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
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.