The Securities Litigation Expert Blog

IOSCO Publishes "Regulation of Retail Structured Products" Report

Posted by Jack Duval

Apr 30, 2013 2:51:00 AM

This blog post continues our expert analysis of complex investments and their regulation.

IOSCO has published a consultative piece on the regulation of retail oriented structured products.  (Press Release, Paper)  As you can read, there is much confusion about structured products, even at this level.  For example:


    • There is no clear definition of a "retail client";

    • There is no clear definition of "structured product"


There are some things that are clear though:

    • The products are complex;

    • There is a large amount of issuance;

    • There have been many blowups of structured products in the recent past


Investors and advisors alike should be wary of structured products because of their complexity and high costs.

Our previous coverage of structured products can be found here, here, and here.

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Topics: suitability, investments, Structured Products, Complex Investments, Compliance, IOSCO, Complexity

IOSCO Issues Toothless Final Report on Suitability of Complex Products

Posted by Jack Duval

Jan 28, 2013 5:13:00 AM

This blog post continues our expert analysis of complex investments and their regulation.

IOSCO has issued an essentially toothless final report on suitability requirements for the distribution of complex financial products.  (IOSCO)  In the executive summary, the authors spell out a number of principles that should be followed.  While certainly true, they merely restate what is already in place in Finra and other rules.

Also, some of the issues contemplated are nonsensical, such as the occurrence of unsolicited trades in complex financial products.  As anyone in the industry could attest, these types of products (hedge funds, private equity funds, structured products, etc.) are virtually never advertised and almost always sold on a new issue basis, so it is virtually impossible for a retail client to be aware of them (and thus to call their broker to initiate an unsolicited trade).

Nevertheless, the report is interesting in some respects, especially to see how IOSCO has addressed complex products over time.

Our previous coverage of complex products can be found here and here.

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Topics: FINRA, complex products, investments, Structured Products, Compliance, IOSCO, regulation., Complexity

IOSCO Report Seeks Comments on Libor Benchmarks

Posted by Jack Duval

Jan 14, 2013 3:05:42 AM

The International Organization of Securities Commissions has issued a report seeking comment regarding benchmarks.  (Press Release, Report)  The goal of the report is:

To address concerns regarding the potential inaccuracy or manipulation of Benchmarks and maintain confidence in the credibility of Benchmarks, the Task Force is seeking to articulate policy guidance and principles for Benchmark-related activities (including those related to effective self-regulation) and consider issues related to transition. To inform this work, the Task Force will:

  • identify Benchmark-related issues across securities and derivatives and other financial sectors and identify the relevant policy issues including:

  • the appropriate level of regulatory oversight of the process of Benchmarking;

  • the standards that should apply to methodologies for Benchmark calculation, and credible governance structures to address conflict of interests in the Benchmark setting process within the reporting financial institutions as well as in the oversight bodies; and

  • the appropriate level of transparency and openness in the Benchmarking process.


The Consultation Report also discusses potential provisions for replacement and issues Market Participants might confront when seeking to make a transition to a new or different Benchmark.

Obviously, what is on everyone's mind is how to insure benchmark integrity post-Libor.  My suggestion is to get away from the committee and let the market set the rate.

See our previous coverage of the IOSCO here and here.

Comments can be submitted on or before February 11th, 2013.

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Topics: benchmarks, LIBOR, litigation, SEC, Compliance, IOSCO, regulation.

LIBOR-Type Manipulation Possible in Many Global Indicies

Posted by Jack Duval

Sep 22, 2012 3:38:50 AM

Joshua Gallu of Bloomberg reports here that many of the worlds benchmarks could be subject to the same type of manipulation seen with LIBOR.  How?:

Fewer than half of the benchmark interest rates surveyed in the U.S., Europe and Asia were based on actual transactions, according to a confidential International Organization of Securities Commissions discussion paper obtained by Bloomberg News. Instead, the rates were calculated by methodologies that were unclear, not transparent and only rarely subject to specific regulatory standards or obligations, the group said.

I think most people would be shocked to discover that less than half the interest rate indexes were based on transactions.  We have previously commented on this here.

The press release by the industry group IOSCO can be found here.

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Topics: Bloomberg, Joshua Gallu, benchmarks, LIBOR, interest rates, IOSCO

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