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Welcome to EQUITY ISSUES, a short note on a relevant issue in the private equity and venture capital industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  


Claire Cummings

020 7585 1406



IOSCO consults on guidance to address conflicts of interest in the equity capital raising process

IOSCO has proposed guidance to help its members address conflicts of interest and associated misconduct risks that may arise during the equity capital raising process, including in relation to the role of connected analysts, the role that connected research plays in investor education and price formation, and allocations of securities. Conflicts of interest and associated conduct risks stemming from the role of intermediaries can threaten the integrity and efficiency of equity capital raising, damage investor confidence and undermine capital markets as an effective vehicle for issuers to raise funding.   The guidance reflects an expectation of high standards of conduct by market intermediaries in the equity capital raising process.

Proposed IOSCO guidance

Although the guidance is not binding, given the significant potential risks and harms they are intended to address, IOSCO encourages its members to consider the following proposals carefully in the context of their legal and regulatory framework. 

  • Measure 1: In the context of pitches to secure a mandate to manage an equities securities offering, regulators should consider requiring firms to take reasonable steps to prevent their analysts from coming under pressure to take a favourable view on the offering from the issuer’s representatives.
  • Measure 2: Regulators should consider requiring that, once an underwriting or placing mandate has been awarded, firms take the reasonable steps to prevent a connected analyst’s views and research on the equities securities offering from being improperly influenced and to ensure that the analyst remains objective.
  • Measure 3: Regulators should consider requiring that, once an underwriting or placing mandate has been awarded, firms have appropriate controls to manage potential conflicts of interest and associated conduct risks arising from connected analysts performing an internal advisory role within the firm in the context of an equity securities offering.
  • Measure 4: Regulators should consider requiring firms to support the provision of a wide range of independent information to investors in a timely manner, where distribution of such information is permitted under local law.
  • Measure 5: Regulators should consider requiring firms to maintain an allocation policy that sets out their approach for determining allocations and that provides the issuer with an opportunity to express their preference during the process.
  • Measure 6: Regulators should consider requiring firms to maintain records of the allocation decisions to demonstrate that any conflicts of interest are appropriately managed.
  • Measure 7: Regulators should consider requiring firms to manage any conflicts of interest that arise in relation to pricing an equity securities offering, keep the issuer informed of key decisions or actions which can influence pricing outcome, and give the issuer an opportunity to express preference regarding the pricing of an issue during the pricing process.
  • Measure 8: In the context of a securities offering, regulators should consider requiring firms to prevent any employees who have access to confidential information on the issuer from entering into or causing any personal transactions in situations where it involves misuse or improper disclosure of the confidential information. Regulators should also consider requiring firms to prevent any employees from entering into personal transactions where it otherwise gives rise to any conflicts of interest.
The guidance proposed by IOSCO is intended to address some significant potential conflicts of interest and associated misconduct which can arise at various stages of the equity capital raising process. If implemented, the guidance should bring about material improvements to the process. This includes enhancing the: (i) range and quality of timely information that is made available to investors during the process; (ii) transparency of allocations; and, therefore the (iii) efficiency and integrity of overall process, boosting investor confidence and making capital markets a more effective route for issuers to raise finance.  This would help to ensure that capital markets continue to have a positive impact on the global economy.

This document is for general guidance only. It does not contain definitive advice.


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Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

20 02 2019


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