Corporate Governance

Corporate Governance Guidelines in Bangladesh: Some Observations

Pallab Kumar Biswas*

Abstract: This paper discusses the likely impact of the revised Corporate Governance guidelines issued by the Securities and
Exchange Commission (SEC) in Bangladesh on 3 July 2012. In so doing, it critically examines the changes made in the current
guidelines from the one issued on 20 February 2006. It is found that a number of key changes are made in the guidelines,
particularly in the areas of independent director requirement, board’s statements, CEO and CFO certification on financial
statements, subsidiary company governance, and reporting and compliance of corporate governance. However, the guidelines could
be further improved, for example, by including provisions to ensure true independence of the board and its committees, minimum
educational and professional service requirement for non-independent directors, and annual assessment of the board members. The
lack of flexibility in the revised guidelines is likely to pose challenges to the listed firms when implementing the guidelines fully. On
part of market regulators, the key challenge will be to ensure enforcement of the regulation.
Keywords: Corporate governance guideline, SEC, audit committee, remuneration committee, independent director.

Introduction previous and current CG guidelines in Bangladesh and literature survey

Corporate governance (CG) guidelines (codes) “…are a set of ‘best
practices’ recommendations regarding the behavior and structure of a
firm’s board of directors issued to compensate for deficiencies in a
country’s corporate governance system regarding the protection of
shareholders’ rights” (Aguilera and Cuervo-Cazurra 2004, 415). These
recommendations generally include a comprehensive set of norms on
the role and composition of the board of directors, relationships with
shareholders and top management, auditing and information disclosure,
and the selection (nomination), remuneration, and dismissal of
directors and top managers. Although the content of the codes varies
across countries probably reflecting their unique economic, social,
cultural and institutional characteristics, two main objectives of every
code are: (a) to improve the quality of companies’ board governance;
and (b) to increase the accountability of companies to minority
shareholders while maximizing shareholder or stakeholder value
(Aguilera and Cuervo-Cazurra 2004).
The Enron debacle and other notable corporate failures in different
parts of the world during the early 2000s raised widespread community
concerns about inadequate governance standards. The affected
economies responded to such scandals by establishing different
corporate governance related acts, codes, guidelines, or rules.
International Financial Agencies (IFAs) also included corporate
governance as a development goal. Following the footsteps of the
developed nations, developing economies also started programs on
corporate governance legal reform to develop their capital markets, to
ensure continuing support from the IFAs, and to attract a constant flow
of foreign investment to those economies. Bangladesh is no exception.
The market regulator of Bangladesh (the Securities and Exchange
Commission of Bangladesh, hereafter ‘the Commission’) issued the CG
Guidelines in 2006 on ‘comply or explain’ basis. Following its
widespread adoption by listed firms irrespective of their size, and
considering the limitations of the guidelines, the Commission issued
revised CG guidelines on 3 July 2012 on ‘comply’ basis.
The purpose of this paper is to discuss the implications of the revised
guidelines on the listed companies and market regulators. It is based on
* Pallab Kumar Biswas is a Lecturer in the Department of Accounting &
Information Systems, Faculty of Business Studies, University of Dhaka.
of the quarterly and annual publications of the Commission, and CG
regulations in Australia, Singapore, and Malaysia. Singapore and
Malaysia are chosen since they exhibit family controlled business
environment like Bangladesh. Australia is considered to represent the
CG requirements in a developed country.
The remainder of the paper is organized as follows. Section 2 reviews
different CG approaches. Section 3 discusses the CG regulatory
environment of Bangladesh. Section 4 outlines the changes made in the
revised CG guidelines from the earlier one. Section 5 describes the
likely implications of the revised guidelines. Section 6 presents some
grounds for future improvement. Section 7 concludes the paper.
2. Corporate Governance Approaches
There are mainly two approaches of corporate governance: mandatory
or rule-based approach and voluntary or ‘soft law’ based approach. In
the mandatory or rule-based approach companies are uniformly
required to abide by a set of legal rules. The USA is a prime example
that follows this approach after passing of the Sarbanes-Oxley Act in
2002. On the other hand, the voluntary or ‘soft law’ approach is mostly
found in other countries, whereby a company’s compliance with the
governance code or guidelines is not mandatory, but that disclosure
relating to compliance is. The issue of ‘flexibility’ is one reason behind
the adoption of a voluntary code. Since companies subject to the codes
often differ significantly in terms of size, structure and organization, it
is unlikely for a “one size fits all” approach to achieve its desired
outcome. For example, smaller listed companies, particularly those
newly listed or young growth companies, may judge some guideline
conditions to be disproportionate or less relevant in their case. In
situations like these, companies should determine what they consider to
be the best rules in their specific circumstances and provide an
explanation in the compliance statement. Similarly, it is also argued
that the voluntary approach reduces the risk of companies complying
only with the letter, rather than the spirit, of codes or guidelines (often
referred to as “box-ticking” exercise) (Campbell 2009).
Until recently, Bangladesh also adopted a ‘comply or explain’ approach
of CG. The latest notification of 3 July 2012, however, requires the
companies to ‘comply’ with all the guideline conditions. Therefore, the
flexibility of choosing an appropriate governance structure arising from
the differences in the costs and benefits of adopting the new guidelines

The Cost and Management, July-August, 2012 5

Electronic copy available at: http://ssrn.com/abstract=2271156

 Corporate Governance

facing an organization is greatly reduced. This may have some CG Area CG Guidelines of 2012 CG Guidelines of 2006
implications for the capital market, which is discussed in later section. Board n The company has not entered into any fraudulent n IDs need to be appointed by the
Effectiveness or illegal transaction, or any transaction violating appointed directors
3. Corporate Governance Regulation in Bangladesh the company's code of conduct.
n Specific qualification criteria for independent n No such requirement
Although the country-level initiative to develop corporate governance directors
n IDs need to be nominated by the Board of n No such requirement
regulation in Bangladesh began in 2003 by Bangladesh Enterprise
Directors (BOD) and approved by the shareholders
Institute (BEI), a non-profit and non-political research centre, such at the Annual General Meeting (AGM)
initiative on part of the capital market regulatory authorities is first n The post of an ID cannot remain vacant for more n No such requirement
than 90 days
evidenced in 2006. On 9 January 2006, the Commission issued an n Any member of the AC can be its
n Code of conduct for all board members and
order1 requiring the listed companies to follow a number of CG related annual compliance with the same Chairman
conditions. The aim was to improve the CG situation and thereby, n The normal tenure of an ID is three years which n The roles of AC have been expressed in
can be extended for another one term only general terms 4
better protect the interests of minority shareholders and develop n The AC Chairman shall be an ID n Professional qualification requirement for
Audit
Bangladesh capital market. The Commission revised its order by a Committee n 10 specific roles of AC have been identified the Chairman of the AC only
(AC) Affairs
notification2 dated 20 February 2006. Except for two issues, the n Professional qualification requirement for all
n No specific requirement for the

members of the AC independent AC member(s) to present in the

notification is the same as the order: first, the number of independent AC meetings
directors was reduced from a fifth to a tenth of the board size and n At least one independent director must present to n No specific requirement for the AC
fulfil the quorum of the AC meeting Chairman to present at the AGM
second, a requirement in the earlier order to disclose one additional  The Chairman of the AC must present at the AGM
n n No such requirement
statement by the board concerning the firm’s significant plans and n The company secretary shall be the secretary of the AC

decisions such as corporate restructuring, business expansion and n The AC must report any material finding to the n The AC must report any material finding
SEC after expiry of six months from the date of its to the SEC after expiry of nine months from
discontinuance of operations along with future prospects, risks and first reporting to the BOD or after reporting to the the date of its first reporting to the BOD or
uncertainties surrounding the company was omitted from the board three times, whichever is earlier after reporting to the board three times,
whichever is earlier
notification. It is to be noted that the notification was issued under a
‘comply or explain’ basis, meaning that although the disclosure of Auditor n Neither any partner nor any employee of the
n No such restriction
Independence external audit firm should hold any share of the
compliance statement was mandatory, companies had the option to client firm during the term of the audit assignment
comply with individual provision or explain the reasons for non- Additional n Industry outlook and possible future n No such requirement
developments in the respective industry
compliance with any of the provisions. Statements
by the BOD n Segment-wise or product-wise performance n No such requirement
Prior studies show that listed companies in Bangladesh have accepted n Different risks facing the organization and related n No such requirement
concerns
the notification with positive intent as evident from their level of n No such requirement
n Discussion on the cost of goods sold, gross profit
compliance with the Commission’s CG guidelines and disclosure of margin and net profit margin of the company
No such requirement
compliance statement in the annual reports (Imam 2006; Mohiuddin, n Discussion on continuity of any extra-ordinary
n

gain or loss
Abdullah, and Hossain 2008; Uddin 2008). In order to further improve n No such requirement
n A statement of all related party transactions
the CG situation, the Commission issued the revised CG guidelines including the basis of such transactions
through a notification3 on 3 July 2012 replacing its previous n Application of funds raised from public issues, n No such requirement
rights issues or through other instruments
notification issued in 2006 in this respect. Although the notifications
n An explanation when the company's financial n No such requirement
are similar in some key areas, they differ in other aspects. In the results deteriorates after major events such as the
following section, the differences between the notifications are Initial public offering (IPO), Repeat Public
Offerings (RPO), Rights Offer
discussed. n Reasons for significant deviation between n No such requirement
quarterly financial performance and annual
4. Differentiating Characteristics of Corporate financial performance need to be discussed
Governance Guidelines of 2012 n Remuneration to the board members n No such requirement
n Key operating and financial data of a minimum of No such requirement
The revised guidelines of CG issued in 2012 are similar to those issued last five years shall be summarized
n

in 2006 in different respects. In fact, the new notification either n Disclosure of the directors' biographical n No such requirement
information including their expertise and positions
modifies or retains all the guideline conditions of 2006 and includes held in different committees and directorship held
some new conditions. Table 1 presents the differences between the in other organizations
Governance No such requirement
guidelines. n The board composition of the subsidiary company n
of the shall be the same as the holding company
Subsidiary n The holding company shall appoint one of its IDs
Table 1: Corporate Governance Guidelines of 2006 and 2012: A Company to be the director of the subsidiary company
n No such requirement

Comparison n The minutes of the subsidiary company's board n No such requirement

CG Area CG Guidelines of 2012
n Separation between the Chairman n Separation between the Chairman
Board
and CEO roles is required
Effectiveness At least 1/5th independent
n n
directors (IDs)
n The definition of 'independent' n
director has been expanded by
including additional criteria
n Specific qualification criteria for n
independent directors
1 The SEC order no. SEC/CMRRCD/2006-158/Admin/02-06
2 The SEC notification no. SEC/CMRRCD/2006-158/ Admin/02-08
3 The SEC notification no. SEC/CMRRCD/2006-158/129/Admin/43
CG Guidelines of 2006
and CEO roles is proposed
At least 1/10th independent
directors (a minimum of one)
Specific criteria for a director to
be considered 'independent'.
independent directors
No qualification criteria for independent
directors
meeting shall be placed to the board meeting of
the holding company for review
n The minutes of the board meeting of the holding n No such requirement
company shall state that the board has reviewed
the affairs of the subsidiary company
n The AC of the holding company shall review the n No such requirement
financial statements of the subsidiary company
including any investment made by the subsidiary.
Certification n The financial statements do not contain any
n No such requirement
by the CEO materially untrue statement or omit any material
fact or any misleading statement
and CFO to
the Board
4 Guideline 3.00 requires the AC to assist the BOD in ensuring that the financial statements
present a true and fair view of the state of affairs of the company and in ensuring a good
monitoring system within the business.

6 The Cost and Management, July-August, 2012

Electronic copy available at: http://ssrn.com/abstract=2271156


CG Area CG Guidelines of 2012 CG Guidelines of 2006
n  The statements present a true and fair view of the n No such requirement
company's financial affairs and are in compliance
with existing laws and accounting standards
Reporting n The company shall obtain a certificate from a
n No such requirement
and professional accountant or Chartered Secretary
Compliance regarding compliance of conditions of CG
of CG
guidelines
n  The company shall send the compliance n No such requirement
certificate along with the annual report to the
shareholders on a yearly basis
Mode of n Listed companies must disclose their
n Listed companies must comply with the
Implementation
guideline conditions and report their compliance compliance report in their annual reports
statements in the annual reports, meaning that mentioning the specific provisions they have
both compliance and reporting of compliance complied with and the reasons for non-
statement is mandatory compliance with the remaining provisions
As the Table 1 shows, the CG guidelines of 2012 include many new
conditions. For example, the revised guidelines require certification by
the CEO and CFO that to the best of their knowledge and belief, the
financial statements present a true and fair view of the company affairs,
there is no materially misleading or omitted facts in the financial
statements, and the company has not entered into any transactions that
are fraudulent or illegal or that violate the company’s code of conduct.
As the new notification is issued under a ‘comply’ basis, it would be
interesting to examine how this “one size fits all” approach achieves its
intended purpose.5 One possibility is that many newly listed small firms
may face challenge in complying with all the guideline conditions.
Another likely outcome is that non-listed firms may be less inclined to
be listed on the Exchange. Apart from this, there are other implications
of the new guidelines which are discussed in the next section.
5. Implications of the Revised Corporate Governance
Guidelines in Bangladesh
The new CG Guidelines have at least two implications for listed
companies in Bangladesh. First, the guidelines are aimed at improving
CG practices of the listed public limited companies in Bangladesh.
Therefore, listed companies should be able to reap the benefits from
improving their governance practices. Second, implementation of the
guidelines is likely to be costly, particularly for small firms. The
guidelines require the companies to obtain a ‘certificate of compliance
of conditions of Corporate Governance Guidelines of the Commission’
from a Chartered Accountant or a Cost & Management Accountant or a
Chartered Secretary, and send it to the shareholders along with their
annual reports (Guideline Condition 7(i)). This requirement is likely to
be beneficial to the market regulators as well as to the general investors
since it would ensure systematic verification of the contents of
compliance statements, which would indirectly reduce their cost of
monitoring the company’s compliance with the CG conditions.
However, such certification is unlikely to be free of any cost. For
example, in a case study, Sneller and Langendijk (2007) show that in
the USA, company’s audit fee increases by 50 per cent in the first year
of compliance with Section 404 of the Sarbanes-Oxley Act (SOX) that
requires a company to assess its internal controls and acquire an
attestation of such assessment from its external auditor.
On part of the regulators, the key challenge will be to ensure
compliance. The effectiveness of any law lies in its enforcement.
Enforcement of the law that does exist is vital for economic
5 for furnishing the status report on compliance of corporate governance
Except for the US, most countries follow the 'comply or explain' basis of
adoption of CG code. Consistent with the Implementation Review Group Report
(p. 1), the Corporate Governance Council of the Australian Securities Exchange
(ASX) justifies such approach by stating that (p. 6): "… there is no typical
organization and no single readily identifiable model for corporate
governance…At different times and stages in a company's life, some governance
structures may be better for the generation of wealth for investors than others…"
The Cost and Management, July-August, 2012
Corporate Governance
development. Berglöf and Claessens (2006) points out that enforcement
of the law is arguably the central functional difference between
developed and developing markets. There exists ample empirical
evidence to suggest that enforcement of laws rather than their mere
presence help explain the development of securities markets
(Bhattacharya and Daouk 2002; Gibson 2003; Defond and Hung 2004).
For example, in a multi-country setting, Bhattacharya and Daouk
(2002) empirically show that actions taken against insider trading,
rather than the mere presence of insider trading laws, explain the
development of securities markets as evidenced by the lower cost of
equity capital. The evidences do not, however, undermine the
importance of laws but they imply that laws need to be written in such
a way so that they can be enforced and that there must be well-
equipped institutions to enforce them.
Whether well-equipped institutions exist in Bangladesh to enforce the
legal provisions is a critical question. In its country study report, World
Bank (2002, 99) puts this in this way:
… the gap between international standards and national
standards is not as serious as the gap between national
standards and national practices. Laws and regulations exist,
but are not enforced. At present there are few visible sanctions
for wrongdoing. As laws and regulations have not been
enforced they have fallen into disuse and often been forgotten.
As a result, although the current CG guidelines require all the listed
companies to comply with all the conditions and they need to obtain a
certificate of compliance from selected professionals, to what extent the
guidelines will be effectively enforced remains an open to question. A
survey of the quarterly publications (Quarterly Review) and annual
reports of the Commission from 2006 to 2011 show that except for few
instances where the Commission issued reminder letters or directives to
non-complied or partly-complied companies,6 there was no instance of
imposition of penalty.
6. Grounds for Future Improvement
Although the current guidelines are improvement over those issued in
2006, there remain grounds for future improvement. For example, the
guidelines only require the establishment of an audit committee without
any requirement to establish any nomination or remuneration
committee. For companies with small board, the efficiencies of such
committees may be derived without formally forming them when
appropriate board processes are in place. However, in large firms, such
committees and their independent functioning are likely to add value
(Conyon and Simon 1998; Uzun, Szewczyk, and Varma 2004). It is to
be noted the proposed amendment of the CG guidelines (displayed on
the Commission’s website from 19 February to 14 March 2012 for
public opinion purpose) included provisions on the formation,
functions and reporting requirements of the remuneration committee of
the board. However, these provisions were not included in the revised
guidelines of 3 July 2012.
6 During the financial year of 2007-2008, apart from sending 17 companies to
the Enforcement Department of the Commission for taking actions for their
failure to provide compliance statements in the annual reports, the Commission's
Corporate Finance Department issued reminder letters to 32 listed companies
guidelines, as these companies did not respond to Commission's earlier letter in
this regard, and directives to 159 companies to comply with the guidelines
conditions fully (SECB 2007, 2008). Besides, during first quarter of 2009, the
Commission's Enforcement Department issued directives to five listed companies
as they failed to present compliance statement in the annual report in the
prescribed format (SECB 2009).
7
Corporate Governance
CEO-duality (where the CEO is also the Chairman of the board) is
generally discouraged in the literature (largely from advanced
economies) to avoid any role conflict and to promote accountability
and facilitate division of responsibilities between them. Bangladesh is
no exception to this. The new guidelines require the positions to be
filled by two individuals and their roles and responsibilities also need
to be clearly defined (Guideline Condition 1.4). It is to be noted that the
debate on whether CEO-duality is beneficial or detrimental to
improved firm performance is still not over (Baliga, Moyer, and Rao
1996; Brickley, Coles, and Jarrell 1997; Abdullah 2004; Elsayed 2007).
While agency theory suggests that CEO duality is detrimental to the
firm performance as it often compromises the monitoring and control
of the CEO, stewardship theory supports CEO-duality on the ground
that it presents unity of command. Therefore, the efficacy of the revised
guidelines’ mandatory requirement of separate individuals to fill these
two positions remains questionable. On the other hand, since most of
the listed companies in Bangladesh are family-owned and family
members often sit on the board, there is possibility that this condition
will be complied in letter rather than in spirit when members of the
controlling family fill the positions of the CEO and the board
Chairperson.
Another concern in the context of emerging countries like Bangladesh
is: how much independent are the independent directors? In a recent
study, Ong (2010) argues that ‘true’ independence is possible when
certain conditions are met: (i) the political and legal environment of the
country should nurture the independent directors and allow them to act
in order to carry out their intended tasks; (ii) the securities market of
the country should allow for the possibility of competing shareholder
groups to be present within the corporation; (iii) the corporation must
be free to pursue profit maximization as its ultimate goal; (iv) a strong
and independent judiciary should be present to equitably decide on
lawsuits that may be filed to vindicate shareholder or director abuses;
and (v) the responsibilities for policing corporate action must be
properly organized so that independent directors can proceed with their
tasks keeping in mind their legal responsibilities. To what extent these
conditions are met in Bangladesh remains an open to question.
As an alternative, the “Code of Corporate Governance” in Singapore
(issued on 2 May 2012) can be considered. In order to ensure an
independent element on the board, the Code in Singapore requires the
firm to have at least one-third of the board to be independent directors
(Guideline 2.1). However, it also requires that (Guideline 2.2):
The independent directors should make up at least one half of the
Board where:
(a) The Chairman of the Board (the “Chairman”) and the chief
executive officer (or equivalent) (the “CEO”) is the same person;
(b) The Chairman and the CEO are immediate family7 members;
(c) The Chairman is part of the management team; or
(d) The Chairman is not an independent director.
The guidelines in Bangladesh do not require any annual assessment of
the board members including the independent directors. Although the
guidelines require a number of criteria to fulfil before considering any
director as ‘independent’, this does not undermine the requirement of
an annual assessment. Malaysian Code on Corporate Governance 2012,
7 to have boards with at least 20 per cent independent directors. Another
In Singapore, “immediate family” includes the person’s spouse, child, adopted
child, step-child, brother, sister and parent.
8 The Cost and Management, July-August, 2012
for example, states that (commentary of Recommendation 3.1):
The existence of independent directors on the board by itself does
not
ensure the exercise of independent and objective judgement as
independent judgement can be compromised by, amongst others,
familiarity or close relationship with other board members.
Therefore, it is important for the board to undertake an annual
assessment of the independence of its independent directors.
Similarly, Guideline 5.1 of the Singapore Code of Corporate
Governance requires that:
Every Board should implement a process to be carried out by the
NC (Nomination Committee) for assessing the effectiveness of the
Board as a whole and its board committees and for assessing the
contribution by the Chairman and each individual director to the
effectiveness of the Board.
The current guidelines in Bangladesh require the board to establish an
audit committee consisting of three members and headed by an
independent director. The guidelines do not prohibit the inclusion of
the board Chairperson to be one of the members of the audit
committee (theoretically, the board chair can also be the chairman of
the audit committee if he/she is an independent director), which is
likely to hamper the spirit of forming an audit committee. The
effective functioning of the audit committee can also be called into
question since the independent director(s) may not comprise the
majority of the audit committee.
Another concern of the current guidelines is no specific requirement
for non-independent directors’ educational and service background.
The guidelines require the companies to disclose the following
information as part of the director’s report (Guideline Condition 1.5
(xxii)):
In case of the appointment/re-appointment of a director the
company shall disclose the following information to the
shareholders:-
a) a brief resume of the director;
b) nature of his/her expertise in specific functional areas;
c) names of companies in which the person also holds the
directorship and the membership of committees of the board.
The guidelines require specific qualification requirement for the
independent director(s) (Guideline Condition 1.3):
(i) Independent Director shall be a knowledgeable individual
with integrity who is able to ensure compliance with
financial, regulatory and corporate laws and can make
meaningful contribution to business.
(ii) The person should be a Business Leader/Corporate
Leader/Bureaucrat/ University Teacher with Economics or
Business Studies or Law background/Professionals like
Chartered Accountants, Cost & Management Accountants,
Chartered Secretaries. The independent director must have
at least 12 (twelve) years of corporate
management/professional experiences.
(iii) In special cases the above qualifications may be relaxed
subject to prior approval of the Commission.
It is to be noted that the existing guideline requires the listed companies
related condition that has a bearing on the educational qualification and

service background of directors is Condition 3.1(iii), where all the
members of the Audit Committee (AC) is expected to be financially
literate8 and at least one of the members is expected to have accounting
or related financial management expertise.
Read together, it is reasonable to infer that if a company wishes to
form a board of 10 members, the guidelines require that there be at
least two financially literate and experienced independent directors,
one financially literate non-independent director and by inference,
these three should be the members of the AC with one of the
independent directors being the Chairperson of the AC. In situations
like this, since majority (70 per cent) of the board members may serve
the company without being financially literate or having accounting or
related financial management expertise, question remains on the
effectiveness of the board in effectively monitoring the activities of
management. Therefore, although the requirement in Guideline
Condition 1.5 (xxii) is expected to improve the users’ understanding of
the directors’ level of expertise in different functional areas, and their
busyness in other boards and committees, it does not warrant the
requirement of a minimum level of educational and service
background on part of the remaining non-independent directors. This
is further necessitated by the fact that the minimum board
independence requirement is 20 per cent. Prior literature also supports
the view that financially literate and experienced directors can monitor
management more efficiently and thereby limit the likelihood of
accounting fraud (Agrawal and Chadha 2005; Rahman and Azim 2007).
7. Conclusion
The Securities and Exchange Commission of Bangladesh issued a
revised version of CG guidelines on 3 July 2012. The revised
guidelines include many new provisions in the areas of board
independence, audit committee affairs, board’s declaration on the
corporate governance issues, certification by the CEO and CFO of the
company on the truthfulness and fair presentation of the company
affairs, and compliance certificate from selected professionals.
However, the guidelines did not include any provision in the areas of
remuneration committee, nomination committee, performance
evaluation of the board, audit committee independence, among others.
In spite of the shortcomings, the revised guidelines are believed to be
beneficial to both capital market participants and its regulators.
However, the cost of compliance on part of the listed firms may
increase since the revised guidelines are issued on a ‘comply’ basis.
Therefore, it would be interesting to examine the extent to which the
listed companies comply with the guidelines not merely in letter but in
spirit, and the extent to which the market regulators become successful
in ensuring enforcement of the regulation.
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