Principles for Retail Structured Products Key to Mitigating Risk of Divergent Regional Standards, According to Joint Associations Committee

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Jonathan D. Gupta | Bloomberg Law ISDA Press Release (Nov. 23, 2011) The International Swaps and Derivatives Association (ISDA or Association) discussed the translation of the principles for managing provider-distributor and provider-individual investor relationships in retail structured products (Principles)—developed by the Joint Associations Committee on Retail Structured Products (JAC)—into French and German. ISDA explained that these principles were developed to achieve fair treatment of individual investors, and to clarify the roles of the various parties in the creation and distribution process.

Regulatory Initiatives

ISDA suggested that retail structured products can play a key role in meeting investor demand, particularly in light of the increased onus on individuals to take individual responsibility for long-term retirement planning. It noted that, as a result of impaired investor confidence following the financial crisis, regulatory initiatives have been undertaken in various jurisdictions to improve investor protection. ISDA explained that the Principles were re-released following the financial crisis in order to encourage their usage and inform the current debate. Translation of the principles into French and German should further advance these goals, according to the Association.

Conceptual Rationale

In its preamble to the Principles, the JAC also noted that much of the conceptual rationale for the Principles foreshadowed recent regulatory reform across jurisdictions in the retail structured products area. Common themes include (1) the focus on the interactions between individual investors and distributors, including ensuring that products are suitable for the particular investor; (2) the focus on greater pre-sale disclosure, and reducing information asymmetry; and (3) providing for regulatory intervention where particular products are not appropriate for specific audiences. The JAC emphasized that adoption of the Principles serves a public policy interest of mitigating potential damage to investor protection that might arise from divergent regional approaches. DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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