Foreword
In 2013, the Board of the International Organization of Securities Commissions (‘IOSCO’)
published a report which contained Principles of Liquidity Risk Management for Collective
Investment Schemes (‘2013 Liquidity Report’) against which both the industry and authorities
were asked to assess the quality of regulation and industry practices concerning liquidity risk
management of collective investment schemes (‘CIS’).
1
The 2013 Liquidity Report took into account the lessons learned from the financial crisis of
2007-10 and reflected the approach taken by member jurisdictions having responded to those
events. The 2013 Liquidity Report was designed as a practical guide for authorities and
industry practitioners and focused, for the most part, on the liquidity risk management of
open-ended CIS.
2
They were addressed to the entity / entities responsible for the overall
operation of the CIS. It was recognised that implementation may vary from jurisdiction-to-
jurisdiction, depending on local conditions and circumstances.
Since then, IOSCO has actively engaged with the Financial Stability Board (‘FSB’) in their
analysis of the potential systemic risks arising in relation to the liquidity risk management of
CIS, among other matters. The FSB, on January 12 2017, issued recommendations to address
structural vulnerabilities from asset management activities that could potentially present
financial stability risks.
3
Eight of its nine recommendations relating to liquidity are
addressed to IOSCO.
4
In addition, a number of member jurisdictions have conducted further
significant work either on updating their own regulatory framework or guidance with regard
to liquidity risk management of CIS.
5
1
IOSCO, Principles of Liquidity Risk Management for Collective Investment Schemes, Final Report, Report of the
Board of IOSCO, March 2013, available at: https://www.iosco.org/library/pubdocs/pdf/IOSCOPD405.pdf
2
By open-ended CIS, in this document we mean a registered/authorised/public CIS which provides redemption
rights to its investors from its assets, based on the net asset value of the CIS, on a regular periodic basis during its
lifetime - in many cases on a daily basis, although this can be less frequently.
3
FSB, Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities (‘FSB
Policy Recommendations’), January 12, 2017, available at:
http://www.fsb.org/wp-content/uploads/FSB-Policy-Recommendations-on-Asset-Management-Structural-
Vulnerabilities.pdf.
4
The seven recommendations relevant to liquidity are Recommendations 2-8 of the FSB Policy Recommendations.
Regarding Recommendation 1 of the FSB Policy Recommendations, please see the IOSCO June 2016 Statement
on ‘Priorities Regarding Data Gaps in the Asset Management Industry’, available at:
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD533.pdf
5
See for example:
• Financial Conduct Authority, Liquidity Management for Investment Firms: Good Practice, Feb 2016, available
at: https://www.fca.org.uk/news/liquidity-management-for-investment-firms-good-practice
• French AMF, Guide to the Use of Stress Tests as Part of Risk Management within Asset Management Companies,
Aug 2016, available at:
http://www.amf-
france.org/en_US/Publications/Guides/Professionnels?docId=workspace%3A%2F%2FSpacesStore%2F8e10f441-
056c-4809-9881-36c23a292200
• French AMF, Public consultation by the AMF on the terms for implementing gates in UCITS and AIFs, Dec
2016, available at:
http://www.amf-france.org/en_US/Publications/Consultations-
%20publiques/Archives.html?docId=workspace%3A%2F%2FSpacesStore%2F49e6bd83-3397-4ae4-bcc7-
35975b6e9dcc
• Hong Kong SFC, Circular to Management Companies of SFC-authorised Funds on Liquidity Risk Management,
July 2016, available at: http://www.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=16EC29