IOSCO recommendations regarding the Protection of Client Assets

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

Events such as the Lehman Brothers and MF Global insolvencies have placed client asset protection regimes in the spotlight. This is the result of investors trying to better understand the potential implications of placing their assets with particular intermediaries and in certain jurisdictions. Regulators also have been seeking to address risks to client assets and how to transfer or return client assets in default, resolution or insolvency scenarios.

The eight principles published today 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 risk management systems and internal 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 received 21 public responses to the consultation report Recommendations Regarding the Protection of Client Assets, which was published in February 2013. A Feedback Statement summarizing the major issues in the comment letters and the collated responses to the most recent survey on client asset protection were also published today with the final report.

NOTES FOR EDITORS

1. IOSCO is the leading international policy forum for securities regulators and is recognized as the global standard setter for securities regulation. The organization’s membership regulates more than 95% of the world’s securities markets in more than 115 jurisdictions and it continues to expand.

2. The IOSCO Board is the governing and standard-setting body of the International Organization of Securities Commissions (IOSCO), and is made up of 32 securities regulators Mr Greg Medcraft, chairman of the Australian Securities and Investments Commission, is the chair of the IOSCO Board. The members of the IOSCO Board are the securities regulatory authorities of Argentina, Australia, Belgium, Brazil, Chile, China, France, Germany, Hong Kong, India, Italy, Japan, Korea, Malaysia, Mexico, Morocco, the Netherlands, Nigeria, Ontario, Pakistan, Portugal, Quebec, Romania, Saudi Arabia, Singapore, South Africa, Spain, Switzerland, Trinidad and Tobago, United Kingdom and the United States.

3. The Growth and Emerging Markets Committee is the largest Committee within IOSCO, representing 75 per cent of the IOSCO membership. Mr. Ranjit Ajit Singh, Chairman, Securities Commission, Malaysia, and Vice Chair of the IOSCO Board, is the Chair of the GEM. The Committee endeavours to promote the development and greater efficiency of emerging securities and futures markets by establishing principles and minimum standards, providing training programs and technical assistance for members and facilitating the exchange of information and transfer of technology and expertise.

4. IOSCO aims through its permanent structures:

• to cooperate in developing, implementing and promoting adherence to internationally recognized and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks;

• to enhance investor protection and promote investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct and in supervision of markets and market intermediaries; and

• to exchange information at both global and regional levels on their respective experiences in order to assist the development of markets, strengthen market infrastructure and implement appropriate regulation. OSCO, the leading international policy forum for securities regulators, is recognized as the global standard setter for securities regulation. The organization’s membership regulates more than 95% of the world’s securities markets in 115 jurisdictions and it continues to expand.

2. The IOSCO Board is the governing and standard-setting body of the International Organization of Securities Commissions (IOSCO), and is made up of 32 securities regulators. Mr. Masamichi Kono, Vice Commissioner for International Affairs at the Financial Services Agency of Japan (JFSA), is the Chairman of the IOSCO Board. The members of the IOSCO Board are the securities regulatory authorities of Argentina, Australia, Belgium, Brazil, Chile, China, France, Germany, Hong Kong, India, Italy, Japan, Korea, Malaysia, Mexico, Morocco, the Netherlands, Nigeria, Ontario, Pakistan, Portugal, Quebec, Romania, Singapore, South Africa, Spain, Switzerland, Trinidad and Tobago, Turkey, United Kingdom and the United States.

3. The Emerging Markets Committee is a specialized working group established by IOSCO’s Executive Committee, representing the world’s emerging financial markets. It endeavors to promote the development and improvement in efficiency of emerging securities and futures markets by establishing principles and minimum standards, preparing training programs for the staff of members and facilitating exchange of information and transfer of technology and expertise.

4. IOSCO aims through its permanent structures:

• to cooperate in developing, implementing and promoting adherence to internationally recognized and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks;

• to enhance investor protection and promote investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct and in supervision of markets and market intermediaries; and

• to exchange information at both global and regional levels on their respective experiences in order to assist the development of markets, strengthen market infrastructure and implement appropriate regulation.

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