News

09 December 2011
Press release

Structured products: FINMA report identifies shortcomings in protecting investors

A review conducted by FINMA has shown that buyers of structured products are not adequately protected. Most of the prospectuses and the sales documentation are not easy to understand, too long and not structured in a uniform manner. From FINMA's viewpoint, the statutory regulations must therefore be improved. 
FINMA made and reviewed representative spot checks of simplified prospectuses and sales documentation for structured products. The project was prompted by FINMA's investigations into the bankruptcy of Lehman Brothers Holdings Inc. in autumn 2008.
The law prescribes the provision of simplified prospectuses for structured products which the average investor can easily understand, describe profit and loss prospects in a standard format, and explicitly point out that structured products are neither a collective investment scheme, nor do they require authorisation by FINMA.

The spot checks conducted by FINMA found that while the content of the majority of the prospectuses are complete, key legislative requirements are not satisfactorily fulfilled. Most of the prospectuses checked are not easy to understand, too long and too technical. They are lacking in explanatory scenarios and charts and are not structured in a uniform manner which makes it difficult to compare the different products. Moreover, the prospectuses are often only written in English.

None of FINMA's checks revealed any evidence of sanctionable violations of the prospectus rules, but did show that investors are not adequately protected under the current regulations. Furthermore, the existing self-regulatory norms of professional associations are also deemed to be unsatisfactory. FINMA therefore expects an improvement in the regulatory basis. As proposed by FINMA as part of the ongoing, partial revision of the Collective Investment Schemes Act, providers should be subject to clear rules of conduct. They should therefore be required to provide full transparency on their products.

Contact

Tobias Lux, Media Spokesperson, phone +41 (0)31 327 91 71, tobias.lux@finma.ch