The International Organisation of Securities Commissions (IOSCO) has set out nine proposals in a consultation paper to improve custody of collective investment scheme (CIS) assets.
The international regulatory agency has launched a consultation on Friday designed to gain feedback from investment managers, custodians, institutional investors and other interested parties on CIS custody.
From its report, IOSCO argues CIS assets should be segregated from the asset of the responsible entity and other schemes, the assets of the custodian and sub-custodians, d the assets of other clients throughout the custody chain.
It also proposed that CIS assets should be entrusted by a third party custodian, and the custodian should be functionally independent from the responsible entity.
Protection of CIS assets has grown in importance since the collapse of Lehman Brothers and MF Global during the height of the financial crisis.
The principles from IOSCO are the first lot to be proposed since it published a discussion paper on the “guidance on custody arrangements for collected investment schemes” in 1996.
The consultation paper seeks to clarify, modernise and further develop principles regarding the custody of CIS assets.
Specifically, the principles are divided into two sections aimed at identifying the core issues that should be kept under review by the regulatory framework. The first section relates to the process of CIS custody, while the second section relations to the appointment and ongoing engagements of custodians.
Participants have until December 10, 2014 to submit comments on the paper.
IOSCO Lists Nine Proposals on CIS Custody
The IOSCO consultation paper seeks to clarify, modernise and further develop principles regarding the custody of CIS assets.