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FINRA Press Release: Best Practices

NASD Recommends Best Practices for Reviewing New Products

The Financial Industry Regulatory Authority (FINRA) published a NASD Notice to Members 05-26 providing best practices guidelines for firms on "developing and vetting" new structured products. This notice was motivated by the increasing popularity of structured products and the increasing complexity of these products.

Because structured products can be so complex, investors should be careful when considering them. They should consider the product's potential downside risks and upside returns, its payoff structure or payoff scenario, its potential credit and liquidity risks, any underlying securities to which the product is linked and the exposure to these underlying securities, and the level of fees associated with purchasing these products, and other considerations.

SLCG has a dedicated website providing papers, notes and calculation tools on a variety of structured products.