IOSCO has set out its work program (PDF 315 KB) for 2021/2022. In addition to work on sustainable finance, passive investing and index trackers, fragmentation in the securities and derivatives markets, crypto-assets, artificial intelligence (AI) and machine learning (ML), and digitalisation in retail distribution, the program includes two new priorities:

  • Financial stability and systemic risks of non-bank financial intermediation (NBFI) activities
  • Risks exacerbated by the COVID-19 pandemic - misconduct, fraud and operational

The program includes both new policy proposals and monitoring of markets and the implementation of published principles and recommendations. All areas of the program will resonate with the asset and fund management industry, either directly or as participants in the capital markets. It heralds regional and national regulatory activity over the next couple of years. Sustainable finance and digital finance feature significantly, as do analyses of open-ended investment funds.

For further thoughts on these issues see KPMG's publications series, Financial Services: regulating the new reality.

Questions for CEOs

  • Are we proactively and regularly revisiting the stress testing of our funds and service offerings, taking into account industry experience during the market stresses in March and April 2020?

  • Are we reviewing our liquidity risk management and valuation processes, and our use and calculation of leverage in open-ended funds?

  • Are we thinking innovatively about how to identify, measure and manage the risks arising from new technologies, including the use of new techniques and tools?

  • Are our corporate reporting and our company and fund-level disclosures on ESG consistent? And are we doing what we say we do?

  • Given the changing nature of products and services and how they are delivered, are we considering the end-investor, throughout the business and at all stages of a product lifecycle?

NBFI activities

In addition to work on the corporate bond market, margin dynamics, corporate debt and leveraged finance, and data gathering:

  • In November 2020, IOSCO published an analysis (PDF 861 KB) of the events that occurred in the money market fund (MMF) sector during the pandemic-induced market stresses of March and April 2020. Importantly, the report noted that the MMF sector is not homogeneous, with marked differences in investments, investors and regulation from one jurisdiction to another, and that these differences need to be considered when formulating policy. In 2021, IOSCO will build on the findings of this report by contributing to policy work by the Financial Stability Board (FSB) on MMFs and the underlying short-term funding markets. 
  • IOSCO has just launched a thematic review of regulators' and industry responses to its 2018 recommendations on liquidity risk management in open-ended funds. It will report by 2022. By late 2021, IOSCO and the FSB will conduct a joint analysis of the availability, use and impact of liquidity risk management tools in funds, including an analysis of funds that experienced redemption pressures in March/April 2020. 
  • Linked to the work on liquidity risk in funds, IOSCO is also planning to conduct exploratory work on fund valuations in 2022. It will investigate the conditions around the shift to mark-to-model portfolio valuations and fair valuation of certain underlying securities where reliable market prices are not available. The methodologies used by other market participants will be explored where relevant.
  • IOSCO will continue its analysis of exchange-traded funds (ETFs) during 2021, and will complete its findings with respect to market-facing (arbitrage and trading) and investor-related issues. It will draw on observations and evidence gathered over the first half of 2020. It will report to the IOSCO Board on its findings and policy proposals by Q3 2021, followed by a consultation on possible policy proposals in late 2021/H1 2022. 
  • Building on its 2019 report, IOSCO will gather data from national regulators related to measures of global leverage in investment funds. A first global leverage report will be published by end-2021.

Misconduct, fraud and operational risks

Recognising the challenges posed to regulators and industry by lockdown measures and the expected continuation of large-scale remote working, and with a focus on investor protection issues, by 2022 IOSCO will issue three reports covering:

  • Misconduct risks
  • Operational, cyber-security and business contingency planning risks
  • Fraud and scams

Sustainable finance

IOSCO's three focus areas are:

  • Disclosures by issuers (report by end-June 2021)
  • Disclosures by asset managers (report by end-2021, with particular attention to green washing)
  • ESG ratings and data providers (report by end-2021)

IOSCO will also explore international collaboration towards mandatory (rather than comply or explain) disclosures. It will engage with the IFRS Foundation on the proposed sustainability standards setting board and will advance discussions on an ESG assurance framework.

Passive investing and index trackers

In mid-2021, IOSCO will report on the findings of its thematic review of the impact of the growth of passive investing on equity capital markets. It will provide an overview of the increase in passive investing and its drivers; examine the impacts, if any, of increased passive investing on market efficiency and corporate governance; and investigate the consequences of the interplay between passive and other types of funds for how investors collectively pay for efficient and effective equity markets.

By end-2021, IOSCO will report on the findings of its thematic review of conduct-related issues in relation to index providers. The review will explore issues related to the role of asset managers in relation to indices and index providers, and the role and processes of index providers in the provision of indices (including the potential impact of administrative errors on funds and identifying potential conflicts of interest that may exist at index providers in relation to funds).


IOSCO continues to explore how AI & ML is being used in capital markets and the risks that may be emerging from the use of these technologies. It is seeking to gain a better understanding of potential areas of risk where AI & ML is being used by market intermediaries and asset managers. It is expected to report in Q2 2021.

Retail distribution and digitalisation

The rapid growth in digitalisation, especially via social media, has changed the way financial products are marketed and distributed, providing new opportunities for domestic and cross-border offerings. IOSCO is developing a set of policy measures to address and mitigate the risks posed by online cross-border marketing and distribution. The measures will also contain guidance on effective enforcement approaches. The final report will be published by end Q3 2021.

This article was originally published on by Julie Patterson, Wealth & Asset Management, EMA FS Regulatory Insight Centre, KPMG in the UK.


Gabrielle Jaminon
Head of Regulatory Centre of Excellence Asset Management
Tel.: +352 22 51 51 7635

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