ISLAMABAD, July 29: The need for resolving potential cross-border jurisdictional disputes before allowing the outsourcing of financial services in the emerging market countries has been emphasized in a report presented to the Standing Committee-3 (SC3) of the International Organization of Securities Commissions (IOSCO).

The report on the draft principles of outsourcing of financial services by financial intermediaries was prepared by the 6-member Working Group-3 (WG3) of the Emerging Market Committee (EMC) of IOSCO.

It was presented by the Chairman, Securities and Exchange Commission of Pakistan, Dr Tariq Hassan, as Chairman of WG3 at the meeting of SC3, which was held in Toronto last week.

According to the SECP press release here on Thursday, the report also included separate comments from the six WG-3 members. Some of the EMC members in their comments, Dr Hassan informed the meeting, stressed that although outsourcing should be encouraged in areas where it enhances efficiency and facilitates the business of financial intermediary, it should be regulated with some caution.

The member countries highlighted the need of cross-border outsourcing in the context of almost all the principles. Generally, it was pointed out that some guidelines to determine eligibility of service providers may need to be formulated.

Secondly, they emphasised the importance of addressing jurisdictional issues that may arise implementing certain principles. In addition to individual comments, the report also pointed out that, given the lack of proper disclosure standards and the small size of emerging markets, issues might arise where out sourced function of multiple intermediaries get concentrated in a single or a few service providers.

The service providers, it was further emphasised, should give adequate disclosures regarding the number of outsourcing firms on their clientele list so that each outsourcing firm should be aware of the concentration issue and they be able to decide accordingly before choosing the service provider.

Moreover, the outsourcing firms should also provide disclosures to their clients regarding the number and nature of functions being outsourced to the service providers, it was further stressed.