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ASIC and IOSCO report on conflicts of interest within debt capital raising process


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ASIC has today issued Report 668 Allocations in debt capital market transactions (REP 668).

REP 668 outlines findings from ASIC’s surveillance of market practices in debt capital market (DCM) transactions and sets out better practice guidelines, including ASIC’s expectations that Australian Financial Service (AFS) licensees:

  • identify and manage potential conflicts of interest when making allocation recommendations
  • have effective policies and procedures for identifying and managing confidential and market-sensitive information
  • have processes to ensure that information provided to issuers and investors (including updates) is accurate and not misleading or deceptive, and
  • have active and effective supervision and monitoring for DCM transactions.

ASIC’s report follows the 21 September 2020 release of the Final report on Conflicts of interest and associated conduct risks during the debt capital raising process (IOSCO Report) by the Board of the International Organization of Securities Commissions (IOSCO).

The IOSCO Report helps regulators to identify and address conflicts of interest and associated conduct risks from the role of intermediaries in debt capital raisings, which can impact market integrity and investor outcomes.

Key areas where conflicts of interest can arise include the pricing of debt securities and related risk management transactions, the quality of information provided to investors, and the allocation of debt securities.

The IOSCO Report provides guidance for IOSCO member organisations and sets out nine measures to address conflicts of interest that arise in the key stages of debt capital raising transactions. The guidance reflects an expectation of high standards of conduct by market intermediaries in the debt capital raising process. The better practices outlined in REP 668 are consistent with the measures in the IOSCO Report.

Commissioner Cathie Armour said, ‘All licensees should review ASIC’s findings and consider whether their controls for the allocation process in DCM transactions – including policies, procedures and monitoring – are appropriate and sufficiently robust.

REP 668 builds on ASIC’s previous work on improving conduct in capital raising transactions, including the better practices in Report 605 Allocations in equity raising transactions and guidance in Regulatory Guide 264 Sell-side research.


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Regulator Information

Abbreviation: ASIC
Jurisdiction: Australia

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