Registered Rep.: A Tempest Over Structured Products
A Tempest Over Structured Products
Registered Rep. issued a news release today reporting on the state of the structured products market. The sale of structured products has grown by an estimate of 33% from 2005 to 2006. Yet the general features of structured products seem to make these products unattractive: complex, expensive, and illiquid. Financial advisors might favor structured products for it enables portfolio diversification and for its ability to tailor to the specific needs of...
Forbes: Guaranteed to Go Up
Guaranteed to Go Up
Forbes published an article examining structured products sold to retail investors around the world. It describes how a structured product works, the payoffs and risks, using an example of the principal protected note. It then explains how the principal protected note is equivalent to and can be replicated by a combination of traditional securities and derivatives.
A principal protected note returns at least the face value of the note at maturity. If the reference...
FINRA Investor Alert: Variable Annuities
Should You Exchange Your Variable Annuity?
The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on how to determine if investors should exchange their variable annuity for another model. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments.
While equity-indexed annuities have become increasingly popular, some have questioned their value and...
FINRA Press Release: Structured Products
NASD Provides Guidance Concerning the Sale of Structured Products
The Financial Industry Regulatory Authority (FINRA) published a NASD Notice to Members 05-59 providing guidance to members concerning their sales practice obligations when selling structured protects to retail customers.
The complexity of structured products can often obscure their risks. It is therefore important that investors are protected from unscrupulous sales practices that might arise in an unregulated...
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...