Consultation on Updated Liquidity Risk Management Recommendations for Collective Investment Schemes

The International Organization of Securities Commissions has published a consultation report on its proposed revised recommendations for liquidity risk management for collective investment schemes. The Liquidity Risk Management Recommendations For Collective Investment Schemes were originally published in 2018. The revised recommendations take into consideration the Financial Stability Board's revised recommendations to address structural vulnerabilities from liquidity mismatch in open-ended funds, published in December 2023. The recommendations also take account of recent market events such as the COVID-19-induced market volatility and the conflict in Ukraine. Responses to the consultation may be submitted until February 11, 2025. IOSCO aims to publish its final report in the first half of 2025.

The proposals consist of 17 recommendations organised into a revised structure with six sections, namely: (i) the collective investment scheme design process; (ii) liquidity management tools and measures; (iii) day-to-day liquidity management practices; (iv) stress testing; (v) governance; and (vi) disclosures to investors and authorities.

The accompanying Implementation Guidance, also for consultation, sets out technical elements focusing on open-ended funds, such as the determination of asset and portfolio liquidity and considerations relating to the calibration and activation of liquidity management tools and other liquidity management measures.

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