Global securities regulators published a new set of principles Friday that aim to help regulators improve their supervision of dealers to ensure the safety of client assets.
The International Organization of Securities Commissions (IOSCO) published a consultation report that sets out nine principles, which provide guidance to regulators on how to enhance their supervision of firms that hold client assets by clarifying the roles of the firm and the regulator in protecting those assets.
“Recent events such as the Lehman Brothers and MF Global insolvencies have highlighted the importance of client asset protection regimes,” IOSCO says. And, it notes that investors are trying to understand the potential implications of placing their assets with particular intermediaries, and in certain jurisdictions. At the same time, regulators are seeking to address risks to client assets, and determine how to transfer or return client assets in the event of default or insolvency scenarios, it says.
IOSCO notes that many jurisdictions have rules and regulations governing client assets, but that asset protection regimes may vary across jurisdictions. The report outlines firms’ responsibility to ensure compliance with these rules, including the development of internal systems and controls to monitor compliance; and, the role of regulators in supervising compliance with these rules, and maintaining a regime that promotes effective safeguarding of client assets.
Comments on the consultation paper are due by March 25.