IOSCO publishes recommendations regarding the protection of client assets

The International Organization of Securities Commissions (IOSCO) has published a consultation report on Recommendations Regarding the Protection of Client Assets, which seek to help regulators improve the supervision of intermediaries holding client assets.

Events such as the Lehman Brothers and MF Global insolvencies have highlighted the importance of client asset protection regimes, IOSCO said, and investors are trying to better understand the potential implications of placing their assets with particular intermediaries and in certain jurisdictions.

Regulators are seeking to address risks to client assets and determine how to transfer or return client assets in default, resolution or insolvency scenarios. The nine principles provide guidance on how to enhance the supervision of intermediaries holding client assets, by clarifying the roles of the intermediary and the regulator in protecting those assets.

IOSCO noted that many jurisdictions already have rules and regulations governing client assets, although protection regimes vary.

The report outlines the intermediary’s responsibility to ensure compliance with these rules, including through the development of internal systems and controls to monitor compliance. Where the intermediary places client assets with third parties, the intermediary should reconcile the client´s accounts and records with those of the third party.

While the intermediary must comply with the client asset protection regimes, the regulator has a role in supervising the intermediary’s compliance with the applicable domestic rules and maintaining a regime that promotes effective safeguarding of client assets, the report proposes.

IOSCO is the leading international policy forum for securities regulators. Its membership regulates more than 95% of the world’s securities markets in 115 jurisdictions. Comments on the consultation paper are sought by Monday, 25 March 2013.

Click here to read the full Recommendations Regarding the Protection of Client Assets


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