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Displaying 10 out of 48 results for "Structured Products".

SEC Examiniation Priorities 2014

The Securities and Exchange Commission (SEC) senior staff recently announced their 2014 examination priorities . The national examination program will be focusing on fraud detection and prevention, corporate governance, and registrants that serve as both a broker-dealer and investment adviser.

SEC staff also plans to undertake initiatives that examine the rollover of retirement vehicles during employment transitions or near retirement. In particular, the staff is concerned about misleading...

FINRA Regulatory Priorities 2014

Early this month, the Financial Industry Regulatory Authority (FINRA) released their 2014 regulatory and examination proirities . FINRA is continuing to focus on the suitability of recommendations made to retail investors. FINRA specifically mentions complex structured products (including leveraged ETFs), non-traded REITs, frontier funds, and interest rate sensitive instruments such as mortgage-backed securities and municipal bonds. At a recent conference, a FINRA representative added that...

FINRA Action Against JP Turner for Unsuitable Leveraged ETF Sales

Last Thursday, FINRA ordered JP Turner, an Atlanta-based broker-dealer, to pay restitution related to sales of leveraged and inverse exchange-traded funds (ETFs) and excessive mutual fund switching. The total restitution to 84 customers totaled over $700,000.

Leveraged and inverse ETFs are extremely complex investments, that are designed for professional traders and are generally considered unsuitable for buy-and-hold investors. One fundamental issue with leveraged and inverse ETFs is that...

FINRA's Conflict of Interest Report

On Monday, the Financial Industry Regulatory Authority (FINRA) published their Report on Conflicts of Interest "to better understand how [a number of a large firms] manage conflicts of interest and to identify effective practices to manage those conflicts." The report details observations made in connection with FINRA's targeted examination letter in July 2012 as well as in-person meetings resulting from that letter.

The report makes it clear that a well-defined framework is necessary for...

SEC Approves Municipal Adviser Registration Requirement

Late last week, the Securities and Exchange Commission (SEC) voted to adopt rules requiring municipal advisors to register with the commission if the advisor "provides advice on the issuance of municipal securities or about certain 'investment strategies' or municipal derivatives." This permanent registration requirement was required by Dodd-Frank (Section 975) and replaces the temporary registration requirement previously implemented by the SEC.

The registration requirement is meant to...

Illiquid ETFs and SEC Market Maker Incentives

There is now nearly $1.5 trillion invested in exchange-traded products (ETPs) in some 1,400 exchange-traded funds and exchange-traded notes. However, not all of that huge sum is distributed evenly. Some funds, like SPY, have huge assets under management, while many others struggle to top $10 million. Often, issuers will close lightly-traded ETPs (leading to substantial turnover each year), but if they don't, the market price of an ETP can often deviate from the net asset value of its...

Limit Up/Limit Down Rules and the NYSE

Nearly a year after the "flash crash" of May 6, 2010, the Securities and Exchange Commission (SEC) proposed a "limit up-limit down" mechanism that would limit the trading prices for listed equity securities to within a range near recent prices -- effectively limiting the realizable volatility of the price movements.1 The proposal called for price bands around the average price over the preceding five-minute period and would prevent execution of trades outside of these bands. The proposal was...

SEC Commissioners Vote Unanimously on Money-Market Reform Measures

The SEC voted on Wednesday on changes to rules governing money market funds (MMFs). As we discussed on Tuesday, MMFs are considered low risk, low return investments similar to bank accounts, but experienced 'runs' during the financial collapse of 2008 that helped freeze financial markets. The SEC's new rules hope to prevent such runs by changing how MMFs report their assets.

As widely suspected, the changes target MMFs favored by large institutional investors (dubbed 'prime funds'). While...

FINRA Fines Wells Fargo and Banc of America Over Unsuitable Sales of Floating-Rate Bank Loan Funds

Yesterday, the Financial Industry Regulatory Authority (FINRA) announced fines totalling more than $2.1 million levied against Wells Fargo and Banc of America. In addition, FINRA has ordered the two institutions to pay restitution in excess $3 million to customers who suffered "losses incurred from unsuitable sales of floating-rate bank loan funds."

A floating-rate bank loan fund is a mutual fund that mainly invests in floating-rate high-yield senior secured loans. The floating-rate on the...

Investors Bristle at New Structured Product Valuations

Back in February, the SEC issued a letter to structured product issuers that required them to estimate and prominently state the estimated value of the notes to investors. According to, as issuers have begun doing so, many investors have "expressed surprise" at how low those valuations are.

However, these valuations should be no surprise to anyone familiar with the structured product literature, which has documented significant discounts for a wide variety of product types. You can...

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