Iosco publishes systemic risk data requirements for hedge funds

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The International Organization of Securities Commissions’ Technical Committee has published details of an agreed template for the global collection of hedge fund information which it believes will assist in assessing possible systemic risks arising from the sector. 

The template was developed by the Task Force on Unregulated Entities following requests from the Financial Stability Board as well as from Iosco members.

The purpose of the template is to enable the collection and exchange of consistent and comparable data amongst regulators and other competent authorities for the purpose of facilitating international supervisory cooperation in identifying possible systemic risks in this sector. 

Iosco believes that participants are best monitored through their trading activities, the markets they operate in, funding and counterparty information, amongst others. 

Kathleen Casey, chairman of the Technical Committee, says: “Iosco believes that regulators should seek to develop a comparable and consistent set of data to be collected from local hedge fund managers and advisers to monitor systemic risks and prevent gaps in regulatory reporting requirements.

“We recognise that the legislative process is ongoing in many jurisdictions and their outcomes could further influence the information needed to monitor systemic risk in the hedge fund sector, as well as who collects the data.  Nonetheless, setting out these categories of information may help regulators in the assessment of systemic risk and help to inform the relevant legislative debates.”

The intention behind the Iosco template is to allow regulators to gather comparable and consistent data from managers and advisors about their trading activities, the markets they operate in, funding and counterparty information, amongst others. 

There are 11 proposed categories of information which incorporate both supervisory and systemic data and build on the data collection recommendations set out in its final report on Hedge Fund Oversight.

The template is not a comprehensive list of all types of information and data that regulators might want and so regulators are not restricted from requiring additional information at a domestic level. 

The 11 proposed categories are: general manager and adviser information; performance and investor information related to covered funds; assets under management; gross and net product exposure and asset class concentration; gross and net geographic exposure; trading and turnover issues; asset/liability issues; borrowing; risk issues; credit counterparty exposure; and other issues such as complexity, number of open positions and concentration.

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