This is the result of investors trying to understand better the potential implications of placing their assets with particular intermediaries and in certain jurisdictions. Regulators also have been seeking to address risks to client assets and how to transfer or return client assets in default,resolution or insolvency scenarios.
The eight principles provide guidance to regulators on how to enhance their supervision of intermediaries holding client assets by clarifying the roles of the intermediary and the regulator in protecting those assets. Many jurisdictions have rules and regulations governing client assets, although their protection regimes may vary across these jurisdictions.
The report outlines the intermediary’s responsibility to ensure compliance with these rules, including through the development of risk management systems and internal controls to monitor compliance. Where the intermediary places client assets with third parties, the intermediary should reconcile the client ́s accounts and records with those of the third party. While the intermediary must comply with the client asset protection regimes, the regulator has a role in supervising the intermediary’s compliance with the applicable domestic rules and maintaining a regime that promotes effective safeguarding of client assets, according to the report.
IOSCO received 21 public responses to the consultation report Recommendations Regarding the Protection of Client Assets, which was published in February 2013. A Feedback Statement summarising the major issues in the comment letters and the collated responses to the most recent survey on client asset protection were also published today with the final report.
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