On 05 March 2015, the Financial Conduct Authority (FCA) published a Thematic Review containing the findings of its discovery work, based on finalised guidance (published in 2012) into structured product development and governance.
The FCA has continued to review how firms in both the retail and wholesale markets were developing new structured products.
The thematic review highlights, amongst other things, the following:
- Some firms are falling below the standards the FCA expects in their approach to the design, manufacture, packaging and distribution of structured products;
- some firms are not meeting the requirements of the FCA rules, which provide a clear framework in developing products in a way that supports the delivery of good consumer outcomes; and
- there must be more of an effort made to match product design with customer needs, demonstrate product value through robust stress-testing, and provide potential customers with clear, balanced information on the product and any risks.
The firms assessed must explain to the FCA the steps taken to ensure the fair treatment of customers when marketing new structured products and any issues identified will need to be addressed with further remediation work.
The FCA will continue to supervise and monitor the structured product market to assess how firms respond to the findings contained in the thematic review.
In order to ensure they are able to comply with the more detailed requirements on firms manufacturing and distributing structured products to retail customers as they come into force The FCA recommends that firms consider the report alongside:
– the FCA’s Principles, rules and guidance,
– Regulation on key information documents (or KIDs) for packaged retail and insurance-based investment products (PRIIPs), and
– MiFID II
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