Structured Thoughts - Volume 3, Issue 1 - January 19, 2012


In this issue: FINRA Notice Regarding Complex Products; FINRA’s Recent Consent Agreement: A Continued Focus on Adequate Supervisory Systems and Procedures in the Sale of Reverse Convertible Notes; FINRA Revises Proposal re Communications with the Public; and SEC Announces Second Extension of Comment Period for Conflict of Interest Rules.

Excerpt from 'FINRA Notice...':

FINRA recently released Regulatory Notice 12-03 titled “Complex Products: Heightened Supervision of Complex Products.” The Notice identifies the types of products that may be considered “complex” and provides guidance to member firms regarding supervisory concerns associated with sales of complex products. Until now, in the United States we had avoided the debate ongoing for some time now in Europe regarding “complex” and non complex (simple?) products. It is interesting that FINRA is now headed in a direction similar to that taken by European regulators.

This Notice identifies as complex products those that include “complicated or intricate derivative like features”, like structured notes, certain exchange-traded funds, hedge funds and asset-backed securities. The Notice references FINRA’s prior Notices to Members and Regulatory Notices regarding particular types of structured products. The Notice reminds member firms that the firms should review and assess the adequacy of their controls with respect to products that may be deemed complex. In this regard, the Notice reminds members that they must discharge their suitability obligation, which entails diligence regarding the features of the product, including potential risks and rewards.

Please see full publication below for more information.

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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.

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