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Capital Markets

Retail investment: Trade bodies lay out principles for structured products

Structured product providers were last month encouraged to conduct "know your distributor" approval processes in order to ensure that only appropriate distributors be allowed to pass on complex derivatives-based investment products to the retail and high-net-worth markets.

 Michael Nelskyla, Royal Bank of Scotland

"It’s encouraging that the five associations are strengthening guidelines for the industry, and it’s also about time. After all, this is arguably the most dynamic market in global finance"  Michael Nelskyla, Royal Bank of Scotland

The call came as part of a wide-ranging set of non-binding principles for operators in the retail structured products market jointly published by five of the world’s financial trade bodies, including the International Swaps and Derivatives Association. The guidance focuses on the management of the relationship between retail and high-net-worth structured product providers and distributors, from the perspectives of firms performing either function.

Releasing the guidelines, Timothy Hailes, chairman of the joint association’s working group, and also a managing director and associate general counsel at JPMorgan Chase in London, said the principles were established as a result of the practical experiences of firms active in the growing structured products area. "They will also be of great value in dialogue with regulators around the world," he added.

The trade bodies define structured products as a "variety of financial instruments that combine various cash assets and/or derivatives to provide a particular risk-reward profile that would not otherwise be available in the market.

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