Derivatives Week: Global Principles for SPs Go Final Next Week

by Sam Mamudi

The final version of a new set of principles for the structured product industry is due to be released early next week.

The Principles for Managing the Distributor-Individual Investor Relationship follows last year’s retail structured products provider-distributor principles. While those principles were focused on the relationships between firms, the latest principles address interactions with clients.

As with the previous principles, the new ones will be jointly released by five trade associations, the European Securitisation Forum, International Capital Market Association, International Swaps and Derivatives Association, London Investment Banking Association and Securities Industry and Financial Markets Association.

Timothy Hailes, managing director and associate general counsel at JPMorgan and Chairman of the Joint Associations Committee on Retail Structured Products who produced the principles, said in producing the latest set he had spoken with various regulators, including the U.S. Securities and Exchange Commission and Hong Kong’s Securities and Futures Commission.

He said the they should be read as a list of desirable outcomes, rather than a document that prescribes how things should be done.

The principles call for measures such as adequate risk disclosure to clients and training for financial advisors. “Although these principles are non-binding…and do not create enforceable obligations or duties, firms…are encouraged to reflect these principles in their policies and procedures,” states the document.

Anna Pinedo, partner at Morrison & Foerster in New York, said the document will not give firms in the U.S. reason to pause or reassess compliance procedures. “These are a nice reminder, nothing more than that,” she said.

However, the principles are “ahead of the curve in a number of [other] jurisdictions,” said Hailes.