The changes are primarily aimed at reinforcing controls and procedures by setting globally consistent minimum standards on the internal conduct of DC member firms. This includes explicit requirements for written policies or procedures to be in place at all member firms concerning the identity of DC decision-makers, identification and management of potential conflicts of interest, and record keeping. These requirements complement existing securities laws and anti-manipulation requirements, which DC member firms are already subject to.
The changes are part of an ongoing process of review to ensure the DC process is robust and transparent. ISDA will continue to assess policies and processes, and will consider all available options to further support the DCs and the credit derivatives market more broadly.
The agreed changes include requirements for written policies or procedures to be in place at member firms that:
Require the identification and management of any conflicts of interest arising from DC membership and potential profits or losses from trading or holding economic positions in instruments where the price may be affected by a DC decision.
Set limits on the individuals who can act on the DC firm’s behalf. Those individuals cannot work within departments in the firm that carry out core activities in various business lines (such as credit trading, hedging, lending, investing, advisory or similar functions), unless the firm is satisfied that the relevant function is independent of the business.
Make explicit how any material non-public information received through the DC process should be handled, in accordance with any applicable securities laws.
Describe the DC member firm’s internal process of deciding how to vote.
The policies or procedures set to satisfy these requirements must be retained by the firm for at least five years. ISDA, in its role as Secretary of the DCs, will maintain records of the individuals authorized by DC member firms to participate on their behalf, as well as records of individuals’ attendance on DC calls, for at least five years.
The changes will be implemented from mid-February 2016.
Full press release
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