On 21 September 2020, the International Organization of Securities Commissions (IOSCO) published a final report containing guidance on potential conflicts of interest and associated conduct risks market intermediaries may face during the debt capital raising process.

The guidance is in the form of nine measures. Each measure is designed to address one or more of the key risks and harms identified by IOSCO. The guidance reflects an expectation of high standards of conduct by market intermediaries in the debt capital raising process. The objective is to help regulators and intermediaries avoid and effectively manage conflicts of interest and associated conduct risks in the debt capital raising process.

Measures 1 and 2 are designed to help ensure that the pricing of an offering does not reflect the firm’s own interests or those of its investor clients in a way which conflicts with the issuer’s interests. Measures 3 and 4 aim to address any asymmetries in the quality of information that is available to different investor clients. Measures 5, 6, 7 and 8 are aimed at increasing transparency and accountability in the allocations process. In the absence of these measures, there is an increased risk that the firm will act in its own interests or those of only certain clients. This conduct could potentially compromise the interests of the firm’s issuer client and of other clients. Measure 9 is designed to respond to specific concerns about behaviours that have arisen in the current COVID-19 crisis, which are equally observable under periods of relative “normality”, that certain lending banks are potentially treating their corporate clients unfairly when raising debt finance.

Although the guidance is not binding, IOSCO members are encouraged to consider it carefully in the context of their legal and regulatory framework, given the significant potential risks and harms the guidance intends to address.