SPA sets regulatory relationship as priority for 2009; survey shows regulators, disclosure at top of minds

By Kenneth Lim

Boston, Dec. 18 - The Structured Products Association will focus on working closer with regulators in 2009 after an industry survey suggested that the issue was near the top of members' minds, according to a press release.

The group said a two-week poll of 114 structured products professionals indicated that 82% of the members want the industry to have "enhanced relationships with regulators."

Two-thirds of the participants called for a single disclosure document for the industry that is approved by the Financial Industry Regulatory Authority, while 65.8% wanted a directory of structured products providers, services and professionals.

The survey showed that 65.5% of those polled asked for more educational advertising in mainstream media, while 54.5% wanted a certification program for marketers. Just slightly more than half of the respondents wanted a centralized clearinghouse.

When respondents were asked which issues would be most important to their firms, better regulatory interaction received the most votes with 44.3%. Having a single disclosure document came in second, followed by the centralized clearinghouse and increased advertising. The certification program was deemed the most important by the least number of participants.

The association will create four executive committees in January - a front-office executive committee, a distribution committee, an internal counsel committee and an external counsel committee - to try to accomplish those objectives. The committees will meet quarterly.

Of the people who were polled, 39.4% were on the sellside, while 20.2% were wholesalers or distributors, 13.1% were third-party vendors and 12.1% were internal or external counsel.

A distributor told Prospect News that the results were not surprising.

"One thing that's become clear over the past year is that structured products as an industry is still a nascent sector in the United States, and one of the key challenges to growing the industry continues to be educating not just the investment public but also the regulators who make up the rules about structured products," the distributor said.

"On the regulation side there are still questions about the tax treatment of ETNs, the implications of default on structured notes as a result of Lehman, and more recently I guess was the decision to exclude structured notes from the FDIC guarantee program.

"So you can see there are still many unresolved issues and unless there's better clarity and better communication from the industry to the people who are making decisions, people will continue to see structured products as too exotic or complex. So I think it's good that Keith [Styrcula, chairman of the Structured Products Association] wants to make this a priority."

Most of the top issues that were highlighted by the survey fall under the umbrella of education, the distributor added.

"If you look at all of the points, what's tying all of it together is education, education, education," the distributor said.

"I'm a firm believer in education as the best way to grow our industry. The more people understand the product, the more you enable people to assess these as investments, the risks and returns, the more these investors will feel comfortable using these products.

"We want to market our industry, but we want to do it responsibly because we're professionals, first of all, and because one of the biggest risks for a young product is people losing money on the product because they didn't understand it."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.