The International Organization of Securities Commissions ("IOSCO") published a report on regulating the risks associated with misconduct in wholesale markets. The report covered the findings of IOSCO's Market Conduct Task Force, which was established in 2015 to evaluate existing tools and approaches employed by IOSCO members to regulate conduct in wholesale markets.
The report highlighted (i) why wholesale markets and market conditions are particularly susceptible to financial misconduct, (ii) existing regulatory mechanisms for preventing financial misconduct and (iii) regulatory procedures and methods that are particularly effective at deterring misconduct and managing risk.
IOSCO identified some of the more effective tools and strategies used to combat wholesale market misconduct, including:
- consenting to "agreed remediation" with firms that require the implementation of specified measures to foster greater compliance, while avoiding more extensive and burdensome regulatory processes;
- compiling information in a database to allow interested parties to track individuals with histories of financial misconduct;
- implementing market surveillance and monitoring mechanisms in order to identify suspicious trades;
- establishing clear guidelines for the supervisory responsibilities of managers; and
- imposing significant financial penalties in order to hold individuals accountable for their misconduct.
IOSCO Board Chair Ashley Adler emphasized the importance of managing misconduct risk in the wholesale markets:
"The LIBOR and FX scandals highlight the severe consequences when firms or individuals fail to manage risk effectively or to observe proper standards of market conduct. This report provides tools to help IOSCO members minimize conduct risk in wholesale markets."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
