IOSCO issues measures to reduce conflict of interests in debt capital raising

September 21, 2020

Published: IOSCO

The Board of the International Organization of Securities Commissions (IOSCO) today published final guidance to help its members address potential conflicts of interest and associated conduct risks market intermediaries may face during the debt capital raising process. The guidance also seeks to address some specific concerns observed by certain regulators during the COVID-19 crisis that may affect the integrity of the capital raising process.

Conflicts of interest and associated conduct risks can weaken investor confidence and undermine debt capital markets as an effective vehicle for issuers to raise funding. To help regulators identify and address these risks, IOSCO today published the final report on Conflicts of interest and associated conduct risks during the debt capital raising process.

The report also explores the potential benefits and risks of Blockchain technology in addressing conflicts of interest in the debt capital raising process.

The report describes the key stages of the debt raising process and identifies where the role of intermediaries might give rise to conflicts of interest. The guidance comprises nine measures that address potential issues when issuers are preparing to raise debt finance, including such things as the use of risk management transactions, the quality of information available to investors, and the allocations process.

The consultation report on the guidance comprised eight measures published in December 2019 prior to the start of the COVID 19 pandemic. The final report includes an additional ninth measure that addresses specific concerns that emerged from the crisis. It seeks to address the potentially problematic conduct of lenders that may opportunistically leverage their role during debt capital raising to pressure corporate clients into awarding them future mandates.

While the guidance focuses on traditional corporate bonds, it may prove useful to IOSCO members considering raising capital through other types of debt securities. The guidance is the second part of a two-stage project on conflicts of interest in capital raising. The first stage focused on the equity capital raising process with the final report Conflicts of interest and associated conduct risks during the equity capital raising process published in September 2018.


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