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Asset manager conduct standards
The World Assembly (WA),
Noting that asset management is an industry prevalent in numerous WA states;
Desiring a common solution across WA states to facilitate cross-border investments by governing the conduct of asset managers and their duties to investors that invest in their products;
The WA hereby enacts as follows:
Definitions.
“A2M” refers to authorized asset managers duly authorized by an authority to manage, on a discretionary basis, the assets of independent third parties, regardless of whether they are managing the assets of sophisticated investors or others.
“Authority” refers to an entity designated by a WA state to enforce this resolution.
“Cross trades” refer to trades where one customer of the A2M buys or sells a financial instrument to another customer of the same A2M, for whatever reason.
“FISA” refers to the WA Financial Services Authority.
Resources. Each authority is required to ensure minimum standards for A2Ms in:
financial resources for meeting payroll, overheads, and other requirements;
human resources to meet its duties to investors, such as the education and skills training of staff, experience in managing the type of assets it manages, expertise in operations, compliance, risk management, internal audit, and other matters;
Technical resources such as computing models, communications tools, and record keeping databases,
Access to sufficient coverage for professional indemnity insurance for directors and officers of the A2M in the event of litigation;
Other resources required by the authority.
Risk controls. Each authority is required to ensure minimum standards for A2Ms in:
Internal and external audit, internal control, compliance procedures, and corporate governance for the A2M;
Risk management governance, procedures and procedures sufficient to meet the needs of managing the assets that the A2M purports to manage, especially in the case of investments in complex financial instruments.
Duties. Each authority is required to ensure minimum standards for A2Ms in:
Segregating the duties of staff members in the A2M, such as between active managers, middle office staff, marketing, compliance, and dealing;
Maintain clear lines of reporting and supervision of all staff members;
Maintaining a board of directors (or any analogous body or individuals pursuant to local laws that is deemed the most senior body in charge of an A2M, hereafter “directors” for convenience) that can provide proper supervision to staff members of the A2M, including a sufficient number of independent directors;
Holding directors individually responsible for any lapses in compliance with all legal and regulatory requirements;
Safeguarding the escalation of potential risk factors (as well as whistleblowing) for consideration by the board of directors without interference from other staff members.
Conflicts of interest. Each authority is required to ensure minimum standards for A2Ms in:
Identifying, monitoring and managing potential conflicts of interest that may be detrimental to customers that entrust their assets to the A2M;
Promptly disclose any potential and actual conflicts of interest to investors.
Cross-trades. Each authority is required to ensure minimum standards for A2Ms in:
Ensuring any cross-trades between customer accounts are in the best interests of both accounts, and fall within the investment objectives, restrictions and policies of both clients;
The trades are priced on an arm’s length basis at the current fair market price;
The reasons for a cross trade a documented prior to execution;
All cross-trades are disclosed to both customers.
Staff ethics.
The WA declares that it is a principle that anyone who engages in the A2M business, when transacting for themselves, must give customers of the A2M business priority and avoid conflicts of interest.
Cross-trades between accounts held by staff and accounts held by customers is prohibited,
Front-running of orders ahead of customers is strictly prohibited and is an offence in all WA states. The authority shall be responsible for determining any penalties associated with front-running.
Model standards.
FISA shall provide model standards (and to update these standards from time to time) for WA states that prefer to adopt common standards for clauses (2) to (4) in lieu of setting standards.
Standards set by WA states may not be less stringent than FISA’s model standards.
Delegation.
A WA state may request FISA to enforce and interpret this resolution on its behalf.
FISA will only accept such a request if it determines that a WA state (i) lacks a functioning government or (ii) lacks the resources necessary to maintain such infrastructure.
Each authority is responsible for interpreting terms not defined herein. If FISA is the enforcing authority, FISA is responsible for interpretation.
Each WA state may designate one or more entities as the authority depending on the governance structure of that state.
The World Assembly (WA),
Noting that asset management is an industry prevalent in numerous WA states;
Desiring a common solution across WA states to facilitate cross-border investments by governing the conduct of asset managers and their duties to investors that invest in their products;
The WA hereby enacts as follows:
Definitions.
“A2M” refers to authorized asset managers duly authorized by an authority to manage, on a discretionary basis, the assets of independent third parties, regardless of whether they are managing the assets of sophisticated investors or others.
“Authority” refers to an entity designated by a WA state to enforce this resolution.
“Cross trades” refer to trades where one customer of the A2M buys or sells a financial instrument to another customer of the same A2M, for whatever reason.
“FISA” refers to the WA Financial Services Authority.
Resources. Each authority is required to ensure minimum standards for A2Ms in:
financial resources for meeting payroll, overheads, and other requirements;
human resources to meet its duties to investors, such as the education and skills training of staff, experience in managing the type of assets it manages, expertise in operations, compliance, risk management, internal audit, and other matters;
Technical resources such as computing models, communications tools, and record keeping databases,
Access to sufficient coverage for professional indemnity insurance for directors and officers of the A2M in the event of litigation;
Other resources required by the authority.
Risk controls. Each authority is required to ensure minimum standards for A2Ms in:
Internal and external audit, internal control, compliance procedures, and corporate governance for the A2M;
Risk management governance, procedures and procedures sufficient to meet the needs of managing the assets that the A2M purports to manage, especially in the case of investments in complex financial instruments.
Duties. Each authority is required to ensure minimum standards for A2Ms in:
Segregating the duties of staff members in the A2M, such as between active managers, middle office staff, marketing, compliance, and dealing;
Maintain clear lines of reporting and supervision of all staff members;
Maintaining a board of directors (or any analogous body or individuals pursuant to local laws that is deemed the most senior body in charge of an A2M, hereafter “directors” for convenience) that can provide proper supervision to staff members of the A2M, including a sufficient number of independent directors;
Holding directors individually responsible for any lapses in compliance with all legal and regulatory requirements;
Safeguarding the escalation of potential risk factors (as well as whistleblowing) for consideration by the board of directors without interference from other staff members.
Conflicts of interest. Each authority is required to ensure minimum standards for A2Ms in:
Identifying, monitoring and managing potential conflicts of interest that may be detrimental to customers that entrust their assets to the A2M;
Promptly disclose any potential and actual conflicts of interest to investors.
Cross-trades. Each authority is required to ensure minimum standards for A2Ms in:
Ensuring any cross-trades between customer accounts are in the best interests of both accounts, and fall within the investment objectives, restrictions and policies of both clients;
The trades are priced on an arm’s length basis at the current fair market price;
The reasons for a cross trade a documented prior to execution;
All cross-trades are disclosed to both customers.
Staff ethics.
The WA declares that it is a principle that anyone who engages in the A2M business, when transacting for themselves, must give customers of the A2M business priority and avoid conflicts of interest.
Cross-trades between accounts held by staff and accounts held by customers is prohibited,
Front-running of orders ahead of customers is strictly prohibited and is an offence in all WA states. The authority shall be responsible for determining any penalties associated with front-running.
Model standards.
FISA shall provide model standards (and to update these standards from time to time) for WA states that prefer to adopt common standards for clauses (2) to (4) in lieu of setting standards.
Standards set by WA states may not be less stringent than FISA’s model standards.
Delegation.
A WA state may request FISA to enforce and interpret this resolution on its behalf.
FISA will only accept such a request if it determines that a WA state (i) lacks a functioning government or (ii) lacks the resources necessary to maintain such infrastructure.
Each authority is responsible for interpreting terms not defined herein. If FISA is the enforcing authority, FISA is responsible for interpretation.
Each WA state may designate one or more entities as the authority depending on the governance structure of that state.