IOSCO Sees Uneven Progress in Global Protection of Client Assets

In a Progress Report reviewing implementation of IOSCO's 2014 client asset protection recommendations, IOSCO concluded that a majority of participating jurisdictions have "generally adopted a client asset protection regime described by the Principles."

The 2014 report - "Recommendations Regarding the Protection of Client Assets" (the "Principles Report") - outlined guidance for regulators concerning the protection of client assets at regulated intermediaries. The guidance encompassed intermediary responsibilities for risk management systems and books and records requirements, and regulators' responsibilities to supervise intermediaries and facilitate regimes that ensure the effective protection of client assets. In the Progress Report, titled "Thematic Review of the Adoption of the Principles Set Forth in IOSCO's Report: Recommendations Regarding the Protection of Client Assets," IOSCO evaluated the participant jurisdictions based on their progress in adopting legislation, policies and regulations consistent with the Principles Report.

The Principles Report made recommendations in the following areas:

1. Intermediary Records;

2. Statement of Accounts;

3. Maintaining Appropriate Arrangements to Safeguard Client's Rights and to Minimize the Risk of Loss and Misuse;

4. Understanding of Domestic and Foreign Regimes;

5. Disclosure regarding Client Asset Protection;

6. Waiver or Modification;

7. Compliance with Domestic Requirements; and

8. Information on Foreign Jurisdictions.

According to the Progress Report, all jurisdictions were found to have taken adoption measures for Principle 2 (Statement of Accounts) and all but one jurisdiction was found to have taken adoption measures for Principle 7 (Compliance with Domestic Requirements) and Principle 8 (Information on Foreign Jurisdictions). Principle 3 (Maintaining Appropriate Arrangements to Safeguard Client's Rights and to Minimize the Risk of Loss and Misuse) was implemented by the fewest number of jurisdictions, with 12 out of 36 jurisdictions taking adoption measures.

IOSCO noted that European Union and North American jurisdictions were most successful in implementing adoption measures from the Principles. Latin American jurisdictions, including Argentina, Brazil, Ecuador, and Mexico, were less advanced in their implementation efforts. Australia also was determined to have taken adoption measures in just three of the eight principles.