The International Organisation of Securities Commissions (IOSCO) set the wheels of innovation in motion once again, by publishing a Consultation Report on good practices for consideration in relation to leveraged loans and Collateralized Loan Obligations (CLOs). Here you will find more detailed information.
The purpose of the report is to provide suggestions and recommendations as to how these financial instruments can be structured, managed, and overseen legally and ethically. Particularly during these uncertain times, maintaining financial stability, protecting investors, and fostering fair and transparent markets has gathered additional emphasis.
Leveraged loans and CLOs are complex instruments, which in recent times have become high-profile products in the financial markets. However, they carry risk-profiles that can be significantly complicated to assess. It is more important than ever that jurisdictions across the world understand and implement best practices to manage and mitigate these risks.
The IOSCO’s Consultation Report sets out some critical areas to consider. It stresses the importance of aligning the interests of asset managers and investors; improving the transparency and quality of disclosures; ensuring appropriate valuation of CLOs; and enhancing the ability of asset managers to manage liquidity and redemption risks under stressed market conditions.
These are only proposals at present and the IOSCO is in the consultation stage. The agency will be collecting feedback and suggestions from industry participants and interested parties to help shape the final recommendations, thus demarking itself as a body that values broader participation and opinion. Stay tuned to updates as the world inches closer to making financial markets safer and more efficient.