International Standards Body Seeks To Tackle Conflicts Of Interest And Conduct Risks In Equity Capital Raisings

SS
Shearman & Sterling LLP

Contributor

Our success is built on our clients’ success. We have a long and distinguished history of supporting our clients wherever they do business, from major financial centers to emerging and growth markets. We represent many of the world’s leading corporations and major financial institutions, as well as emerging growth companies, governments and state-owned enterprises, often working on ground-breaking, precedent-setting matters. With a deep understanding of our clients' businesses and the industries they operate in, our work is driven by their need for outstanding legal and commercial advice.
On February 21, 2018, the International Organization of Securities Commissions published a consultation report in which it seeks feedback on proposed Guidance to address the significant potential conflicts ...
United States Corporate/Commercial Law

On February 21, 2018, the International Organization of Securities Commissions published a consultation report in which it seeks feedback on proposed Guidance to address the significant potential conflicts of interest arising from the role of intermediaries during key stages of an equity raising.

IOSCO has identified a number of key risks. In the early, pre-offering phase of an equity raising, conflicts of interest can arise where analysts employed by firms managing the securities offering may be under pressure to present a positive view of the issuer. During the investor education and price-formation phase these "connected" analysts may produce conflicted research and conflicts can also be present during the allocation of securities. There can be both conflicts of interest and risks of misconduct where staff employed within firms that are managing an equity raising enter into personal transactions. These issues can damage investor confidence and the effectiveness of the capital markets as route for issuers to raise finance.

The proposed Guidance consists of eight separate measures that are designed to increase the range and quality of timely information available to investors, make allocations more transparent and enhance the integrity and efficiency of the process as a whole. IOSCO recognizes, however, that differing market practice, legal and regulatory frameworks in place to govern the equity capital raising process means that conflicts of interest and associated misconduct risks vary across jurisdictions. For this reason, ISOCO has built in some flexibility in the proposed Guidance that should enable national regulators to tailor its implementation in accordance with the specific risks of their jurisdiction.

Comments are invited by May 4, 2018. The finalized Guidance will not be binding, but IOSCO encourages its members to consider the proposals carefully in the context of their legal and regulatory frameworks.

The Consultation Report is available at: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD593.pdf.

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.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More