The International Organization of Securities Commissions has published a
Recent events such as the Lehman Brothers, MF Global and Peregrine bankruptcies have highlighted the importance of client asset protection regimes.
In this context, 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 published Friday in IOSCO’s consultation report provide guidance to regulators on how to enhance their supervision of intermediaries holding client assets by clarifying the roles of the intermediary and the regulator in protecting those assets.
Many jurisdictions have rules and regulations governing client assets, although their protection regimes may vary across these jurisdictions. 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, according to the report.
IOSCO is seeking comments on the consultation paper by Monday, March 25, 2013.
