Global standards setters are proposing new guidance for regulators on dealing with conflicts of interest in the bond underwriting business.
The International Organization of Securities Commissions (IOSCO) published a consultation paper that sets out proposals designed to help regulators address potential conflicts of interest and conduct risks that industry firms may face in the process of raising debt capital.
Among other things, it examines the conflicts that can arise in pricing debt issuances, allocating securities to investors, and the quality of disclosure provided to investors.
The paper also considers the possible use of blockchain technology in the bond issuance process, and its impact on conflicts.
“The integrity of these markets and the protection of investors depend largely on high standards of conduct by market intermediaries managing the debt capital raising process for issuer clients,” the paper said.
In these kinds of transactions, firms “may perform multiple roles and provide a range of services to its clients while having a proprietary interest in the transaction itself,” it added.
IOSCO said that failing to manage conflicts and conduct risks in these markets can “impact investor choice and returns and investor protection; jeopardize fair, orderly and transparent markets; and potentially curb capital creation, giving rise to poor outcomes in debt capital raisings.”
The deadline for feedback on the consultation is Feb. 16, 2020.