New guidance from the International Organization of Securities Commissions (IOSCO) on is intended to help securities regulators address conflicts of interest and associated misconduct risks that may arise when investment dealers are involved with raising equity for companies.
To help regulators identify and address these risks, IOSCO has published the final report on Conflicts of interest and associated conduct risks during the equity capital raising process.
Among other things, the report highlights the possible pressure on analysts during the pre-offering phase, conflicts in pricing and allocating securities and the risks of personal trading. It outlines eight measures to address these concerns.
“Conflicts of interest and associated conduct risks stemming from the role of intermediaries can harm the integrity and efficiency of the equity capital raising process, damage investor confidence and weaken capital markets as an effective vehicle for issuers to raise funding,” IOSCO says in a news release.
IOSCO expects the implementation of its guidance to “materially improve the equity raising process” in a variety of ways, including: enhancing the quantity and quality of timely information that’s available to investors during the process; improving the transparency of allocations; and enhancing the efficiency and integrity of the process, which boosts investor confidence and market efficiency.
The report represents the first phase of IOSCO’s work on conflicts and conduct risks in the capital raising process. The second phase will focus on the debt capital raising process.