Keep it simple - Supervisors have taken an increasing interest in structured products recently. But regulating complexity isn’t easy

Morrison & Foerster LLP - Structured Products

Originally published in International Financial Law Review on February 5th, 2013.

Structured products have come under considerably greater regulatory scrutiny in recent years. In the US, regulators have become increasingly interested in structured products as the market for these products has grown to approximately $64 billion in 2012. Although structured products are relatively new to the US market, they have a long history in Europe, where the market, despite recent volume declines, remains deeper and more varied than in the US.

Investors on both shores have sought out these products for their higher yields and tailored return profiles, which provide portfolio diversification. These products are designed to meet the needs of investors and offer distinct benefits that cannot otherwise be easily obtained. However, regulators have expressed concerns that many investors who purchase these products may not fully understand their risk profiles or their costs relative to benefits, and that the products may be too complex for retail investors.

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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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