Sales of VIX-Linked ETPs – Back to Basics for FINRA -

FINRA used a misselling case to remind member firms of certain fundamentals, including the importance of implementing a new product approval process, reasonable diligence processes prior to making recommendations, suitability policies, training, supervisory procedures, and monitoring sales materials to ensure that these are fair and balanced.

In Regulatory Notice 17-32, FINRA takes a “back to basics” approach to sales of exchange-traded products (“ETPs”) designed to track futures on the Chicago Board Options Exchange Volatility Index (“VIX”). FINRA focused on unsuitable sales of complex products to retail investors who may have purchased ETPs linked to VIX futures as “buy and hold” investments.