IOSCO Seeks Tougher Asset Protection to Prevent MF Global Repeat

Banks and investment companies may face tougher scrutiny from regulators over how they safeguard clients’ assets in a bid to prevent any repeat of losses such as those caused by the bankruptcy of MF Global Holdings Ltd.

Global regulators are seeking to address “risks to client assets” held by financial intermediaries and how they should be returned “in default, resolution or insolvency scenarios,” the International Organization of Securities Commissions, said in a statement on its website.

The group, which brings together markets regulators from more than 100 nations, said it has issued guidance to authorities on how to enhance their supervision of so-called financial intermediaries that hold client assets.

MF Global in 2011 filed the eighth-largest U.S. bankruptcy after getting margin calls and bank demands for money at its brokerage following its investment in the debt of troubled European economies. Legal disputes between the U.K. and U.S. units initially tied up assets worth more than $1 billion and hindered repayment of the brokerage’s clients and creditors.