IOSCO issues recommendations and good practices to improve liquidity risk management for investment funds

On 1 February 2018, the Board of the International Organization of Securities Commissions (IOSCO) issued final recommendations that seek to improve liquidity risk management practices of open-ended collective investment schemes (CIS). The final report, Recommendations for Liquidity Risk Management for Collective Investment Schemes, sets out IOSCO’s recommendations to entities responsible for managing the liquidity of CIS (responsible entities) to ensure that liquidity is managed to safeguard and protect the interests of investors, including in stressed market conditions. In addition to its recommendations to responsible entities, the final report includes IOSCO’s additional guidance to securities regulators to promote good liquidity management practices for CIS.  The final report replaces the liquidity risk management framework contained in IOSCO´s 2013 report Principles of Liquidity Risk Management for Collective Investment Schemes.

IOSCO has also simultaneously published a final report that provides practical information, examples and good practices regarding open-ended fund liquidity risk management, to supplement its recommendations.  The final report on good practices Open-ended Fund Liquidity and Risk Management – Good Practices and Issues for Consideration, is intended to assist regulators, the industry, and investors. the report describes good practices for liquidity risk management throughout the entire life cycle of a fund.