Principles for Retail Structured Products Key to Mitigating Risk of Divergent Regional Standards, According to Joint Associations Committee
Jonathan D. Gupta | Bloomberg Law
The International Swaps and Derivatives Association (ISDA or Association) discussed the translation of the principles for managing provider-distributor and provider-individual investor relationships in retail structured products (Principles)—developed by the Joint Associations Committee on Retail Structured Products (JAC)—into French and German. ISDA explained that these principles were developed to achieve fair treatment of individual investors, and to clarify the roles of the various parties in the creation and distribution process.
ISDA suggested that retail structured products can play a key role in meeting investor demand, particularly in light of the increased onus on individuals to take individual responsibility for long-term retirement planning. It noted that, as a result of impaired investor confidence following the financial crisis, regulatory initiatives have been undertaken in various jurisdictions to improve investor protection. ISDA explained that the Principles were re-released following the financial crisis in order to encourage their usage and inform the current debate. Translation of the principles into French and German should further advance these goals, according to the Association.
In its preamble to the Principles, the JAC also noted that much of the conceptual rationale for the Principles foreshadowed recent regulatory reform across jurisdictions in the retail structured products area. Common themes include (1) the focus on the interactions between individual investors and distributors, including ensuring that products are suitable for the particular investor; (2) the focus on greater pre-sale disclosure, and reducing information asymmetry; and (3) providing for regulatory intervention where particular products are not appropriate for specific audiences. The JAC emphasized that adoption of the Principles serves a public policy interest of mitigating potential damage to investor protection that might arise from divergent regional approaches.
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