The U.S. Financial Industry Regulatory Authority will not intervene in the retail structured products market by banning specific structures that it feels are complex. The move is in contrast to regulators in Europe, with some proposing to ban so-called complex structures in an effort to simplify the market and create a greater level of transparency.
We're not headed down the path of product intervention, said an official at an industry conference today. The official declined to elaborate on the regulators plans when approached by DI and a spokeswoman at FINRA did not return calls or emails by press time.
The comments will be welcomed by structurers, who have been concerned that the U.S. may move in line with some regulatory proposals in Europe and intervene in the market where it felt complex products were being sold. Last week, for example, structurers were becoming concerned that volumes in some products, such as dual range accruals, were dropping off as FINRA began to examine the marketing of structured products.
In January, FINRA published a regulatory notice in response to proposals by some European regulators to ban complex retail products. The decision to recommend complex products to retail investors is one that a firm should make only after the firm has implemented heightened supervisory and compliance procedures, the notice stated. Firms also should monitor the sale of these products in a manner that is reasonably designed to ensure that each product is recommended only to a customer who understands the essential features of the product and for whom the product is suitable.
In Europe, some regulators have proposed to ban products that it feels are too complex for the retail structured products market. The Belgian Financial Services and Markets Authority, for example, has proposed reducing structured products that it considers complex. The U.K. Financial Services Authority is also considering intervention in the structured product market following a discussion paper on the issue.
I can't see that in the U.S., said Joseph Inzerillo, director and senior counsel at BNP Paribas in New York. He added that market regulators in the U.S. are market leaders in regulation ahead of Europe, and that they won't necessarily follow the FSA's move.