On 12 February 2009, the FSA published a speech by Dan Waters (Asset Management Sector Leader) entitled Industry response to developments in regulation of structured products.
In his speech Mr Waters mentioned that the FSA has been working with the Committee of European Securities Regulators (CESR) on a taskforce to consider particular issues that have arisen from the collapse of Lehman Brothers (LB). One key issue was to assess the size and value of the product population which was affected by LB’s failure. In addition to this assessment, the taskforce has also come up with a number of recommendations for existing CESR work streams, to consider how structured products are distributed and sold to retail customers across Europe. The report of the taskforce is an internal CESR document and will not be made public. However, Mr Water stated that there are some key recommendations for CESR to consider including:
- Further elaboration of the application of the criteria which determine whether or not products are non-complex and which determine whether or not products can be sold on a truly non-advised basis.
- Input into the European Commission's work on competing products in the mass retail market.
- Further analysis in respect of certain key elements of the Prospectus Directive.
Mr Waters also stated that the FSA has been considering the quality of marketing material and risk disclosures in communications issued for the products affected. The FSA will be working through some of the regulatory issues that prevent investors or their advisers from knowing which institution or institutions have issued the debt that makes up the capital protected element of a particular product.
Mr Waters also reported that the FSA is concerned about the range of structures and forms in the UK structured products market. For certain types of wrapper, the FSA believes that it is not altogether clear that firms’ interpretation of how the Markets in Financial Instruments Directive, the Prospectus Directive and applicable disclosure requirements interact in order to provide optimal protection to retail investors.
View FSA speech - Industry response to developments in regulation of structured products, 12 February 2009