As financial markets grow more international in nature, is the Securities and Exchange Commission up to the task of cross-border enforcement? Commissioner Luis Aguilar says the SEC must do more to extend its global reach despite the many obstacles for doing so.

Technological advances have presented a greater ability to invest in securities markets around the world and “the protection of American investors will require that the SEC increase its efforts to communicate, coordinate, and cooperate with its international counterparts, something that is easier said than done,” Aguilar said during a speech at the University of Georgia.

Aguilar cited statistics that illustrate both the problem and ways the SEC is getting involved. Nearly 20 percent of its enforcement cases involve foreign persons and entities. To investigate and prosecute these caseseffectively, the SEC has entered into more than 130 information-sharing arrangements with foreign regulators and law enforcement agencies. In Fiscal Year 2014, the Commission made approximately 735 requests for international assistance, and, in turn, received approximately 460 requests for assistance from foreign regulators.

The SEC also conducts technical assistance programs to train its international regulatory and law enforcement partners on enforcement and examination topics. In Fiscal Year 2014, it trained more than 2,300 regulatory and enforcement officials from around the world.

Nevertheless, “these international efforts are not what they should be,” Aguilar lamented. “Although some international partners have been helpful, there are too many times that when the SEC calls for help, we find only silence, or worse, there are regulatory obstacles put in the its path,” he said. Among those obstacles: a foreign regulatory authority’s lack of broad powers to investigate, litigate, or sanction violations; lack of regulatory independence from political and industry influences; and the lack of resources dedicated to international cooperation. Also, some countries have privacy laws, blocking statutes, and other laws restricting or limiting the disclosure of information required in enforcement investigations and regulatory examinations.

Even when the SEC succeeds in obtaining remedies for a cross-border fraud, enforcing those judgments and orders poses a challenge. Legal authorities in other countries often deny administrative orders that impose monetary fines. Further restraining the SEC, the Supreme Court, in its Morrison v. National Australian Bank decision, limited the anti-fraud provisions of the Exchange Act to claims that relate to activity on an American stock exchange or U.S. security transactions.

The challenge is also demonstrated by the Public Company Accounting Oversight Board’s difficulty in inspecting firms that are based in foreign jurisdictions, Aguilar said. In order to audit financial statements of companies that are publicly-traded in the U.S., accounting firms are required to register with the PCAOB and undergo regular inspections. More than 900 of the approximately 2,300 firms registered with the PCAOB are located outside the U.S.

Nevertheless, the PCAOB “has faced significant regulatory obstacles to its inspections,” Aguilar said. In European Union member states, there was a lengthy delay before it was allowed to inspect registered accounting firms, due to state sovereignty claims and data privacy concerns.

The good news: the PCAOB has made progress in overcoming some of these regulatory obstacles. The bad news: it is still unable to conduct inspections of approximately 175 registered accounting firms in 11 EU member countries, as well as in China, the Czech Republic, Greece, Hong Kong, Venezuela, and other countries. “The PCAOB’s experience shows how difficult it is to develop cross-border oversight but, on the other hand, the progress that has been made shows it’s possible,” Aguilar said.

In countries where the PCAOB is unable to conduct inspections, it must rely on local regulators to inspect accounting firms and share their findings and audit materials. In China, for example, the PCAOB entered into a cooperative arrangement with regulators for the exchange of audit documents relevant to investigations in both countries. Although far from a perfect arrangement, Aguilar described a February settlement the SEC reached with four registered accounting firms in China as “a breakthrough.”

“As companies increasingly have foreign operations, the SEC will need to address how best to extend its enforcement reach and supervisory oversight,” Aguilar said. “The success or failure of those efforts will determine if the SEC will be an effective regulator in the future.”