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IOSCO reports on progress in the protection of clients assets

IOSCO reports on progress in the protection of assets

IOSCO found that the majority of the 36 participating jurisdictions have a client asset protection regime that meets most of the principles, with Europe and North America, in particular, having measures in place against all applicable principles.

Julie Patterson

Wealth & Asset Management, EMA FS Regulatory Insight Centre

KPMG in the UK


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IOSCO’s 2014 recommendations describe:

  • firms’ responsibility to ensure compliance with rules and regulations governing client assets, including the development of risk management systems and internal controls to monitor compliance;
  • where client assets are placed with a third party, firms’ responsibility to reconcile clients’ accounts and records with those of the third party; and
  • regulators’ responsibility to supervise firms’ compliance with the applicable domestic rules and to maintain a regime that promotes effective safeguarding of client assets.

In summary, the eight principles cover:

  1. intermediary records;
  2. client statements;
  3. safeguarding arrangements when assets are placed with a third party;
  4. understanding of domestic and foreign regimes;
  5. clarity and transparency of disclosures to clients;
  6. where applicable, waivers, modifications or opt-outs;
  7. regulators’ oversight of compliance with domestic requirements; and
  8. the use by regulators of information and assistance from foreign regulators.

Jurisdictions were asked to identify the published requirements (legislative, regulatory and policy measures) that implement (or were proposed to implement) the principles. Mere guidance was deemed insufficient.

IOSCO concluded that implementation progress varied by jurisdiction and by principle. In the EU, most jurisdictions reported having final adoption measures across all principles. Canada and the US had measures across all principles, with the exception of Principle 6, which is not applicable in those jurisdictions. In some other regions (e.g South America), implementation progress was less advanced. Also, progress varied across the principles. All bar one jurisdiction had implemented Principles 2, 7 and 8, whereas only 24 out of 36 jurisdictions had measures in place to meet Principle 3. Also, only two jurisdictions (Pakistan and Switzerland) reported that adoption measures were in progress (neither of which related to Principle 3). IOSCO gives no indication that it intends to undertake any further work at this stage.

Although good progress has been made, it is important that firms inform themselves of potential gaps in foreign regimes and take appropriate measures to mitigate potential risks to clients’ assets.

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