The Board of the International Organization of Securities Commission (“IOSCO”) have recently published a consultation paper in order to obtain stakeholders’ views on a set of proposed good practices for investors to voluntarily terminate collective investment schemes and other types of funds such as hedge funds, commodities and real estate. The IOSOC are producing these good practices because they believe it is important, from an investment protection perspective, that investment funds have robust termination procedures in place.

The IOSCO does not intend that the good practices would be a replacement for any national or regional legal or regulatory requirements for the termination of funds, but would compliment the issues that regulators currently acknowledge. It is also important to note that the good practices set out by the IOSOC may not be applicable to involuntary terminations.


The consultation paper sets out proposed good practices under the following categories:

  • disclosure at time of investment;
  • decision to terminate;
  • decision to merge;
  • during the termination process; and
  • specific types of investment funds.

In relation to the category, ‘specific types of investment funds’, the IOSCO point out that illiquid securities can have a direct impact on the voluntary termination of investment funds, particularly commodity, real estate and hedge funds, therefore the consultation paper sets out additional good practices specific to the termination of these types of investment funds.

Application of Existing IOSCO Principles

The IOSOC states that although many of its existing Principles have a bearing on the termination of investment funds, Principle 25 is of particular interest: “the regulatory system should provide for rules governing the legal form and structure of CIS and the segregation and protection of client assets”. Therefore to comply with this Principle, the regulatory system should ensure that the rights of investors are clearly defined.

The IOSCO are looking for responses to their proposed good practices by 17 October 2016.

To access the full IOSOC consultation paper and to find out how you can send comments, please click here. Appendix 2 sets out a useful list of all the proposed good practices.

For any further information or advice on this subject, please get in touch with Cleveland & Co, your external in-house counsel.