Protection of Clients Assets

On 8th February 2013, IOSCO – the International Organisation of Securities Commissions – published a consultation report outlining eight principles regarding the protection of client assets and the means of implementation of such Principles. Comments on the Consultation Report – CR02/13 may be forwarded to IOSCO by the 25th March 2013.

This paper lists 8 principles which seeks to help regulators to better improve and enhance their supervision of intermediaries holding client assets.

These Principles mainly relate to the following:

• Principle 1 – An intermediary should maintain accurate and up-to-date records and accounts of client assets that readily establish the precise nature, amount, location and ownership status of client assets and the clients for whom the client assets are held. The records should also be maintained in such a way that they may be used as an audit trail.
• Principle 2 – An intermediary should provide a statement to each client on a regular basis, as well as on request, detailing the client assets held for or on behalf of such client.
• Principle 3 – An intermediary should maintain appropriate arrangements to safeguard the clients’ rights in client assets and minimise the risk of loss and misuse.
• Principle 4 – Where an intermediary places or deposits client assets in a foreign jurisdiction, the intermediary should understand and take into account the foreign regime to the extent necessary to achieve compliance with applicable domestic requirements.
• Principle 5 – An intermediary should ensure that there is clarity and transparency in the disclosure of the relevant client asset protection regime(s) and arrangements and the consequent risks involved.
• Principle 6 – Where the regulatory regime permits clients to waive or to modify the degree of protection applicable to client assets or otherwise to opt out of the application of the client asset protection regime, such arrangements should be subject to a number of predetermined safeguards.
• Principle 7 – Regulators should oversee intermediaries’ compliance with the applicable domestic requirements to safeguard client assets.
• Principle 8 – Where an intermediary places or deposits client assets in a foreign jurisdiction, the regulator should, to the extent necessary to perform its supervisory responsibilities concerning applicable domestic requirements, consider information sources that may be available to it, including information provided to it by the intermediaries it regulates and/or assistance from local regulators in the foreign jurisdiction.

Any comments on the consultation paper may be forwarded to IOSCO by the 25th March 2013.