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IOSCO Launches Public Information Repository for Central Clearing Requirements

On August 5, 2014, the International Organization of Securities Commissions (“IOSCO”) released an information repository for central clearing requirements for OTC derivatives.  The repository sets out central clearing requirements on

Report on the IOSCO Social Media and Automation of Advice Tools Surveys (Abstract)

Only July 4, 2014, the IOSCO’s Committee on the Regulation of Market Intermediaries (“Committee”) reported on its study on the use of social media and automated advice tools in the

Report on the IOSCO Social Media and Automation of Advice Tools Surveys (Abstract)

Only July 4, 2014, the IOSCO’s Committee on the Regulation of Market Intermediaries (“Committee”) reported on its study on the use of social media and automated advice tools in the

IOSCO Launches Public Information Repository for Central Clearing Requirements

On August 5, 2014, the International Organization of Securities Commissions (“IOSCO”) released an information repository for central clearing requirements for OTC derivatives.  The repository sets out central clearing requirements on a product-by-product level, and any exemptions.  The information in the repository will be updated quarterly.

The repository was only available to IOSCO members, until they gained sufficient experience and gathered enough information on central clearing requirements to open the repository to the public.  The IOSCO stated that the information in the repository is for reference only.  Interested parties should refer to the original version of the relevant laws and regulations.

The repository provides regulators and market participants with consolidated information on the clearing requirements of different jurisdictions.  This information is intended to assist authorities in their rule making and help participants comply with the relevant regulations in the OTC derivatives market.

The first quarter repository is available at the following link: IOSCO Repository as of June 30, 2014

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Report on the IOSCO Social Media and Automation of Advice Tools Surveys (Abstract)

Only July 4, 2014, the IOSCO’s Committee on the Regulation of Market Intermediaries (“Committee”) reported on its study on the use of social media and automated advice tools in the capital markets by market intermediaries and how regulators are overseeing the use of these tools. Committee studied these issues because technology, and particularly the use of the Internet, is continuing to change the ways in which market intermediaries interact with both potential and existing customers.  This is part 2 of a two-part series on this study.

 

Regulators

Regulators identified a number of concerns related to the use of automated toots, including:

 

  • Firms classifying the output of automated advice tools as something other than a recommendation (e.g., non-personal promotional material) to avoid regulations or to engage in regulatory arbitrage.
  • Firms not regularly updating customer information used for a suitability analysis. Customers not providing sufficient information for the automated tool to provide appropriate responses.
  • Customers, believing that they received advice, buying riskier, unsuitable products. Conflicts of interest between a firm and its customers result in an automated tool making recommendations that favor the firm at its customers’ expense (e.g., recommending proprietary products, churning, favoring preferred clients).
  • Firms lacking sufficient internal controls to adequately supervise the use of automated advice tools.
  • Whether firms are providing their customers with sufficient information/disclosure about using automated tools (e.g., instructions and risk disclosures).
  • Whether firms are properly applying suitability requirements when they recommend complex or illiquid products to retail customers.

 

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Report on the IOSCO Social Media and Automation of Advice Tools Surveys (Abstract)

Only July 4, 2014, the IOSCO’s Committee on the Regulation of Market Intermediaries (“Committee”) reported on its study on the use of social media and automated advice tools in the capital markets by market intermediaries and how regulators are overseeing the use of these tools. Committee studied these issues because technology, and particularly the use of the Internet, is continuing to change the ways in which market intermediaries interact with both potential and existing customers.  This is part 1 of a two-part series on this study.

They noted that the use of social media may affect how regulators oversee market intermediaries that use these evolving mediums as well as the tools they use to approach social media-related regulatory issues.  And ass regulation has evolved, and the use of Internet-based technology has advanced, so too has the sophistication and range of functionalities and analytics that social media and automated advice tools provide.

Another key aspect of social media that causes concern is the growing use of personal mobile devices by employees of intermediaries to access business applications and to engage in business communications with customers. This trend highlights the need for both market intermediaries and regulators to be able to identify and distinguish communications that are subject to securities regulation from personal communications.

 

As part of the study, during the latter half of 2013, Committee surveyed market intermediary and regulator practices in the use and oversight of social media and automated advice tools to accomplish two goals: to gather data to understand more filly how market intermediaries are using social media and automated advice tools today and their plans for future use and how regulators are overseeing such usage today; and to determine what unique challenges the use of social media and automated advice tools present to regulators (if any) and whether it is appropriate to devise recommendations or principles that regulators should consider in overseeing market intermediaries that use social media or automated advice tools.

 

Market Intermediaries

The Committee utilized four surveys:  one to intermediaries addressing the use of social media; one to intermediaries addressing the use of automated advice tools; one to regulators addressing the supervision of social media; and one to regulators addressing the supervision of automated advice tools in their jurisdictions.  Across all surveys, nearly 200 intermediaries from 20 jurisdictions participated in the study as well as 21 regulators from 20 jurisdictions.

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