With financial products and markets continually growing in complexity, ASIC has reviewed its approach to regulating complex products.
Today ASIC has published Report 384 Regulating complex products (REP 384) about its review. REP 384:
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outlines the risks posed by complex products to retail investors
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sets out ASIC’s recent and current work on complex products, including considering the whole of the product lifecycle – development, distribution, sale, and post-sale, and
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identifies opportunities for further work, including working with industry, where appropriate.
‘The low yield environment and non-trending equity market over recent years has contributed to the development of new products that have the potential to introduce new types of complexity,’ ASIC Commissioner Greg Tanzer said.
‘This development can have an impact on the realisation of ASIC’s strategic priorities of promoting confident and informed investors and financial consumers, and fair and efficient markets.
‘Complex products, due to their nature, can be difficult for investors to understand. This can lead to them being mis-sold, particularly when investors are searching for yield.
‘We want those institutions selling these complex financial products to consider the risks outlined in this report in the context of their own business. It’s not a sustainable business model if your customers are losing money.’
Feedback on the report closes 31 March 2014.
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Background
ASIC’s focus on complex products has occurred through a dedicated Complex Products Working Group. The group conducted the review of the risks posed to investors by complex products and ASIC’s approach to regulating complex products.
In December 2013 the International Organization of Securities Commissions (IOSCO) published a final report, Regulation of retail structured products, which provides a toolkit outlining regulatory options that securities regulators globally may find useful to regulate retail structured products (refer: 13-359MR).