Supervision of the Capital Market Regulatory System in Iran from the Perspective of Optimal Regulation

Abstract

The nature of regulatory governance necessitates the delegation of regulatory authority over a market or a specific issue to a technical, sectoral, and independent institution. In this regard, the model of optimal regulation requires, on the one hand, a network of diverse oversight mechanisms—parliamentary, judicial, and administrative—to ensure that the regulatory body does not deviate from its intended regulatory objectives. On the other hand, such oversight must be exercised in a manner that does not undermine the independence and effectiveness of the regulatory institution. This article, employing a descriptive and analytical method, seeks to examine how the supervision of the capital market regulatory system in Iran aligns with the aforementioned model. The findings indicate that although the capital market regulatory system constitutes one of the earliest transitions to regulatory governance in Iran, it has been significantly successful in designing and developing a comprehensive network of directive, regulatory, review, and prosecutorial oversight mechanisms. Furthermore, it has managed to establish an acceptable balance between supervision and participatory governance on the one hand, and the system’s independence and effectiveness on the other. Nevertheless, several critical shortcomings remain, including: the delegation of supervisory and ratification authority to the Minister of Economic Affairs and Finance over all resolutions of the Supreme Council of the Stock Exchange; the lack of oversight over the decisions of the Arbitration Board in capital market disputes; and the inconsistency in the competent authority for reviewing individual decisions of the Supreme Council and the Securities and Exchange Organization despite the unified nature of such decisions. These issues underscore the need for legislative revision and reform.