Structured Products Mag: Closer regulatory links needed, says US structured products industry

by Sophia Morrell
Structured Products Magazine

An overwhelming majority of members of the US structured products industry are calling for closer links with regulators in the wake of the financial crisis, a survey by the US Structured Products Association (SPA) has shown. The survey, which was conducted throughout the last fortnight, saw 82% of the 114 participants call for enhanced relationships with regulators in the future.

Other regulatory initiatives also proved to be popular as means of contributing to the progress of the industry. Nearly 70% of those surveyed were in favour of a single Financial Industry Regulatory Authority (Finra) approved standardized disclosure and educational document, which would cover the industry. Half of all respondents were in favour of establishing a centralized clearing house, which would guarantee the payoff of structured products and ETNs regardless of issuer credit.

The development of a certification system program for marketers was also approved of by over half of those surveyed, while 66% of respondents expressed a desire to see more educational advertising in mainstream newspapers. When participants were asked to rank the initiatives in order of importance, regulatory interaction topped the bill, while certification exams were deemed the least important.

The group surveyed was made up of a mix of industry professionals, of which sell-side members were most prevalent, followed in size by wholesalers and distributors, third-party vendors, and lastly internal and external counsel.

The SPA has subsequently announced that it will set up four executive committees in January 2009 that will meet quarterly to discuss how to meet the goals laid out by the results: a front-office executive committee, a distribution committee, and internal and external counsel committees.


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SPA Recruiting Industry Executive Committee Members

In the wake of recent market events, several senior level executives of the structured products industry have approached the Structured Products Association about creating a single, cohesive voice to address concerns expressed by regulators, the press, investors and distributors of structured products.

Concurrently, a recent poll taken of structured products professionals, 81% stated that the industry needs to be more proactive with regulators in shaping its future course. Almost 70% stated that there should be a single, model disclosure document for structured products used by issuers, and approved by FINRA. A majority of those polled agreed there should be more education through advertising in mainstream publications such as the Wall Street Journal, a centralized clearinghouse for structured products and ETNs and a certification examination for marketers of structured investments.

Accordingly, the SPA is seeking to create an executive committee of senior structured products professionals. The executive committee are expected to meet once a quarter to discuss current issues and take appropriate action. It will also create executive committees for in-house counsel, external counsel and distributors of structured products.

The first meeting of the Executive Committee will convene in the third week of January 2009 with place and date to be announced. The SPA looks forward to the industry's collective contribution to strengthening efforts to bring structured products into the mainstream of investment opportunities, along side mutual funds, ETFs, closed-end funds, hedge funds and other vehicles.