the previous IOSCO’s report, “Securities Activity on the Internet II” issued in June 2001.
           The AFA, Association des Fournisseurs d’Accès, is the main French association of ISPs
           According to the yearly survey commissioned by EURONEXT Paris and conducted by TAYLOR NELSON
SOFRES in May and June 2002. Available at
           According to Brokers on line, the French online brokers association (

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List of significant regulations, developments and websites

Collective Investment Schemes (CIS) and the Internet

Because of the stock market collapse in the past years, a large number of online investors started to
invest more in CIS: in 2002, 25% of the value of an online investor’s portfolio was invested in CIS, while
the percentage was 17% a year before. More and more online brokers, in order to offer new services to
their clients, started to promote CIS on their websites.

Internet financial fora and chatrooms

Even though the stock market collapse also had consequences on the activity of Internet financial fora,
online brokers were still very interested in that online community of investors, a pool of potential new
clients: by the end of 2002, BOURSORAMA, the main financial information website in France, was
bought by FIMATEX, SOCIETE GENERALE’s online broker. The new entity, which kept the name
BOURSORAMA, is, after several other acquisitions, the leading French online broker with 130,000

Even with limited activity, Internet fora are still a valuable source of information for individual investors,
but can also be used as a means to conduct market abuses, such as dissemination of false information,
and are therefore closely monitored by the COB.

New developments with regard to the use of Internet by regulators

As stated in Annex 1, the COB issued new regulations in 2002, compelling listed companies soliciting
document approval by the COB (e.g. for IPOs or take-overs) to provide an electronic version of the
document. Once approved, the electronic version of the document is made available to the public by
updating the SOPHIE database on the COB’s website .

Listed companies can comply with their compulsory obligation to provide the COB with a copy of every
press release they issue 18, by directly updating the SOPHIE database, through a secure access, with
an electronic version of the press release.

Twice a month, the COB’s website also provides the names of all listed companies which haven’t met
the deadline for the compulsory legal periodic information (e.g. quarterly revenues, biannual
accounts…). While the list counted 62 names in September 2002 when the COB started providing this
data, the number fell to 34 in March 2003.

3.         List of websites

     Industry associations                Brokers on line
                                          online brokers association (18 members)

                                          Investment firms association (129 members)
     Market Intermediaries:               List of authorized investment firms and credit institutions:

                                          Firms authorized for custody and account keeping:

                                          Authorized portfolio management firms
     Investment Advisers:                 Non regulated in France

     Collective Investment Schemes:

                                          more specific information (summary of the mandatory
                                          information note for CIS, date of approval, main
                                          characteristics) are available on the Minitel elecronic
                                          network 3617 COB

           Please refer to Annex 1 for more detailed explanations.
           According to article 8 of COB’s regulation 98-07.

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List of significant regulations, developments and websites

     Markets:                            Regulated markets in the EEC:



1.         New developments

New developments with regard to the use of the Internet in financial markets and industry after June

On-line brokers in Italy showed a consolidation and closure trend in 2002. Only a few independent
online brokers remain, while the most part of investment services via internet are offered by commercial

New developments with regard to the use of Internet by regulators

Consob website has been empowered with a new section concerning investor education.
In addition, it is now possible for investment firms to send via internet to Consob all documents included
balance sheet and statistical data and information concerning their activity.

1.         Internet-related regulations, policy and guidance

(Securities Commission Malaysia (SC))

The SC had in August and December 1999 issued 2 press releases in respect of securities offered
through the Internet.

Primary Offers Of Securities Via The Internet
(available at the SC’s homepage at )

This policy statement which was released in August 1999 as a press statement basically deals with the
position of securities that are offered by offerors based overseas via the Internet. The SC is of the view
that an offering over the Internet that is accessible by persons in Malaysia will be caught under section
32 of the Securities Commission Act 1993 which deals with proposals/offers that will require the prior
approval of the SC.

However, there are certain aspects that the SC will take into consideration in assessing whether
approval is required under section 32. The SC will take into account the following factors in determining
if approval is required:

     o     The intention of the person making the offer i.e. whether offer is targeted to a person in
     o     The penetration of the offering of securities in Malaysia i.e. whether any person in Malaysia
           accepts the offer
     o     The involvement of a person from Malaysia in making the offer

The SC has also in the press release recommended practical steps/measures, which are not exhaustive
in themselves, that may be taken so that such offer will not be caught under the said section. Some of
these practical steps include:

     o     Not publishing the offer or invitation in websites that are frequently visited by or draws the
           attention of a person in Malaysia. For example offering in websites that have “.my” in its
           address or that the offering content is relevant to a person in Malaysia;
     o     Ensuring that the offering does not contain information specifically relevant to a person in
           Malaysia. For example, tax rates or prices which are presented in Malaysian currency;

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List of significant regulations, developments and websites

    o     Designing or taking steps to automatically exclude and/or reject any subscriptions made by a
          person from Malaysia and to have a monitoring system on applications made by such person.
          For example, an offeror may programme their subscription system in such a manner to
          automatically reject any applications for subscription from a person in Malaysia where the
          telephone, address and postal addresses indicate that they are from Malaysia;
    o     Restricting the access of information of the offering so that a person in Malaysia is unable to
          view documents that are related to the offering; and
    o     Incorporating a clear jurisdictional disclaimer into the on-line prospectus / offer document
          stating that the offer is not intended to be available in Malaysia or to any person in Malaysia or
          which clearly states at which jurisdictions that the offer is targeted in a list that excludes

Capitalshare Fund Not Approved By The SC
(available at the SC’s homepage at )

The policy statement on “Primary Offers of Securities via the Internet” was put to the test when the SC
became aware of an unapproved fund, i.e. the Capitalshare Fund (Fund), soliciting investments from
persons in Malaysia. The Fund is an offshore open-ended mutual fund consisting of 6 mutual funds
which are traded online offered by an investment management company registered in the Cayman

In deciding whether the Fund required the approval of the SC under the Malaysian securities law,
consideration was taken with respect to the determining factors and practical steps highlighted in the
SC’s earlier press release on “Primary Offers Of Securities Via The Internet” (please refer to press
release above). It was decided that the Fund required the approval of the SC since it was accessible to
persons in Malaysia.

Despite concluding that the Fund fell within the regulatory jurisdiction of the SC, the cross-border nature
of the offer hampered any attempts at enforcement by the SC. The SC therefore decided that educating
potential investors would be the best course of action in the circumstances. A press warning was
therefore issued where public investors were warned of the danger in investing in such unapproved
schemes and that they should be wary of such schemes that may be disseminated through the Internet,
fax, brochures and other form of medium.

Consultation Paper On The Implementation Of Electronic Commerce In The Capital Market
(available at the SC’s homepage at )

Further to the press releases issued in 1999, the SC had also issued a Consultation Paper entitled
“Implementation of Electronic Commerce in the Capital Market” for public comment and feedback in
March 2000. The Consultation paper generally identified impediments to the effective implementation of
EC in the capital market and outlined recommendations to overcome these impediments. Pursuant to
this, a Working Group (WG) on Electronic Commerce, which consists of 9 sub-Working Groups (SWG),
was established to look into specific areas, issues and recommendations duly identified in the
Consultation Paper. The WG comprises representatives from the market institutions such as the
exchanges and clearing houses as well as market intermediaries via industry associations. The SC acts
as the Secretariat to the WG and the SWGs. The WG is a collaborative effort between the public and
private sector to better implement EC in the capital market.

Guidelines on the Establishment of Electronic Access Facilities by a Universal Broker (EAF Guidelines)
(available at the SC’s homepage at

The Guidelines were released in August 2001 to allow a Universal Broker (UBs) to establish electronic
access facilities (EAF). EAFs are physical sites or premises such as Internet kiosks or investment
centers which provide facilities that enable clients to initiate orders or obtain market or investment
advisory information electronically. The Guidelines outline the requirements and procedures that a UB
must comply with when establishing an EAF. The Guidelines allow UBs to offer investors greater
access to online services as a complement to the services offered by their traditional brick and mortar

Further to the EAF Guidelines, the SC had in May 2002 released a practice note that further enhances
the range of service available at EAFs. Such services include:-
     o the placement of licensed dealer's representatives, futures broker's representatives and dual
         licence holders;
     o opening and closing of trading accounts and/or securities accounts;
     o receipt and payment of clients monies;

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     o     marketing and selling of approved financial products and services provided by Universal
           Brokers; and
     o     placement and utilisation of broker-front-end and CDS terminals and/or servers.

The practice note can be obtained at

2.         New developments

Malaysia has witnessed an increasing usage of the Internet by the market institutions and intermediaries
in disseminating information on financial services and products since the late 1990s. The 1998 Report
was used by the SC as a guiding principle in the development and preparation of the SC’s Consultation
Paper on the Implementation of Electronic Commerce in the Capital Market, which was released in
March 2000. The Consultation Paper sets out recommendations for removing physical and regulatory
impediments to the use of technology in the capital market. In order to operationalise the
recommendations in the Consultation Paper, a Working Group on Electronic Commerce in the Capital
Market (WG) was established comprising the SC, market institutions, the Exchanges and market
associations. Further to that, the WG was divided into 9 smaller Sub-Working Groups (SWG) to better
implement the specific recommendations identified in the Consultation Paper.

The use of the Internet for providing financial services, presents the greatest challenge to the SC. We
are seeing industry trends reflect the emerging transition by stockbroking companies from intranet to
Internet-based order-routing linkages with their clients. As of November 2002, the Kuala Lumpur Stock
Exchange (KLSE) has approved 20 stockbroking companies to provide Electronic Client-Ordering
Systems (ECOS) via the Internet to their clients. These 20 companies have approximately 50,000
ECOS-Internet clients registered with them.

As at December2002, the SC had granted investment adviser’s license to one pure online investment
adviser operated by its investment advisory company.

Aside from that, the SC is also seeing new developments in the use of the Internet by the industry.
Some of these new developments that can be seen are:
    o eProspectus –The Kuala Lumpur Stock Exchange (KLSE) posts the prospectuses of
         companies listed on the exchange on the KLSE ‘s website in which share applications are done
         offline. Similarly, in the unit trust industry, management companies have also posted
         prospectuses of unit trust fund schemes on their websites.

     o     Introduction services for new start up companies – This service is provided by ME Net, which is
           run by KLSE and it provides a platform for new start up companies to post information. It
           assists companies to profile themselves to a pool of investors on its website. From there,
           interests can be merged whereby the investor can find its targeted investment while the
           company acquires the funds needed to meet its capital requirements.

     o     Portals – These are basically Internet based aggregated sites. These portals are a mixture of
           those that are regionally and locally based.

     o     Chatrooms/bulletin boards/Internet discussion sites – A platform or forum whereby investors or
           the general public meet to discuss securities and other issues relating to the capital market.

     o     Kuala Lumpur Stock Exchange (KLSE) Link - An information dissemination platform, which is
           run by the KLSE to disseminate corporate announcements of listed companies of the
           Exchange to the general public.

     o     Primary offerings via the Internet – Malaysian public investors have also been targeted as
           potential applicants to primary offerings offered by foreign issuers. The SC has issued a Policy
           Statement stating that primary offerings which are aimed at Malaysian resident and which are
           accessible by them would require the prior approval of the SC under the local securities law.
           However, certain factors will be taken into consideration in assessing whether approval is
           required. Further to the Policy Statement, the SC had also issued a press release warning the
           investing public of a foreign offshore fund that had not obtained the prior approval of the SC
           and that the public should be wary of the fund.

New developments with regard to the use of Internet by regulators

In respect of training and educating investors, the SC is adopting a phased approach in enhancing
investors education through the use of technology and acknowledges the importance of having well-
informed and educated investors. It is the SC’s hope that these investors will be able to self-police and

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provide the best defence against contravention of securities laws, particularly those perpetrated over the
Internet. As a first step, the SC has posted the list of licensed intermediaries - futures brokers, fund
managers and futures fund managers - on its website to enable investors to check and ensure that the
intermediaries with whom they are dealing with are properly licensed by the SC. This list can be found
on the SC’s website (

The SC’s website has also been used as a communications method in the public consultation process,
for example the SC’s Consultation Paper on the Implementation of Electronic Commerce in the Capital
Market and the proposed Malaysian Capital Market Masterplan was put up on the SC’s website for
public information, viewing and comments. Other than that the SC’s website contains a list of securities
legislation, guidelines and practice notes that are within the responsibility of the SC which can be
downloaded for free.

The Securities Industry Development Centre (SIDC), the training arm of the SC, had in 1999/2000
developed a computer-based simulation training game called “Wise Investor” which is a stock market
simulation game aimed at teaching the general public about how to invest while giving out information
about investments. The game will ultimately build a learner’s understanding knowledge from a beginner
to an intermediate level on investment. The game is sited at the SC’s website and is available for free.

In February 2002, SIDC launched the Malaysian Investors website,, which is aimed
at educating the public on the capital market and its products. The website has established itself as an
authoritative platform for investor education with articles, quizzes and video streaming, catering for
beginners in the ‘Back to Basics’, ‘Investment Products’ and ‘Capital Market Institutions’ sections. The
website is updated every month and offers free e-notifications of the latest updates to its subscribers.

There is a Technical Reference Panel link in the SC’s website which allows investors or members of the
public to put forward any queries that they may have and which are more technical in nature. The SC is
also currently looking into further enhancing investor education through the SC’s website.

With the many different use of the Internet, the SC is also looking into the possibilities of submission of
documentation required by intermediaries to the SC electronically. The SC is currently developing the
“Electronic Reporting System” infrastructure for an electronic reporting and submission system to ease
communication between the SC and the regulated intermediaries.

The ERS is a communications platform that will establish remote access connections between the SC
and market intermediaries, particularly stockbroking companies, futures brokers, unit trust management
companies and asset management companies, within a secured network. The ERS will enhance
communication between the SC and its regulatees by facilitating the submission of information from
market intermediaries to the SC, and allowing them to obtain information from the SC.

The 1st phase of the ERS focuses on licensing applications and renewals by all licensed stockbroking
companies and their representatives. The pilot implementation of the ERS/ELA involved 2 stockbroking
companies and 2 futures brokers in November 2002. The system will be deployed to all other licensed
market intermediaries by the first half of 2003.

In terms of surveillance, several areas have been identified which are considered to be pertinent to
further strengthen the surveillance of Internet activities particularly for any possible activities of fraud or
manipulation. Effective monitoring of the Internet can only be achieved if the staffs involved in the
surveillance work are equipped with the necessary skills and techniques. The SC hopes to seek
assistance from their foreign counterparts to conduct specific technical training courses for the
surveillance staff on how to perform effective Internet surveillance.

3.          List of websites

     Market Intermediaries:            List of licensed persons (future brokers, fund managers,
                                       dealers, investment advisers and futures fund managers) at

                                       List of members of the Kuala Lumpur Stock Exchange (KLSE)

                                       List of members of the Malaysia Derivatives Exchange (MDEX)

     Investment Advisers:              List of licensed investment advisers at

     Collective Investment Schemes:

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     Markets:                         a) Exchanges

                                      Kuala Lumpur Stock Exchange (KLSE) at

                                      Malaysia Derivatives Exchange (MDEX) at

                                      List of approved securities by the SC’s Syari'ah Advisory
                                      Council which are listed on the KLSE - This is a list of approved
                                      securities by SC's Syari'ah Advisory Council (SAC) who
                                      approves certain securities listed on the Kuala Lumpur Stock
                                      Exchange (KLSE) to be in accordance with the Islamic
                                      principles. This list can be found at:

                                      b) Clearing Houses

                                      Securities Clearing Automated Network Services Sdn Bhd
                                      (SCANS) at

                                      Malaysian Derivatives Clearing House Berhad (MDCH) at

                                      c) Central Depository

                                      Malaysian Central        Depository    Sdn    Bhd     (MCD)     at

The Netherlands Authority for the Financial Markets (AFM)

1.          Internet-related regulations, policy and guidance.

The Netherlands Authority for the Financial Markets (AFM) is the supervisory authority for the conduct of
bussiness in the Dutch financial markets. Until 2002 the AFM (previous: the Securities Board of the
Netherlands, STE) was the supervisory authority for all parties involved in the securities trade.
In April 2002 STE changed into the AFM, responsible for securities rnarkets as well as the conduct of
business (including consumer information and advice) of all financial services, providers in the rnarket
domain (banks, investment funds, insurance cornpanies, securities firms).

The prudential supervisors across all sectors are the Dutch Central Bank (DNB) together with the
Pension and Insuranece Supervisor (PVK).

The statutory basis for the powers of the Netherlands Authority For the Financial Markets is the Act on
the Supervision of the Securities Trade 1995 (Wet toezicht effectenverkeer 1995 / Wte 1995). The aim
of the Wte 1995 is to ensure the efficient, fair and orderly operation of the securities markets and to
protect investors against malpractice, inadequate information provision and incompetence on the part of
securities institutions. In order to promote the confidence of investors in the operation of the securities
markets, trading must be well organised so that transactions are settled smoothly and obligations are
complied with.
The Netherlands Authority For the Financial Markets exercises supervision of securities exchanges and
securities institutions by means of statutory powers to carry out investigations and inspections, to
monitor compliance and to obtain information that are laid down in the Wte 1995.

The general standards that are laid down in the Act are set out in further detail in the Decree on the
Supervision of the Securities Trade 1995 (Besluit toezicht effectenverkeer 1995 / Bte 1995). These
ministerial regulations lay down the obligations that securities exchanges and securities institutions have
to comply with. The Act and the Decree incorporate provisions enabling the Netherlands Authority For
the Financial Markets to issue more detailed rules and the Netherlands Authority For the Financial
Markets has made use of this opportunity by issuing the Further Regulations on the Supervision of the
Securities Trade 1999 (Nadere Regeling toezicht effectenverkeer 1999 / NR 1999). These regulations
lay down the many obligations of securities exchanges and securities institutions.

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Finally, the Netherlands Authority For the Financial Markets has issued policy rules in which the
Netherlands Authority For the Financial Markets has laid down its policy on issues on which the Act, the
Decree or the NR 1999 are either unclear or insufficiently clear.


Policy rule

The policy rule, published in June 1999, is still current in 2003. This policy rule concerns the offering of
investment services through the Internet (“policy document 99-0003 concerning the Internet in relation to
the supervision of securities trade in The Netherlands”, see:

The rules seek to make clear to those offering investment services through the Internet whether or not
they come within the scope of the Act on the Supervision of Securities Trade 1995. Pursuant to the
Decree on the Supervision of Securities Trade (Bte) and the Further Regulation on the Supervision of
Securities Trade 1999 (Nadere Regeling 1999) the policy document also focus on general standards
(technical, security) for websites of investment firms offering online-investing for the retail market.


A draft policy rule on the outsourcing of investment services is published for consultation. The final
version is expected to be published in the second half of 2003.

Information Risk Management

In February 2001 the AFM (STE) decided to elaborate the general information risk management
standards, stipulated in section 27 of annex 4 of the Further Regulation on the Supervision of Securities
Trade 1999. In a revised section 4.27 there will be a reference made to general accepted standards.

These standards are compiled and authorized by the NOREA, the Dutch Organization for Professional
IT Auditors. The NOREA standards are based upon general accepted standards like the Code of
Practice and CobiT (Control Objectives for Information Technology of the ISACA ,Information System
Audit and Control Association) The audit may only be performed by professional IT auditors, who are
committed to their quality rules, laid down in de Rules of Professional Conduct and Practice of
Registered IT Auditors.

The auditor reports on the audit to provide trust and security about the relevant processes. When a part
of the relevant processes is contracted out, the service provider is within the scope of the audit too.

In short the Standard contains the following chapters:

     e-Security policy
     Applicable laws, rules and regulations
     Conditions Contract
     Internal influences, for instance outsourcing, service providing
     Transactions (on-line, messaging, back-office)
     Architecture & infrastructure
     Management of ICT: ITIL-processes
     Management of non ICT: logistics, financials

As the developments in e-business are very fast, a 6-monthly audit / risk-analysis is compulsory.
The standard is developed by the NOREA to have a professional, state-of-the-art- method for auditing
different e-business-processes. Further information on NOREA is available on the website:

2.         New developments

Figures/ trends

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In November 2001, 74% of the Dutch population had a PC at home.19 In September 2002, 61% of the
Dutch population was online. The Netherlands score highest in the European online ranking after
Iceland, Sweden and Denmark.21 Broadband connections, especially ADSL, are growing rapidly. In the
beginning of 2002, 22% of the Dutch households used a broadband connection, in December 2002 this
percentage was already 33%22.

Market leader Rabobank has 1 million online banking clients23, compared to a national population of
            24                               25                                                         26
16.1 million . A wide range of online brokers operates in the Netherlands. According to the table
below online broking in the Netherlands is particularly an activity of the established institutions, even
more so with the recent purchase of online broker Alex by Rabobank.27 The table below measures
market share by the number of accounts.

                Type                Internet brokers             Market share per broker in
                                                                 number of accounts
                Large Banks         ABN AMRO, Postbank, Circa 20% per bank
                Established         Alex                         Circa 20%
                Important           Robeco     Direct,    SNS 4 to 6%
                opponents           bank
                Pioneer             Binck                        Over 2%

                Date: September 2002

Measured in terms of the number of orders, the purchase of online brokers Alex and VEB Bottom-Line
by Rabobank in December 2002 made Rabobank market leader with a 35% market share.28 In 2002
Rabobank processed 2.9 million securities orders (3.1 million in 2001). The share of online orders
increased in 2002 to 40% (32% in 2001).29

In 2003 there is one Day Trading Centre registered at the AFM. In November 2000 the AFM (STE) has
decided in that Day Trading Centres can be considered as brokers, and therefore need a licence.

Website of AFM
The website of the Netherlands Authority for the Financial Markets (AFM) (
provides general information about financial supervision, interpretations, policy rules, press statements

Under the Act on the Supervision of the Securities Trade (Wte) the Netherlands Authority For the
Financial Markets keeps three registers. The purpose of these registers is to promote the transparency
of the market and to improve the provision of information to the various market participants.

•      Insider tranactions registry:

      Source: CBS, Bezit en gebruik personal computer en internet, uitgesplitst naar diverse persoonskenmerken,
     November 2001,
   Source: press release, March 10, 2003 about the annual report 2002.
   Source: CBS, Kerncijfers bevolking van de geregistreerde bevolking van Nederland, for 2002,
    ABN Amro, Alex, Binck, ING Bank, Intereffekt, Keytrade, Postbank, Rabobank, Robeco, Robein, Sem van Berkel,
   SNS Bank, VEB Bottom-Line, WH Selfinvest, OneTwoTrade, Bolero, Cortal Street, Delen Online, Fortis Bank
   België, Leleux, RealBank, TheGoodTrade, VMS-Keytrade, as reported on in april 2003.
   Source: Joint press release of Dexia Bank Nederland, Alex and Rabobank Groep, December 23rd, 2002
   Source: Joint press release of Dexia Bank Nederland, Alex and Rabobank Groep, December 23rd, 2002
   Source: press release, March 10, 2003 about the annual report 2002

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      This register lists all securities transactions by insiders as defined in the Act, for example,
      transactions by an executive director or supervisory director of a company in the securities of the
      same company

•     Institutions register:
      This register lists all of the securities institutions that have been licensed by the Netherlands
      Authority For the Financial Markets to trade in securities or are exempt from that requirement

•     Disclosure of Major Holdings in Listed Companies Act:
      This register lists all of the legal and natural persons who achieve a capital interest and/or voting
      rights of 5, 10, 25, 50 or 66 2/3 per cent by acquiring or transferring securities in a naamloze
      vennootschap / NV (company limited by shares), or if the capital interest and/or voting rights exceed
      or fall below such levels.

With effect from 1 July 2002, all institutions that sell complex financial products (including banks,
securities institutions and insurance companies) will be legally obliged to provide Financial Information
Leaflets (Financiële Bijsluiter / FB) when consumers are obtaining information prior to purchasing
complex financial products. There is a separate website concerning this subject: (dutch only).

Internet Surveillance System (HITS)
In 2000 the three Dutch financial regulators started, together with the National Police Force (KLPD)
and the Economic Control Department (ECD) a project which was set up to elaborate the possibilities for
the investigation and prosecution concerning illegal (financial) activities on the Internet .

Although the project was completed in April 2001, the cooperation is continued . The enforcement
department of AFM participates in the project on internet surveillance. In this project the participants are
involved with the goal to design a "custom made internet tool" (both hard- as software are included) to
scan the internet for illegal financial services activities and managing gathered information. Filtering of
the results of this scan takes place in various forms and afterwards the results are screened and
prioritized by a "cyber cop" (a member of the enforcement division). High priority results lead to further
investigation. The system has been released in April and the cyber cops are now processing the ten
thousands of collected websites.

The system is divided in two subsystems; the front office responsible for sweeping the internet using a
intelligent combination of "key words" through well known search engines as Google, Yahoo, Altavista
etc. Then the front offices collects the results, filters, recognizes priority issues such as county codes,
removes double counts and compares the results in its database to see if sites are already known by the
system from previous sweeps.

The generated output is imported in the back office; a central database where the participating
regulators can query hits, assigned to them, for further analyses and investigation. Before a new sweep
is issued the front office will be updated with the information in the back office, which leads to more
refined future sweep results.

3.          List of websites

     Market Intermediaries:

                                               Wte register lists all licensed institutions and
                                               registered parties (The Act on the Supervision
                                               of the Securities Trade 1995) (Dutch only).

     Investment Advisers:             Only ‘client remisiers’ . Client
                                              remisiers are exempt securities institutions that
                                              are only permitted to introduce clients to
                                              securities institutions or investment institutions
                                              that are subject to supervision. Client remisiers
                                              may not for example pass on client securities

  The AFM, the Dutch Central Bank ( and the Pension and Insurance Supervisory Board , PVK

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                                             orders or hold monies on behalf of clients.
                                             Client remisiers are exempt from the licensing
                                             requirement, because the introduction of clients
                                             is only a simple securities service. They are
                                             registered by AFM, however, by being listed on
                                             the Wte Register .

                                             A new law is in preparation.
     Collective Investment Schemes:

                                             The Wtb register lists all collective investment
                                             schemes, both domestic and foreign, that are
                                             licensed by AFM to offer their units to retail
                                             investors. This register is available in pdf-
                                             format (Dutch only).

     Markets:                                Regulated markets in the European Economic Area

                                             Cash market and derivatives:

                                             Special market for government bonds.:

1.          Internet-related regulations, policy and guidance

(CMVM - Comissão do Mercado de Valores Mobiliários)

CMVM Regulation Nº 13/2002, approved by the CMVM’s Executive Board on August 8, 2002 (Available
on the Internet homepage of the CMVM:          -
Portuguese version)

This regulation modifies the CMVM Regulation Nº 11/2000 in order to permit, in certain cases and
circumstances, the use of Internet, by means of the Information Disclosure System based on the
CMVM’s web site, as an alternative way to comply with information disclosure duties.

CMVM Regulation Nº 8/2002, approved by the CMVM’s Executive Board on June 14, 2002 (Available
on the Internet homepage of the CMVM:        -
Portuguese version)

This regulation, regarding the new legal framework of the property investment funds, also has specific
requirements (Art. 29º) for the marketing of these funds through the Internet.

CMVM Recommendations regarding “Absentee Votes Submitted by Mail in public companies”,
approved by the CMVM’s Executive Board on February 15, 2001 (Available on the Internet homepage of
the CMVM:
s_voto.asp - English version)

The objective of these recommendations is the fostering of the exercise of postal vote in public
companies' general meetings. The CMVM supplies a set of practice recommendations, which address
the use of electronic means in the preparation stage of the general meetings including the notice
convening the meetings, as well as the exercise of postal vote through electronic means.

CMVM Regulation Nº 21/2000, approved by the CMVM’s Executive Board on June 7, 2000. (Available
on the Internet homepage of the CMVM:

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1.asp - English version)

The CMVM establishes specific rules regarding the reception of subscription or transaction orders
through the Internet.

CMVM Opinion and Recommendations Regarding the Use of the Internet, approved by the CMVM’s
Executive Board on January, 2000. (Available on Internet homepage of the CMVM:  -
English version)

Summary of key provisions of this document:
     o Neutrality: It fully explains the principle of neutrality seeking to ensure quite clearly that the use
          of Internet as a means of communication and securities transaction does not imply any
          alteration to the principles regarding the exercise of the intermediation activity, the securities
          public offers, information duties as well the exercise of regulation and supervision.
     o Equivalent levels: The electronic use of documents must ensure equivalent levels of
          intelligibility, durability, authenticity and integrity regarding those which are required for paper-
          based documents.
     o Information contents: The information displayed must be up-dated. When information is given
          by a third party, its exact origin must be mentioned and the language used must be
          Portuguese, unless it is exempted by a CMVM authorisation.
     o Other: Other requirements are also established: the financial intermediaries must comply with
          all the legal procedures as well as the general rules of conduct.
This guidance document deals also with issues of cross-border access and use of Internet and clarifies
the issue of the existence of a relevant connection with the Portuguese legal system on the Internet use.
In this document, the CMVM discloses several recommendations to offerors, financial intermediaries
and investors, e.g. regarding the disclosure of the email address on the intermediary’s site; the
informative disclaimers mentioned on the site; the improvement of the protection of confidentiality of
clients' data transmitted electronically, as well as the adoption of procedures regarding the confirmation
as to the reception of the information by the client; the verification by the investors of administrative
authorisations (by the CMVM) for the performance of the financial intermediation activity in question.

CMVM Regulation Nº 24/1999, approved by the CMVM’s Executive Board on December 28, 1999
(Available on the Internet homepage of the CMVM:
4.asp - English version)

This regulation regarding the trading of mutual funds also has specific requirements (Art. 7º) for the
marketing of funds through open electronic networks, as is the case of the Internet.

2.         New developments

 New developments with regard to the use of the Internet in financial markets and industry since the
2001 Report

The use of the Internet in Portugal has continued to grow at rapid pace, since the adoption of the 2001
Report. The total number of Internet service customers in Portugal in the 3rd quarter of 2002 reached a
total of nearly 4,718,000. Comparison of the total for service customers with the same quarter of 2001
shows a growth of nearly 55%. The Internet access service penetration rate, reached around 46% in the
3 quarter of 2002. Observation of the penetration rate in the same period of the previous year shows a
figure of about 30%.

There is a strong and continuous development of the number of intermediaries offering the investment
service of reception of orders through Internet. The number of intermediaries offering this service more
than doubled from the end of 2000 to the end of 2002 reaching near 40% of the totality of the authorised

According to statistical data collected directly by the Comissão do Mercado de Valores Mobiliários
(CMVM), the securities regulator, the trading volume of securities trade on the Internet represents
already an interesting percentage of the total stock exchange transaction and has grown from 2,5% in
the 4th quarter of 2000 to 9% in the 4th quarter of 2002.

New developments with regard to the use of Internet by regulators
The CMVM continues to use the Internet as a privileged means for the dissemination of information
among the investors, issuers and supervised entities.

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In the year of 2002, with a view to providing faster access to information on listed companies and to
permit the automatic and immediate disclosure of material events by companies by means of the
Information Disclosure System based on the CMVM’s website at, the CMVM has issued
an instruction relating to access by issuing companies to the said system via “extranet”. The system is
prepared for the automatic and immediate disclosure of material events via Internet, regardless of the
time at which the information is submitted, thus the Portuguese issuers with securities listed on foreign
stock exchanges will be able to comply with their information duties at the same time in various

Also, during 2002, securities issuers, financial intermediaries, fund management companies and asset
management companies have received instructions to send to the CMVM all the statistical data and
information which they must submit to CMVM preferably by extranet, through the combine use of a
username and password. Electronic mail and fax shall only be used as alternative means, should the
extranet fail to function at any given time.

3.          List of websites

     Market Intermediaries:              List of   banks        and   other    financial   institutions:

                                         List of banks, brokers and broker dealers companies:
     Investment Advisers:                Independent Advisers:

     Collective Investment Schemes:      List of investment fund management companies, assets
                                         management companies, property investment funds
                                         management companies, loan securitisation funds
                                         management companies, investment funds:

     Markets:                            Regulated markets in the European Economic Area (EEA):

                                         Cash market and derivatives:

                                         Special market for public debt. :

1.          Internet-related regulations, policy and guidance

As an integrated financial services regulator, the Monetary Authority of Singapore (MAS) has the
mandate to supervise the banking, insurance, securities and futures industries in Singapore. In
recognition of the unique regulatory challenges posed by the Internet, MAS has continually refined its
regulatory framework for the entire financial sector.

MAS has recently made legislative changes to the Securities and Futures laws in Singapore and issued
a number of policy statements and guidelines that are relevant to the conduct of financial activities on
the Internet.

Prospectus registration process under the Securities and Futures Act – July 2002
Enacted in October 2001, the Securities and Futures Act (SFA) is the cornerstone of the regulatory
framework for the securities and futures industries in Singapore. The SFA came into force in stages,
beginning from 1 January 2002. It was fully implemented with effect from 1 October 2002.

To raise the standard of prospectus disclosure in Singapore and to introduce an element of market
discipline that harnesses the Internet, MAS had introduced revisions to the procedures for registering
prospectuses in the SFA. Under the SFA, prospectuses lodged with MAS will be subject to a minimum
two-week holding period and posted on a dedicated Internet-based portal called OPERA (Offers and
Prospectuses Electronic Repository and Access) on the MAS web-site. The public will be able to use

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OPERA to search for, view and comment on prospectuses lodged with MAS. This provides MAS with a
source of market information on the adequacy of dislosed information. MAS may refuse to register a
prospectus if it does not satisfy the disclosure requirements or if its registration is not in the public

All prospectuses and related documents lodged with MAS under the SFA will be accessible to the public
through OPERA during the period for which they are current (i.e. for 6 months after registration of
prospectuses for shares and debentures; 12 months for prospectuses relating to collective investment

Internet guidelines on offer of securities – 25 June 2002

The Guidelines issued by MAS on 25 June 2002 apply to offers of securities (i.e. shares, debentures
and collective investment schemes) to the public in Singapore through the Internet, covering both initial
as well as secondary offers of securities. The SFA requires an offer to be made in or accompanied by a
prospectus (or a profile statement, subject to certain conditions) that is registered by the MAS. The
Guidelines supplement the SFA provisions by providing guidance to market participants on compliance
with the statutory requirement with regard to Internet offers.

For an offer to be made through the Internet, MAS will generally regard the prospectus requirement to
have been complied with if:

    o     a prospectus and a profile statement (if applicable) are registered by the MAS before an offer is
          made through the Internet;
    o     the offeror makes a copy of the registered prospectus and profile statement available as an
          electronic prospectus or profile statement; and
    o     the offeror states clearly where copies of the prospectus and profile statement in print form may
          be obtained.

In addition, the electronic prospectus or profile statement must not differ significantly in form or content
from the registered documents. Prior to assessing the application form, prospective investors must be:

    o     provided with instructions as to how they can view or download and print the electronic
          prospectus or profile statement; and
    o     advised that they should read the prospectus or profile statement before submitting the

The Guidelines also set out best practices on:
    o The security issues relating to an electronic prospectus or other electronic documents (to
        prevent unauthorised modification to the contents of the electronic documents);
    o The submission of electronic application for securities; and
    o The actions to be taken by an offeror when an offer closes.

The full text of the Guidelines is available on MAS' website at

Authorisation of Markets – Securities and Futures Act and Guidelines

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The SFA also updates and fine-tunes the regulatory regime for securities and futures markets, to keep
pace with many changes in the industry arising from technological advances, innovation and
globalisation. The new legislation enables MAS to adopt a calibrated approach in regulating a range of
markets, particularly those in the form of electronic trading systems. The SFA introduces a new
authorisation regime called "Recognised Trading System Providers" to cater to these new trading
systems. ATS operators who operate facilities which are predominantly providing market-like services
will require authorization to operate in Singapore as Recognised Trading System Providers (ReTS

To assist market participants to better understand how MAS will administer the SFA legislative
provisions relating to markets, a set of Guidelines on the Regulation of Markets (“Guidelines”) were
issued in Sep 2002, following extensive consultation with industry practitioners.

The objectives of these Guidelines are to:
    o elaborate on MAS’ approach to administering the SFA markets regime;
    o outline the key regulatory factors MAS will evaluate in determining whether a person is
        operating a market that is subject to regulation under the SFA;
    o explain the Recognised Trading System Providers regime; and
    o highlight the transitional arrangements that will apply for existing regulated and exempt market

As the Internet has created a borderless environment, the regulatory issue that arises is whether
Internet based trading systems are establishing a market in Singapore. The Guidelines provide
guidance on some factors MAS will use to assess whether a person is operating a market that is subject
to regulation under the SFA. These factors include:
     o Whether the market is located in Singapore, physically or via screens or terminals placed in
     o Whether the market is directed or targeted at investors in Singapore; and
     o Whether there is direct customer access to the market by investors in Singapore, without the
         assistance or intervention of an intermediary.

The Guidelines can be downloaded at:

2.         New developments

New developments with regard to the use of the internet in financal markets and industry since the 2000

Singapore had its first Electronic Communications Network in May 2002, when Bloomberg Tradebook
was granted a licence to operate its securities operations here. Bloomberg Tradebook, which is
registered under the US SEC’s ATS Regulations, is permitted to match securities listed or quoted on
foreign exchanges.

In March 2001, the Singapore Exchange launched SGX-Access that provides global access to the
Singapore securities market. This is an open interface trading facility based on a universally adopted
messaging standard that enables SGX’s member firms to trade from anywhere in the world. The new
trading facility provides an open electronic gateway which allows investors to place orders via the
Internet or the member firms’ proprietary systems.
In July 2002, SGX launched its SGX Securities Book, a market datafeed system designed to enable
investors 'live' access to all 50 price levels of buy and sell prices for SGX listed stocks, instead of only
the best buy and sell prices. The system enables retail and institutional investors to access in-depth
market information such as real-time order book data on 50 levels of bid and offer prices of stocks in
eight markets, including the ready market, odd-lot market, buy-in market and cash market. In addition,
investors will also be able to directly access real-time information on married deals, market controls and
company notices. SGX currently provides the service through existing vendors, namely broking houses
and on-line news vendors. Investors will have to subscribe to the service from their brokers (via their
on-line trading portals) or from news vendors.

New developments with regard to the use of the Internet by Regulators

MAS Website
Singapore Government Securities (SGS)

MAS expanded the scope of e-Services for the financial sector by introducing the Singapore
Government Securities Electronic Applications (SGS e-Apps) in January 2002. This is a secure

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electronic platform for primary dealers to submit auction bids for Singapore Government Treasury bills
and Bonds online. In addition, a new SGS website, with comprehensive information on
the SGS market, is now available.


Prospectuses relating to offer of securities will have to be lodged with MAS and be subject to a minimum
two-week holding period for public exposure. For this purpose, MAS launched “OPERA” (Offers and
Prospectuses Electronic Repository and Access), a new database on its MAS web-site, in September
2002. The public will be able to use OPERA to search for, view and comment on offer documents
lodged with MAS.
An Internet-based database hosting information and documents on public offers of shares, debentures
and collective investment schemes, OPERA is the only means by which the public will have access to
lodged prospectuses. The public will be able to use OPERA to search for, view and comment on offer
documents lodged with MAS. There are be clear warnings on the website that the lodged prospectus is
not registered and that investors should not make investment decisions on the basis of the lodged
prospectus. Such unregistered prospectuses are not allowed to be put up on any other website or
disseminated in any other way.
As a further safeguard, no application forms can be attached to lodged prospectuses put on the MAS
website for public exposure. Also, no facilities can be provided to enable the public to apply for shares,
debentures or units of CIS before the prospectus is registered.
OPERA allows the public to:
    o Search for and view all offer documents lodged with or registered by MAS
    o Comment on lodged prospectuses and profile statements before MAS registers them
    o View the latest amendments made by offerors to their prospectuses and profile statements
    o Find out the status of prospectuses and profile statements which have been lodged with MAS
         for registration (including those that have been refused registration by MAS)
    o View a list of stop orders that have been issued on registered prospectuses and profile

Projects in the Pipeline

The website is also a useful and effective resource MAS’ investor education efforts. There are plans for
MAS to provide a range of information, ranging from independent resources and educational materials,
materials on regulatory matters such as investor alerts on market misconduct and financial scams, to
both investors and consumers through the MAS’ website. In addition, the website will also provide
hyperklinks to other sites relating to education information on investments and financial regulations.
These new initiatives seek to empower investors with the resources to help them make informed, well-
considered investment decisions on financial investments in a caveat emptor environment.

MAS currently provides an up-to-date, on-line directory of financial institutions in Singapore, including a
list of securities and futures intermediaries on its website. Going forward, MAS intends to provide a
register of licensed individuals on the website. This move is in line with IOSCO's recommendations on
how regulators should use the Internet to conduct investor education activities31.

The Singapore Exchange (SGX)

SGX, as a self-regulatory organisation, has made various efforts to enhance the disclosure of material
information of listed companies to the investing public. Through the SGX’s website, the public can freely
access unaudited financial information of listed companies and other announcements such as
disclosure of price sensitive information.

1.         New developments

At the present time it is difficult to have reliable data on the activity of securities through Internet. Our
latest figures estimate more than three million and a half clients online using all type of services and
more than a million and a half of clients using securities accounts.

     Securities Activity on the Internet, IOSCO, 1998: "Regulators and SROs can establish interactive systems
     allowing investors to confirm the regulatory status of a particular person/entity, or provide a phone number or
     Web site address where an investor could obtain such information. Regulators and SROs also can publish their
     e-mail addresses to allow investors and members of the securities industry to transmit comments and

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The projected data for 2007 shows that 10 million people will be online clients

The current services offered by entities supervised by the CNMV, or the Central Bank of Spain, through
Internet are mainly the following:

- Securities dealing.
- Real time price quotation.
- Research information.
- Investment advice.
- Securities offers, placements, etc.
- Securities margin financing.
- Futures and options dealing.
- Funds dealing.
- Bonds dealing.
- Stock borrowing and lending.
- Warrants dealing.
- Portfolio simulations.
- Transfers of funds.

Many of these services are offered to the clients for the national markets. Depending on the expertise of
the clients the investors invest on other markets of developed or emerging countries reaching practically
to all the variety of securities and financial instruments. At the moment they operate through Internet
diverse national and foreign entities. These foreign entities are in majority from European Community.

Apart from the traditional ways of access to Internet, diverse entities offer services and products of the
stock market through the WAP system.

New developments with regard to the use of Internet by regulators

The CNMV website is increasingly used for the dissemination of information among investors and
supervised entities. All databases containing the data filed at CNMV are accessible trough pages on the
website as well as all the Spanish legislation on securities markets, guidelines, recommendations and
warnings addressed to investors, and other data considered useful to improve the transparency of the

The significant corporate events received at the CNMV are immediately posted on the website including
all the attached documents in PDF format. On the same way the complete text of an issuing or listing
prospectus is available at the website as soon as it is approved by the CNMV. The CNMV also
publishes in its website planned legislation to give the financial community the opportunity to comment
on the drafts.

Recently the CNMV has improved an Investor Protection section on the CNMV´s website. This new
section enclose several aspects about this important matter such as:

                  Information                   Investor orientation        Warnings
                  Investor latest news          Investors Rights & Duties   Investor            protection
                  Consultation Services        Information       concerning Alerts
                                               financial products
                  Information available on the Information             about   Boilling Rooms and non-
                  website                      Investment Firms                authorised firms
                  FAQ´s                        Markets                         Internet cautions
                                               Information guides              Tangible asset investments
                                               Internet trading information

The CNMV in its role of National Numbering Agency for Spain has the responsibility of allocating ISIN (
International Standard Identification Number) and CFI (Classification of Financial Instruments) codes to
all the securities issued in Spain. To provide the users of codes with the ISINs and CFIs, the CNMV
offers on its website a querying facility to access the ISINs database.

But from the CNMV Internet is not seen only as a medium to disseminate information, the Internet is
also used as an efficient means to exchange documents between CNMV and supervised entities.

Electronic exchange of documents

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Since 1998 the supervised entities can submit the documentation required by the CNMV via Internet
using CIFRADOC/CNMV. CIFRADOC is software to encrypt and sign documents electronically.
Brokers, Management Companies of Collective Investment Institutions and issuers can submit
documents to the CNMV via Internet. The documentation can be prepared in a PC, encrypted and
signed with CIFRADOC and directly submitted to the CNMV as a file attached to an e-mail. In answer,
the CNMV sends an electronic acknowledgement of the file received.

The encryption and digital signature guaranty confidentiality, integrity and authentication in the
documentation exchange. The documents submitted with the digital signature have the same legal
strength as those submitted on paper.

The CNMV provides CIFRADOC free of cost to those entities wishing to use this system, but the use of
CIFRADOC is not mandatory, the entities can continue with the submission of papers or disks as long
as they want. Anyway the electronic submission system has been proved as comfortable, secure, timely
and less costly system that the entities are steady moving to this way of submission of documentation.

The documents available to be submitted to the CNMV via Internet are mainly:

Listed companies
     o Significant events
     o Listed companies must remit the significant events to the CNMV and they are now availed to
         submit them via Internet.
     o Shareholders disclosure
     o Periodic financial reports
     o Prospectuses

Collective Investment
     o Prospectuses
     o Shareholders disclosure
     o Financial statements

Market Intermediaries
    o Financial statements
    o Agents

Other information like Board Members changes, fees and Investment Firms issuers will be ready to be
submitted early.

Virtual Desk

As a further step in the process of e-government initiated by the CNMV, in the first half of 2001 it is
envisaged to set up a “Virtual Desk” that will allow the entities to complete electronically through Internet
a significant number of procedures before the CNMV. The needed interchange of information between
entities and CNMV required in these procedures will be protected with CIFRADOC.

Through this Virtual desk, accessible at the CNMV website, all the supervised entities will be able of
sending, consulting and modifying electronically the majority of data to be registered at the CNMV. For
instance, the collective investment institutions management firms will be able of downloading their
prospectuses already filed at CNMV, modifying them as they deem appropriate and sending the
modified prospectus back to the CNMV via e-mail, previously encrypted and signed with CIFRADOC.
To provide some of these new facilities, as the updating of prospectuses for example, it has been
necessary to develop a new version of CIFRADOC that allows the double digital signature carried out in
different places and time.


The SUNI (Unified Information System for Internet) is a project that came up at the Iberoamerican
Institute of Securities Markets originally initiated by the Argentinean, Brazilian and Spanish Securities

          CNMV Circular 1/2001, of 18 April, relating to the forms of collective investment prospectus.
          Spanish legislation requires the sign of both management and custodian entity to approve any change in
          the prospectus.

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The agreed target is to implement a disclosure system of selective public information from each
Regulator who is a part of this system by a common minimum infrastructure, architecture and
presentation. This system will be run and applied by each regulator.

The system is directed to the technical supervisors of the Iberoamerican area. This system allows the
regulators to register in the system and provide a profile for each web. The user will receive information
according to his profile.

The public information disclosed in this system refers mainly to listed companies. The user can define in
his profile the companies and information he is interested, such as significant events, financial
statements, prospectuses, etc. Also, the user can find recent information containing legislation,
statistics, etc. about the companies.

At present the Argentinean, Brazilian, Chilean and Spanish Commissions are integrated in this system.

3.         List of Websites

     Market Intermediaries:             Investment Firms registered

                                        Investment Scheme Management Companies


                                        Foreing Investment Firms Search under the European


     Listed Companies:                  Listed companies.
                                        Access by name

                                        Access by Sector

                                        Other information about listed Companies

                                        Take over bids

                                        Annual accounts

                                        Periodic financial reports

                                        Significant shareholders

                                        Shareholders disclosure

                                        Significant events

     Investment Advisers:
     Collective Investment Schemes:     Access by type of entity

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                                    Funds Management Companies (List of Entities)

                                    Investment Funds and Monetary Funds (FIM and FIAMM)


                                    Real Estate Investment Funds (FII)

                                    Close End Companies


                                    Open-End Securities Investment Companies

                                    Depositary Companies

                                    Collective Investment foreign companies

                                    Bolsa de Madrid

                                    Bolsa de Barcelona

                                    Bolsa de Bilbao

                                    Bolsa de Valencia

                                    Meff (futures and options Spanish official market)

                                    Senaf (electronic trading platform of Spanish public Debt)

                                    Regulated markets in the EEC

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1.         Internet Related Regulations, Policy and Guidance

SFBC-Circular 99/2 regarding Outsourcing of Business Areas, 6 August 1999, amended 22 August

The circular describes the requirements for outsourcing solutions. If they are met no explicit consent of
the SFBC is required. Issues addressed in the circular include due diligence of potential service
provider, sound contractual basis, monitoring of services, data protection & banking secrecy and
auditor’s/examinor’s access to service provider.

The circular is available on SFBC’s website:
in German language:
and in French language

(Unofficial English translations of this circular can be found at

SFBC-Circular 03/1 regarding Public Advertisement for Invest Funds, 28 May 2003

In the circular the SFBC summarizes its practice concerning the regulation applicable to “Public
advertisement” including e.g. regulation on the distribution of investment funds via the internet.

The circular is available on SFBC’s website:
in German language:
and in French language:

United Kingdom
1.       Internet Related Regulations, Policy and Guidance
The following is not a comprehensive list of all legislation relevant to Internet activities, but merely a
guide to legislation that is likely to be most relevant to the on-line provision of financial services. It
should be noted that unless a provision is specifically limited to a specific type of media, it will tend to be
taken as applying to both electronic and non-electronic channels. The FSA’s Handbook of Rules and
Guidance operates on a similar technologically neutral basis.

Financial Services and Markets Act 2000
The Financial Services and Markets Act 2000 replaced earlier legislation and instituted the FSA as the
single integrated regulator of financial services, including banking and insurance, and in the securities
field exercising powers formerly exercisable by the Self Regulatory Organisations. The Act came into
force on 30 November 2001. The Act has been designed with a progressive move towards home-state
or state of origin regulation of electronic financial promotions in mind. The Act is available on-line at:

Electronic Communications Act 2000
This Act implements the Electronic Signatures Directive and provides for:
approval of electronic cryptography service providers;
providing proof of electronic signatures; and
amendment of legislation by Ministerial order to allow for electronic communications or electronic
storage of information.
The Act is available on-line at:

   Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community
framework for electronic signatures.

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Data Protection Act 1998
This Act implements the Data Protection Directive and provides, with exceptions and qualifications,
that a data controller with the appropriate territorial nexus to the UK must comply with specified data
protection principles in relation to all personal data with respect to which he is the data controller. The
Act provides for notifications by data controllers, for enforcement of the Act by way of enforcement
notices, and other matters. The Act is available on-line at:
Electronic Commerce Directive (ECD) implementation
Her Majesty’s Treasury implemented the ECD for all regulated financial services where the FSA has a
rule making power. These regulations may be found at:

The Department of Trade and Industry has implemented the ECD for all other areas. In the financial
services field this includes Recognised Investment Exchanges and Clearing Houses as well as
Designated Professional Bodies. These regulations may be found at:

Rules and Guidance
The FSA’s Handbook of Rules and Guidance is issued under the Financial Services and Markets Act
The following sections of the Handbook are especially relevant to the provision of services using the
Internet or related technologies.

Appendix 1 of the FSA’s Authorisation Manual (AUTH) contains guidance on the circumstances in which
UK requirements may apply to the provision of services or the communication of financial promotions
using electronic means.

Firms applying for authorisation must fill out a systems form and where appropriate an electronic
commerce systems form. Firms that are required by the FSA to submit audited results must in addition
have these forms signed off by their auditor or reporting accountant. The forms may be accessed at the
FSA’s web-site:

The Electronic Commerce Directive imposes specific obligations on the provision of services using
electronic means. The FSA has incorporated these requirements into a discrete module of its
Handbook: the Electronic Commerce Directive sourcebook (ECO). Some of its provisions affect
European firms based in other Member States providing or communicating services to the UK; while
other provisions affect UK based firms providing services domestically or cross-border. The ECO
sourcebook may be accessed at:

The Electronic Commerce Directive permits a Member State to impose on a case by case basis
restrictions on the freedom of a European provider to provide services by electronic means from another
Member State. Chapter 19 of the FSA’s Enforcement Manual (ENF) outlines the FSA’s powers under
this provision as well as its policy towards the exercise of these powers.

There are some other Handbook provisions that also relate specifically to the use of the Internet. These

The General Provisions sourcebook (GEN) contains rules and guidance on the interpretation of the
Handbook. Paragraphs 2.2.14-16 relate to the use of electronic media and interpret the Handbook
requirement for a communication to be made ‘in writing’ as generally including electronic media.

   Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and on the free movement of such data.
   Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of
information society services, in particular electronic commerce, in the Internal Market (Directive on electronic

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The Conduct of Business sourcebook (COB). Section 1.8 provides guidance on electronic
communication with or for customers. Section 3.14 provides Guidance to UK firms on the Internet and
other electronic media, and paragraphs 7.12.9-10 provide Guidance on orders received over the

The FSA’s policy statement on Operational risk: systems and controls (and the preceding consultation
paper CP 142) contains material that is directly relevant to the management of Internet related
operational risk. The draft Guidance, published as part of the consultation, will be incorporated, as
amended, into the Integrated Prudential sourcebook in 2004. The consultation paper and policy
statement are accessible at:

The full text of the FSA Handbook is variously available on the Internet, through commercial services or
direct from the FSA at the following address:
25 The North Colonnade
Canary Wharf
London, E14 5HS
Tel: 44 (0) 20 7676 1000
Fax: 44 (0) 20 7676 1099

The FSA has details on its Central Register of authorised firms. This
list of authorised firms and the permitted activities which they are
allowed to undertake may be accessed by phone or on-line at:
Telephone number: 44-20-7676 1000
Website: (on-line registration is

2.         New developments

Since the publication of the 1998 Report, there has been a number of significant market and regulatory
developments in the UK.

The number of firms with a web presence has increased significantly in the UK, and so has the use of
the Internet. Some firms use the Internet solely as a marketing medium, to provide details of their
services. This is particularly marked among firms providing financial advice, but is also quite common
among UCITS providers and fund management firms. In the last few years there has been a handful of
firms that have established fund supermarkets and a few fund management firms that trade via the
Internet. Third party Administrators have also been developing Internet capabilities for their clients,
offering the facility to view an individual’s portfolio on line, to value it and eventually to be able to trade.
Firms have also used the Internet to distribute IPO prospectuses, and there has been an increase in the
number of firms taking advantage of the single market to provide services within the EEA based on their
authorisation in the UK.

The area, in which the Internet has had the greatest market impact, has been e-broking. Over 30 firms
now allow their customers to buy and sell shares on an execution only basis via the Internet. The large
banks as well as traditional brokers have been developing Internet operations, and there are also a
number of brokers which provide services only over the Internet.

The growth of the Internet has coincided with a sharp rise and subsequent fall in share values and
trading volumes. According to industry data compiled by ComPeer, while the number of trades for
advisory and discretionary clients has remained relatively constant at between 5-6 million a year, the
number of execution only trades rose from 8.7 million in 1998 to 14.3 in 2000 before falling back to 8
million in 2002.

The fall in trading volumes has increased competitive pressures on brokers, and has led some firms to
chase market share. According to ComPeer, while advisory and discretionary firms remained profitable
in the last two years (2001-2002), execution only brokers made substantial losses. As regards the share
of revenues, ComPeer data suggest that in 1998 the largest execution only firms accounted for 48 per
cent of revenues. This fell to 36 per cent in 2001 but rose in 2000 to 40 per cent. Uncertain market
conditions may also be responsible for the fact that in 2002 there was an increase in
advisory/discretionary client numbers and a fall in the number of execution only clients.

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Over the last two years execution only broking has continued to migrate to the Internet. According
ComPeer, the number of Internet investors rose from around 250,000 in Q3 2000 to a peak of 374,000
in Q2 2002, before declining at the end of the year to 345,000. During the same period the number of
trades per investor fell from 2.5 per quarter to 1.5 per quarter.

Use of the telephone has continued to fall. In the fourth quarter of 1999 the number of on-line orders
placed on-line were around 375,000 while those made by phone were around 2,600,000. On-line orders
peaked in Q1 2001 at 775,000, by which time telephone orders had declined to 1,900,000. By Q1 2003
almost a third of all execution only orders were made via the Internet (550,000 compared to 1,125,000
by telephone).

In the provision of financial services to consumers, firms are looking at a number of different delivery
channels. These include not just Internet access via a PC but also the use of mobile telephony and
interactive digital television. Initial predictions for the take-up of these newer media proved to be
optimistic. Their use as marketing and/or sales vehicles is likely to raise a number of significant issues,
not least the areas of advertising, disclosure and security.

Internet technologies have created new market opportunities. Some of these, such as day trading, have
not had an impact in the UK. In others the impact has been marked. For example, there has been
considerable growth amongst infomediaries, that is firms which supply information and news on
investments, tools for ranking investments according to pre-defined criteria, bulletin boards and chat

Infomediaries have an important role to play in making markets more efficient, by increasing the amount
of information available to the market, by improving its dissemination and by enhancing the
understanding of financial news and products among the public. But the UK along with other countries
has also seen abuse of these opportunities on the part of those who seek to profit from spreading false
news or by engaging in other forms of market manipulation or insider trading.

The Financial Services and Markets Act 2000 gives the FSA significant new powers enabling it to take
enforcement action against those who seek to abuse regulated markets.

B. New developments with regard to the use of Internet by regulators
Market developments have raised a number of issues for UK regulators. These may summarised under
the following headings:

    1.            Consumer information and education. The FSA’s web-site has a specific section devoted
                  to consumer issues, including Comparative Tables detailing the charges levied on certain
                  investment products by providers. One of the FSA’s four statutory objectives is to promote
                  public understanding of the financial system. This objective is especially relevant to e-
                  commerce. Some of the risks faced by consumers are familiar ones, e.g. not appreciating
                  rapid price movements, not understanding limit orders, not understanding the importance
                  of diversification. Some are newer and arise from the global potential of the Internet. This
                  confers opportunities, since consumers may find suitable products, which in the past would
                  not have been accessible to them. On the other hand, consumers also need to inform their
                  decision making with an understanding that by obtaining investment services from firms
                  based in other jurisdictions, UK regulatory protection is forgone.
    2.            Regulated activities. A number of Internet Service Providers, portal sites and infomediaries
                  have been in touch with the FSA to determine what their position is under UK legislation.
                  The Internet, by shifting power along the value chain, places portal sites and especially
                  infomediaries in a very attractive position to organise for their customers special deals with
                  investment firms. Introducing a member of the public to an authorised firm may often
                  constitute arranging deals, an activity which triggers an authorisation requirement. The
                  FSA’s Authorisation Manual provides extensive guidance in this area:
    3.            Firms’ systems security and capacity. Firms applying for authorisation must fill out a
                  systems form and where appropriate an electronic commerce systems form. Firms that are
                  required by the FSA to submit audited results must in addition have these forms signed off
                  by their auditor or reporting accountant. The forms may be accessed at the FSA’s web-

The FSA has also provided additional guidance on its approach to firms’ management of operational
risk, including IT risk and outsourcing. The FSA’s policy statement on Operational risk: systems and
controls (and the preceding consultation paper CP 142) contains material that is directly relevant to the
management of Internet related operational risk. The draft Guidance published as part of the

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consultation will be incorporated, as amended, into the Integrated Prudential sourcebook in 2004. The
consultation paper and policy statement are accessible at:

United States of America (CFTC)

1.         Internet Related Regulations, Policy and Guidance

Domestic Internet-based electronic systems

1. Neither On Exchange or Future Com. – internet-based exchanges that were described in the previous
report -- had commenced trading as of January 31, 2003.

2. The New York Mercantile Exchange offers internet-based clearing and trading facilities (Clear Port).

3. CFTC staff Interpretative and No-Action Letters Providing Guidance Regarding Internet-Related

The following CFTC staff interpretative and “no-action” letters provide guidance with respect to certain
internet-related activities and their consequences under the Commodity exchange Act (e.g., what
conduct may trigger a registration requirement, compliance with advertising rules, particularly the
presentation of hypothetical results, and disclosure requirements):

CFTC staff issued an interpretation that the developer of an interactive Internet website would not be
required to register as a CTA, where the interactive website would be open exclusively to eligible
contract participants (ECPs) and would generate suggestions regarding appropriate OTC energy-related
financial instrument transactions based on variables submitted by such ECP bulk users of gas and
electricity. ECP customers would not trade such instruments on the website, but could separately
negotiate transactions with the website developer or with other ECPs. The staff noted that energy-
related financial products are generally “exempt commodities” under the Commodity Futures
Modernization Act of 2000, and that transactions in such instruments by ECPs not entered into on a
trading facility are generally exempt from the provisions of the Commodity Exchange Act (except for
anti-fraud and anti-manipulation provisions). The staff further cautioned the requester that visitors to a
non-interactive version of the website should be informed that the OTC instruments discussed on the
website are available only to ECPs. [Section 4m(1)] (T&M). No. 02-44 April 2002 – Interpretation,

Staff issued a no-action position concerning CTA registration to a producer of live video and audio
signals over the Internet who proposed to contract with each of several designated contract markets to
provide, for a fee, unedited live video and audio coverage of the trading action on the floor of the
contract market, accompanied by only generic factual commentary. [Section 4m(1)] (T&M). No. 02-08
February 2002 – No-Action,

CFTC staff, in response to an inquiry from a person who intended to develop a website to provide
foreign currency trading advice, that the Commodity Futures Modernization Act of 2000 confirmed the
CFTC's jurisdiction over foreign currency futures and options trading. The Division referred the person to
the Commission's February 5, 2001, Advisory on Foreign Currency. Assuming that the subject matter of
the proposed website could fall within CFTC jurisdiction, the staff offered general guidance regarding:
(1) the general requirement that a CTA must register;
(2) the availability of exemption from commodity trading advisor registration requirements for CTAs who
provide advice on an impersonal basis that is not tailored to any client's particular circumstances; and
(3) the applicability of a antifraud jurisdiction regardless of any registration exemption.
[Section 4(a); Rule 4.14(a)(9) - Foreign currency futures and option; CTA registration exemption for
providers of impersonal non-tailored trading advice] (T&M). No. 01-89 September 2001 – Interpretation,

CFTC staff stated, in response to an inquiry from a person who intended to develop a website with a
daily forecast of the S&P 500 futures contract, that the unsettled nature of the proposed website did not
permit delineation of the disclosures required under Commission rules. Nevertheless, staff offered
general guidance regarding:
(1) the availability of exemption from CTA registration requirements for CTAs who provide advice on an
impersonal basis that is not tailored to any client's particular circumstances;
(2) the advisability, even for exempt CTAs, of clearly displaying all material information;

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(3) the applicability of Rule 4.41 regarding advertising, particularly to presentation of simulated or
hypothetical trading results;
(4) the applicability of the Part 4 disclosure and recordkeeping rules if a CTA is not within Rule
4.14(a)(9); and
(5) the guidance available in the Commission's July 22, 2997, release regarding delivery of required
disclosure materials in electronic environments. [Rules 4.14(a); 4.31; and 4.33 - 4.36 - Required
disclosures by commodity trading advisors] (T&M). [No. 01-87 October 2001 – Interpretation,]

CFTC staff issued a no-action position, for failing to register as an IB, where an individual who authors a
newsletter and maintains the website of a registered IB, advertises subscriptions to the newsletter on
the website and provides the names of subscribers to the IB. The staff took this position based upon
representations that:
(1) the author of the newsletter does not have contact with commodity customers, other than through his
(2) he is not directly compensated for providing the IB with the list of subscribers; and
(3) the IB does not initiate contact with any person on the subscriber list. [Section 4d(a)(1)] (T&M). No.
01-67 June 2001 – No-Action,

The staff addressed questions concerning requirements applicable to certain hypothetical and
proprietary presentations on a CTA's website. The staff advised that while CFTC rule 4.41(b) requires
that a prescribed cautionary statement accompany hypothetical results, the rule permits that either the
statement specified therein, or a statement prescribed by a registered futures association, may be used.
The Division also clarified the application of rules 4.35(a)(6) and 4.35(a)(7) regarding the computation
and presentation of proprietary performance, including pro-forma adjustments to reflect fees,
commissions, and expenses that differ from the program offered to clients. (T&M). No. 01-60 June 2001

CFTC staff addressed questions concerning the operator of a website that would be operated initially as
strictly informational, and subsequently as a manager of customer accounts. The staff advised that the
operator would likely be ineligible for the registration exemption under Section 4m(1) even if less than 15
accounts were managed, due to the "holding out" arising from an Internet presence. Without more
information no answer could be given whether an investor who contacts the website operator is
considered to have been solicited. The website operator was advised to register as a CTA before
managing any accounts, and was referred to the staff’s July 22 1997 Interpretation regarding electronic
delivery of disclosure and other materials. He was further advised that registering for the purpose of
managing accounts would probably vitiate any exemption under Rule 4.14(a)(9) and that clients cannot
be solicited prior to registration. The staff clarified the handling of performance data pre-dating the
disclosure document by more than five years and for which no records exist. Finally, the staff said it has
no objection to the use by dual CFTC/SEC registrants of a single disclosure document, and referred the
writer to NFA for any questions regarding simultaneous compliance with CFTC and SEC disclosure
rules.      [Section    4m(1)    and      Rule     4.14(a)(9)]   (T&M).   No.     01-35    March       2001

2.         New Developments

1. The CFTC uses the internet to provide regulatory guidance to the public, including consumer
advisories, enforcement bulletins and information on how to contact the CFTC.

See all Consumer Advisories at:      . Recent
advisories include:

Anti-Money Laundering Guidance, No.4712-02 October 2002

The CFTC issued web-based guidance on anti-money laundering (AML). Web pages have been
developed to assist futures commission merchants, introducing brokers, commodity pool operators,
commodity trading advisors and commodity pools in complying with their AML obligations under the
Bank Secrecy Act (BSA) as recently amended by the USA Patriot Act. These web pages, which can be
found at http:// www., detail the regulatory responsibilities of Commission
registrants under the BSA, contain links to relevant BSA laws, regulations and forms and provide other
useful background information.

Security Futures Guidance, No.4723-02 November 2002

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The CFTC issued web-based guidance on security futures. Web pages were added to the CFTC
website to assist market participants and others interested in single-stock futures and futures on narrow
stock indices (called security futures under the Commodity Futures Modernization Act of 2000). The
CFTC and the Securities and Exchange Commission (SEC) jointly regulate security futures. The
Security Futures web pages at detail CFTC and SEC requirements
for exchanges and intermediaries; contain links to relevant notices and forms from the National Futures
Association, the National Association of Securities Dealers, and the Intermarket Surveillance Group; and
provide other useful background information.

2. The CFTC, through its Division of Enforcement, participates in the Telemarketing and Internet Fraud
Working Group, which consists of representatives from State, Federal and international regulatory and
criminal authorities. At quarterly meetings, members discuss all aspects of telemarketing and Internet
fraud, including issues such as new scams, new uses of technology, geographical hotspots for certain
types of fraudulent activity, effective enforcement techniques, and recent cases that establish relevant
precedent in the area.

3. The CFTC Division of Enforcement also participates in the Binational Working Group on Cross-Border
Mass-Marketing Fraud. This working group of regulatory and law enforcement representatives from the
United States and Canada focuses on cross-border, mass-marketing operations, such as telemarketing
“boiler rooms” and fraudulent Internet websites that target victims in multiple jurisdictions far from the
operator’s base. The working group seeks to develop improved means to cooperate in an effort to halt
this fraudulent cross-border activity.

4. The CFTC participated in the second annual International Internet Surf Day, organized by the
International Organization of Securities Commissions (IOSCO)(April 21, 2001), that targeted futures and
securities fraud and abuse on the Internet. Participants included approximately 300 individuals from 38
regulators in 35 countries. The participants identified more than 2,400 Internet websites for follow-up
review, including approximately 278 sites that involved cross-border activity. CFTC staff were joined in
their efforts by staff from the National Futures Association (NFA). Building on the success of last year’s
effort, 45 CFTC and NFA participants reviewed over 1,300 websites and identified more than 100 sites
for further review, a number of which involved cross-border activity. The sites identified for follow up
review by CFTC and NFA staff involved a variety of trading opportunities, including foreign currencies,
stock indices, precious metals and other products. Some claimed profits based on the seasonality of
commodities, while others advertised computerized trading systems of various kinds.

Internet-Related Enforcement Cases

The CFTC issued an order settling an administrative proceeding charging Internet fraud violations
against a Michigan man who sold subscriptions to his futures trading recommendation services through
various Internet websites. The order also found that the commodity trading advisor (CTA) touted his
trading record and failed to disclose that it was based on hypothetical or simulated trading and not
actual performance. Further, the websites overstated the profit potential for the CTA’s trading
recommendation services and understated the risk of loss.                [No.4739-03 January 2003,]

A New York foreign currency firm was charged with the fraudulent soliciting of retail customers over the
Internet, through the operation of at least two websites, to invest in illegal, off-exchange foreign currency
(forex) futures contracts. The CFTC sought a permanent injunction against each of the defendants,
restitution to defrauded customers, disgorgement of all ill-gotten profits and benefits defendants
received as a result of their acts and practices described in the complaint, and civil monetary penalties
of up to $120,000, or triple the monetary gain to each defendant, whichever is greater, for each violation
of the Commodity Exchange Act. [No.4737-03 January 2003,

A Tennessee man settled charges alleging that he, an Internet trading system promoter, made
misrepresentations on his website. The man consented to the CFTC’s issuance of an order finding that
he made false statements on his Internet website about a commodity trading system that he developed.
The CFTC order 1) requires him to cease and desist from violating the Commodity Exchange Act, as
charged, 2) requires him to pay a civil monetary penalty of $15,000, 3) orders him never to seek
registration or exemption from registration with the CFTC, and 4) orders him not to misrepresent
performance results achieved by any commodity futures or options trading system or the risks of trading
pursuant to any such system. [No.4653-02 June 2002]

In February 2002 the CFTC filed and simultaneously settled an administrative action against two firms,
finding that they had offered illegal forex futures and options contracts to retail investors. The CFTC

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order issued against the defendants, finds that from late 1999 through at least October 2001, the
defendents sold illegal forex futures contracts to retail customers through a website. On that website,
GCI stated that they transacted nearly $2 billion per month in “spot foreign exchange” and invited
customers to trade through GCI’s Internet trading platform. Contrary to their claim, the order finds that
they were offering forex futures contracts. The CFTC order requires the firms to cease and desist from
further violations of the CEA and CFTC regulations, imposes a $100,000 civil monetary penalty and
requires them to comply with undertakings. In settling the action, the firms neither admit nor deny the
findings in the order. [No. 4611-02, February 27, 2002,]

The CFTC announced the filing of a complaint in federal court on February 8, 2002, charging
defendants with fraudulently operating an internet-based trading platform which purportedly permitted
investors to place orders for commodity futures contracts through defendants and alleges that
defendants misappropriated investors’ funds. According to the complaint, defendants solicited and
accepted at least $2.9 million from at least 60 people. No. 4606-02 February 11, 2002]

The CFTC alleged that defendants, Georgia Internet promoters, made false claims concerning profits
generated by commodity trading systems and that they have violated CFTC orders issued against them
in May and September of 2000. The CFTC alleged that the first defendant fraudulently solicited
customers to purchase his commodity day trading technique, a commodity day trading instructional
course and other products and services over his website. The CFTC alleged that the second defendant,
since a previous settlement with the CFTC, had resumed his fraudulent promotions over the Internet
and     through     e-mail   and    electronic    newsletters.  [No.4568-01      September    2001,

The U.S. District Court for the Central District of California entered a default judgment and order of
permanent injunction against defendants who fraudulently solicited the public by advertising a
commodity options methodology on their internet website. The CFTC brought this action as part of the
CFTC’s law enforcement initiative to clean-up Internet websites that fraudulently promote commodity
trading systems or advisory services. [No.4499-01 March 2001,

In January 2003, the CFTC filed an injuctive action alleging a New York company and its sole owner
and director fraudulently solicited retail customers to trade illegal foreign currency futures. Specifically,
the complaint alleged that the defendants, through e-mails and two Internet web sites, misrepresented
that: 1) customer funds would be held in segregated accounts “used only for trading purposes;” 2) their
trading business was merged with a state-chartered commercial bank and that customer funds would be
covered by FDIC insurance; and 3) that they were either a Swiss bank or a Montenegrin bank with
headquarters in Switzerland. The complaint further alleged, the defendants commingled and
misappropriated customer funds, there was no merger, and they were never associated with any
legitimate foreign bank or regulatory system. [No. 4737-03, January 14, 2003,

Following the filing of an administrative complaint in January 2003, in March a CFTC ALJ entered an
initial decision finding that from approximately March 2001 to September 2002 the respondent, a
Chicago man, fraudulently marketed to the public a commodity futures trading systeem through
advertisements on his Internet website, Specifically, the ALJ found that the respondent misrepresented
hypothetical trades as actual trades, and that he overstated the profit potential of his trading system not
only on his website but also in e-mail messages he sent to financial chat rooms and Internet
newsgroups. The final order imposed sanctions including a cease and desist order and a $25,000 civil
monetary penalty. [No. 4738-03 January 21, 2003, opa/enf03/opa4738-

In February 2003, the CFTC filed a civil injunctive action against two individuals and their company. The
complaint alleged that the defendants defrauded customers they solicited to trade illegal, off-exchange
foreign currency futures contracts through advertisements in local foreign language newspapers and on
the Internet. The complaint alleged that the defendants: issued fictitious account statements, falsely
guaranteed trading profits, falsely led customers to believe that the company was CFTC-registered and
an NFA member, and falsely represented that customers funds were being deposited in a United
Kingdom bank, when in fact, some of their funds were deposited in the defendants’ own bank accounts
in California. On the same day that the complaint was filed, the court issued a restraining order freezing
the defendants’ assets and preserving books and records. [No. 4755-03 February 13, 2003,]

In June 2003, the CFTC simultaneously instituted and settled an administrative action against a
Mississippi resident and his company. The order found that the respondents used an Internet website to

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fraudulently solicit customers to invest in illegal foreign currency futures contracts. Specifically, the
order found that the respondents claimed that customer funds would be invested in the a trading fund,
and falsely represented that this fund had a track record including a 62 percent annual return, when the
fund never actually traded. The order further found that the respondents falsely told customers that their
funds would be maintained in a separate account when, in fact, the respondents mixed these funds with
company operating funds. Without admitting or denying its findings, the respondents consented to the
entry of the Order that: 1) ordered them to cease and desist from further violations; 2) imposed a
$15,000 civil monetary penalty; and 3) ordered them to comply with their undertaking to neither act in a
capacity requiring registration nor apply for registration for a period of five years. [No. 4794-03
June 11, 2003,]

Also in June 2003, the Commission filed a civil injunctive action against another individual and his
Florida firm, alleging that the defendants fraudulently solicited customers through their Internet website
to trade in illegal, off-exchange foreign currency contracts. Specifically, the complaint alleged that the
defendants claimed to have a highly profitable trading system when, in fact, the defendants trading
resulted in enormous losses. The complaint also alleged that the defendants claimed to be
offering contracts in “spot” and “cash” foreign currency contracts to retail customers that were
actually illegal commodity futures contracts. On the same day that the complaint was filed,
the court issued a restraining order freezing the defendants’ assets and preserving books and
records. [No. 4803-03 June 26, 2003,]

In another case from June 2003, the CFTC simultaneously instituted and settled separate
administrative actions against two Florida residents, one of whom was a registered CTA. The
orders found that both respondents fraudulently solicited customers to purchase a commodity
futures trading program through advertisements they placed on a popular Internet auction
website. Specifically, the Orders found that the respondents’ advertisements created the
false impression that they made their livings from trading and did so profitably using the
program when, in fact, neither made his living as a trader, successfully traded commodities,
nor even maintained a commodity futures trading account. The Orders further found that the
respondents led customers to believe that hypothetical trades were actual, profitable trades
made using their trading method. Without admitting or denying its findings, the respondents
consented to the entry of the Orders that: 1) ordered them to cease and desist from further
violations; 2) imposed civil monetary penalties; 3) ordered them to comply with their
undertaking to not make unsubstantiated claims of profits or risk in connection with the use of
a commodity trading system or method; and 4) suspended the CTA’s registration for three
months. [No. 4807-03 July 1, 2003,

Also in June 2003, the CFTC filed an administrative action against an Colorado man and his
Internet-based commodity trading business. The complaint alleged that the defendants
fraudulently solicited customers to purchase commodity futures products and services
through an Internet website. Specifically, the complaint alleged that the individual defendant
made false and misleading statements on this website to market his trading manual and
subscription-based options advisory. Among the misstatements were the presentation of
hypothetical trades as actual trades and overstatements of the profit potential of the
commodity trading system and advisory service. [No. 4812-03 July 3, 2003,]

3.         List of websites

Markets and clearing          The CFTC web-site at
organisations                 (“Exchanges and products”) links to web-pages that list all markets and
                              clearing organizations supervised by the CFTC.
Designated         contract   The CFTC’s web-page at contains
markets                and    links to the following designated contract markets and derivatives clearing
derivatives        clearing   organizations:
organisatons                  Exchanges Designated by the CFTC as Contract Markets
                              Chicago Board of Trade
                              Chicago Mercantile Exchange
                              Island Futures Exchange

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                           Kansas City Board of Trade
                           Merchants’ Exchange
                           MidAmerica Exchange
                           Minneapolis Grain Exchange
                           Nasdaq Liffe Markets
                           New York Mercantile Exchange
                           New York Board of Trade
                           OnExchange Board of Trade
                           Derivatives Clearing Organizations Registered with the CFTC
                           Board of Trade Clearing Corp.
                           BrokerTec Clearing Company
                           CME Clearing House
                           Guaranty Clearing Corporation
                           Kansas City Board of Trade Clearing Corporation
                           The London Clearing House Limited
                           MGE Clearing House
                           New York Clearing Corporation
                           NYMEX Clearing House
                           OnExchange Clearing Corporation
                           The Options Clearing Corporation

                           The CFTC web-site link to the Reparations Sanctions in Effect list should be
                           changed to the following:

United States of America (SEC)

1.         Internet-related regulations, policy and guidance

Final rules
Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports
17 CFR PARTS 210, 229, 240 and 249 [RELEASE NOS. 33-8128; 34-46464; FR-63; File No. S7-08-
Summary: The Commission adopted amendments to SEC rules and forms to accelerate the filing of
quarterly and annual reports under the Securities Exchange Act of 1934 by domestic reporting
companies that have a public float of at least $75 million, that have been subject to the Exchange Act's
reporting requirements for at least 12 calendar months and that previously have filed at least one annual
report. The changes for these accelerated filers will be phased-in over three years. The annual report
deadline will remain 90 days for year one and change from 90 days to 75 days for year two and from 75
days to 60 days for year three and thereafter. The quarterly report deadline will remain 45 days for year
one and change from 45 days to 40 days for year two and from 40 days to 35 days for year three and
thereafter. The phase-in period will begin for accelerated filers with fiscal years ending on or after
December 15, 2002. These amendments also require accelerated filers to disclose in their annual
reports where investors can obtain access to their filings, including whether the company provides
access to its Forms 10-K, 10-Q and 8-K reports on its Internet website, as soon as reasonably
practicable after those reports are electronically filed with or furnished to the Commission. Foreign
governments and foreign private issuers using Form 20-F for their disclosures are exempted from the
accelerated filing requirement.

Mandated EDGAR Filing for Foreign Issuers
17 CFR Parts 230, 232, 239, 240, 249, and 269 [Release Nos. 33-8099, 34-45922, International Series
Release No. 1259; File No. S7-18-01]
Summary: The Commission adopted amendments to the rules that govern the SEC’s Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system to require foreign private issuers and foreign
governments to file electronically through the EDGAR system most of their securities documents,
including registration statements under the Securities Act of 1933 and registration statements, reports
and other documents under the Securities Exchange Act of 1934. These amendments make the
electronic filing requirements for issuers consistent for both domestic and foreign private and
government issuers. The Commission also eliminated a requirement that any first-time EDGAR filer,
domestic or foreign, submit a paper copy of its electronic filing to the Commission..
Effective Date: November 4, 2002, except for §232.101(d), §232.101(b)(10), and §232.101(c)(9), which
are effective May 24, 2002.

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Electronic Submission of Securities Transaction Information by Exchange Members, Brokers, and
17 CFR Parts 200 and 240 [Release No. 34-44494; File No. S7-12-00]
Summary: The Commission adopted Rule 17a-25 under Section 17 of the Securities Exchange Act of
1934, to require brokers and dealers to submit electronically to the Commission, upon request,
information on customer and firm securities trading. Rule 17a-25 is designed to improve the
Commission's capacity to analyze electronic submissions of transaction information, thereby facilitating
Commission enforcement investigations and other trading reconstructions.
Release Date: June 29, 2001

Exemption for Certain Investment Advisers Operating Through the Internet
17 CFR Parts 275 and 279 [Release No. IA-2091; File No. S7-10-02]
Summary: SEC rules permit investment advisers that do not operate in any state to register with the
Commission instead of with any particular state authority. Rule amendments under the Investment
Advisers Act of 1940 adopted on January 20, 2003 extend this permission to advisers operating
through the Internet, provided their businesses are not connected to any particular state.
Effective Date: The rule amendments became effective on January 20, 2003.

Proposed rules
Mandated Electronic Filing and Website Posting for Forms 3, 4 and 5
17 CFR Parts 230, 232, 239, 240, 249, 250, 259, 260, 269 and 274 [RELEASE NOS. 33-8170, 34-
47069, 35-27627, IC-25872; File No. S7-52-02]
Summary: The Commission proposed rule and form amendments to mandate the electronic filing, and
website posting by issuers with corporate websites, of beneficial ownership reports filed by officers,
directors and principal security holders under Section 16(a) of the Securities Exchange Act of 1934,
generally as required by Section 403 of the Sarbanes-Oxley Act of 2002. The amendments are to
implement the statutory changes as soon as reasonably practicable before the July 30, 2003 date
mandated by the Sarbanes-Oxley Act. The Commission also proposed changes to the EDGAR system
in order to facilitate electronic filing. The intended effect of the proposals is to facilitate compliance with
the will of Congress, as reflected in amended Section 16(a), and to facilitate the more efficient
transmission, dissemination, analysis, storage and retrieval of insider ownership and transaction
information in a manner that will benefit investors, filers and the Commission.
Dates: Comments to be received on or before February 10, 2003.

Broker-Dealer Exemption from Sending Certain Financial Information to Customers
17 CFR Part 240 [Release No. 34-46920; File No. S7-48-02]
Summary: On November 26, 2002, the Commission proposed an amendment to Exchange Act Rule
17a-5(c) to codify a pilot program providing a conditional exemption to the requirement that broker-
dealers carrying customer accounts send their full balance sheets to customers twice a year. Broker-
dealers taking advantage of the exemption must send certain net capital information to customers twice
a year, provide a toll free phone number customers can call to request copies of the full balance sheet,
and place the balance sheet on their Internet web sites. Currently, a temporary Commission order
permits broker-dealers to take advantage of the exemption; that order extends the pilot program to June
30, 2003.
Dates: Comments to be received no later than January 2, 2003.

Selected SEC interpretive letters regarding internet technology
Thomson Financial Inc.
July 10, 2002
Summary: Section 203(b)(3) of the Investment Advisers Act of 1940 exempts from the registration
requirement any investment adviser who, during the preceding twelve months, has had fewer than
fifteen clients and who does not hold itself out generally to the public as an investment adviser.
Thomson Financial Inc. offered several services that provided information to institutional subscribers
about the equity and bond holdings of entities such as mutual funds, pension plans, insurance
companies, and variable annuity products. The Services also provide information about the Companies'
investment managers, such as their names, telephone numbers, fax numbers, e-mail addresses,
subaccounts managed, and biographical data. In this no-action letter, the SEC staff indicated it would
not recommend enforcement action to the Commission under Section 203(a) of the Advisers Act against
investment managers solely because of the publication of biographical and contact information about
themselves on Thomson’s password-protected Internet website.

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Swiss American Securities, Inc. and Streetline, Inc.
May 28, 2002
Summary: SEC staff issued a letter granting no-action relief to permit a registered broker-dealer to
retain an unregistered affiliate to provide website and communications services on behalf of the broker-
dealer. Consistent with the framework set forth in previous SEC no-action letters, this relief was
predicated on several conditions to prevent the unregistered affiliate from soliciting securities
transactions and to require the broker-dealer to be responsible for the activities performed by the
unregistered affiliate.

SRO Statements, rules and guidance
New York Stock Exchange (NYSE),
National Association of Securities Dealers, Inc. (NASD),
NASDR Online Suitability Policy Statement
April 24, 2001
Notice to Members 01-23 [Securities Exchange Act Release No. 44178 (April 12, 2001)]
The NASDR Notice to Members provides guidelines to assist NASD members in determining whether a
particular communication could be viewed as a “recommendation,” and, therefore, trigger the application
of NASD’s Rule 2310 (the “Suitability Rule”). The Notice to Members states the Suitability Rule applies
to all recommendations made by members to customers, including those made by electronic means.
Although the Notice states that ultimately the question of whether a recommendation has been made
must be answered on the basis of all of the relevant facts and circumstances, it provides examples of
communications the NASDR believes are, and are not, recommendations. Certain order-taking actions,
provision of search tools, provision of research libraries, and provision of e-mail alert services
subscribed to by the customer are identified as generally not being recommendations. On the other
hand, the NASDR indicated sending targeted emails or pop-up screens recommending purchase of a
particular security would likely be a recommendation. In addition, sending and email recommending a
sector and stocks within that sector would likely be a recommendation, as would providing a research
tool that accepted information from the customer and based on that information provided a list of
securities. Finally, the NASDR indicated that the use of data-mining technology, whether known by the
customer or not, could result in a recommendation.

Proposed Rule Change by the National Association of Securities Dealers, Inc. and Amendment No. 1 to
the Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Research Analyst
Conflicts of Interest
May 10, 2002
SEC Release No. 34-45908; File No. SR-NASD-2002-21; SR-NYSE-2002-09
In May 2002, the Commission approved rule changes filed by the NASD and NYSE relating to research
analyst conflicts of interest. Among other provisions, the rules require that research reports disclose
certain conflicts of interest. In July 2002, the NASD and NYSE provided members with guidance about
how to fulfill the rules’ mandates in connection with electronic research reports. The rules permit
electronic research reports to utilize hyperlinks to the required disclosures, so long as the first screen
that the investor sees clearly and prominently labels the hyperlinks. Also, electronic reports covering six
or more companies (compendium research reports) may include a hyperlink instead of including the
required disclosures in the report itself, while paper compendium reports may include a member's web
address where the disclosures are located in lieu of the required disclosures.

Select SEC enforcement actions relating to securities law violations conducted via the internet
SEC v. Kin H. Lee (Civil Action No. 02-895-A) (ED. Va. 2002)
Litigation Release No. 17579 / June 24, 2002
The SEC filed a complaint in the United States District Court for the Eastern District of Virginia charging
self-employed day trader, Kin H. Lee, with manipulating the thinly-traded after-hours securities markets
of six publicly-traded companies. The complaint alleged that between January 2000 and April 2001, Lee,
a day-trader, using his home computer and multiple online brokerage accounts, attempted to manipulate
the after-hours markets of six publicly-traded companies. Lee's manipulative trading activity primarily
involved the execution of large-volume "wash sales" - transactions resulting in no change in beneficial
ownership - at gradually increasing prices, to create the appearance of an active and rising market in a
given security. Lee consented to the entry of an order enjoining him from violating US federal securities
laws and requiring Lee to pay $100,892 in disgorgement and pre-judgment interest, pay a civil penalty of
$60,000, and prohibiting Lee from engaging in pattern day trading.

SEC v. Invest Better 2001, Cole A. Bartiromo, and John/Jane Does 1-10, 01 Civ. 11427 (BSJ)(S.D.N.Y.
filed January 7, 2002)("IB2001")

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IOSCO Internet Report III (2003)                                                                Annex 3
List of significant regulations, developments and websites

Litigation Release No. 17540 / June 5, 2002; Litigation Release No. 17493 / April 29, 2002; Litigation
Release No. 17296 / January 7, 2002; Litigation Release No. 17272 / December 13, 2001
Cole A. Bartiromo, a 17-year-old high school student, agreed to a partial settlement, including
disgorgement of ill-gotten gains and interest totaling $93,731.00 that he procured from an Internet
pump-and-dump scheme in which Bartiromo manipulated the stock price of fifteen publicly-traded
companies. Bartiromo previously disgorged to the Court's account more than $1,000,000 that he and
Invest Better 2001 ("IB2001") obtained from investors in connection with fraudulent unregistered
offerings of securities which defrauded more than 1,000 investors. The United States District Court for
the Southern District of New York, on May 29, 2002, issued an Amended Partial Final Judgment and
Order, on consent, which permanently enjoins Bartiromo and IB2001, directs Bartiromo and IB2001 to
repatriate all assets outside the United States and deposit such assets into the Court's account, freezes
Bartiromo's and IB20001's assets, orders disgorgement of all ill-gotten gains and grants other relief. Still
pending in the action are the issues of what civil penalty should be imposed by the Court and the
determination of the total amount of disgorgement of ill-gotten gains relating to the IB2001 claims.

SEC v. New World Web Vision.Com, Inc., Capital Corp Investments International, Inc., and Dwight D.
Dubose, Civil Action No. 4:00-CV-0231-Y (USDC/Northern District of Texas)
Litigation Release No. 17442 / March 27, 2002
On March 27, 2002, the Commission announced that it settled an Internet, pre-IPO, stock offering fraud
with New World Web, Inc. ("World Web") and Capital Corp Investments International, Inc.
("Capital"). A United States District Judge for the Northern District of Texas entered a permanent
injunction enjoining each company from further violations of the federal securities laws. The
Commission's Complaint alleged that from at least November 1998 through March 2000, Dubose and
the two companies publicly offered and sold unregistered shares of stock through two Internet web sites
and thousands of unsolicited e-mail messages, commonly known as "spam." The complaint further
alleged that Dubose, playing off investor interest in successful Internet IPOs', made numerous
misleading claims that World Web and/or Capital were preparing to conduct an IPO. Dubose offered
and sold these "pre-IPO shares" at $.60 per share, fraudulently telling investors that their shares would
be worth $16-$17 per share when the companies went public.

Additional Insider-Trading, Market Manipulation, Prime Bank and Securities Fraud Cases involving the

SEC v. Harral Dunbar, Jr., Individually and d/b/a Ghost International, Civil Action Number 02-233-B-M1
(M.D. La.)
SEC v. Clif Goldstein (Civil Action No. 302048517) (D. SC, Columbia Div.)
SEC v. John Freeman, et al., 00 Civ. 1963 (VM) (Southern District of New York)
SEC v. Make It Reel Productions, Inc., et al., 02 CV 60255 (S.D. Fla.);;

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