IOSCO proposed guidance to mitigate conflicts of interest and conduct risks for market intermediaries in debt capital market transactions.
IOSCO recommended that regulators consider requiring firms to:
- handle potential conflicts of interest in relation to the pricing of a debt securities offering by informing issuers of key decisions, such as (i) actions that can influence the pricing outcome and (ii) options during the pricing process of an issue;
- implement strategic steps to disclose to issuers how issuers' interests will not be compromised when conducting risk management transactions;
- provide a range of information to investors regarding debt securities offerings;
- use appropriate controls to identify and remedy possible conflicts of interest during the preparation of research on a debt securities offering;
- oversee and regularly assess compliance with allocation processes in connection with debt securities offerings;
- consider a client's preferences when making allocation decisions or recommendations;
- establish the necessary controls for identifying and avoiding potential conflicts of interest with allocation recommendations of debt securities offerings; and
- keep records of allocation decisions as proof of handling conflicts of interest appropriately.
Comments on the proposed guidance must be submitted by February 16, 2020.
Commentary Nihal Patel
While potentially significant in a number of jurisdictions, the IOSCO proposals, if implemented, would be unlikely to result in a significant change in U.S. markets. Existing SEC and FINRA rules generally address the issues raised in the report.
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