Steering Clear of Merit-Based Regulation for Complex Securities Products


Complex investment products have grown in importance as retail customers search for yield and broker-dealer firms look for innovative products to meet this demand and generate revenue. There are several steps a broker-dealer firm can and should take to consider whether it should sell a complex product to retail customers, and to ensure proper supervision of its registered representatives. Firms must rigorously monitor the extent to which their procedures address the various investor protection concerns related to complex products, and firms should implement procedures to ensure that complex products are recommended only to customers who understand the essential features and for whom the product is suitable. This "ounce of prevention" is most certainly worth "a pound of cure", especially if the alternative is merit-based regulation resulting in prohibition of complex products from reaching the retail market.

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Published In: Professional Malpractice Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Nagy | Attorney Advertising

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