The Securities Litigation Expert Blog

International Structured Product Regulation Overview

Posted by Jack Duval

Feb 7, 2013 2:52:00 AM

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

The International Financial Law Review recently published an article on various regulatory approaches to structured and other complex products.  (IFLR)

The most interesting part of the article has to do with product producer obligations regarding distributors:

Although it is common practice to rely on distribution agreements to document the product provider-distributor relationship, product providers have been more keenly focused on conducting additional inquiries regarding the compliance culture and practices of their distributors. There are varying know-your- distributor practices, but most product providers have been conducting more robust initial screenings of prospective distributors, examining their compliance and litigation backgrounds, and making inquiries regarding the types of products offered by the distributor to assess whether the distributor is experienced in selling complex products.

In the US, the product producer will want to understand the distributor’s process for approving the structured products it offers and discharging the distributor’s know-your-customer and suitability obligations. Often much of this information may be elicited through questionnaires and supplemented through discussions or site visits.  A product provider will also want to consider whether the distributor has undertaken training sessions for its sales and supervisory personnel. A product producer also may want to consider whether only certain distributors should be permitted to sell particular types of structured products. 


This raises the interesting concept of product producer liability.

See our previous coverage of complex product regulation here, here, and here.


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Topics: FINRA, complex, Investment Advisors, litigation, investments, SEC, Structured Products, fixed income, Compliance, International Financial Law Review, regulation., Complexity

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