Latest: UK regulator tightens rules to reduce risk of mis-selling

Under the new rules, firms approving and issuing marketing must have appropriate expertise, and firms marketing types of high-risk investments will need to conduct better checks to ensure consumers and their investments are well matched.

Financial firms offering investment products will also need to use clearer and more prominent risk warnings and certain incentives to invest, such as ‘refer a friend bonuses,’ are now banned.

Our new simplified risk warnings are designed to help consumers better understand the risks - Sarah Pritchard, FCA

As part of its Consumer Investments Strategy, the FCA want to reduce the number of people who are investing in high-risk products that do not reflect their risk appetite.

This follows concerns that a significant number of people who invest in high-risk products do not view losing money as a risk of investing and invest without understanding the risks involved.

These new rules build upon the FCA’s more assertive and interventionist approach to tackling poor financial promotions, reducing the potential for unexpected consumer losses.

‘We want people to be able to invest with confidence, understand the risks involved, and get the investments that are right for them which reflect their appetite for risk,’ said Sarah Pritchard (pictured), executive director, markets, FCA. ‘Our new simplified risk warnings are designed to help consumers better understand the risks, albeit firms have a significant role to play too. Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act.’

The new rules will not apply to crypto asset promotions. Once the Government and Parliament confirms in legislation how crypto marketing will be brought into the FCA's remit, the FCA will publish final rules on the promotion of qualifying crypto assets.

Barclays unveils structured notes rescission offer amounts

Barclays Bank has commenced a rescission offer to eligible purchasers of US$17.6 billion of structured products issued in excess of registered amounts under its US shelf registration statements for a period of 30 US business days.

The securities covered by the rescission order consist of 3,015 structured notes worth US$14.8 billion of and 11 exchange-traded notes (ETNs) valued at US$2.8 billion.            

The indicative market value of each series of structured notes was calculated by Barclays based on its internal pricing models and is expressed as a percentage of the principal amount of the relevant security.

‘Such indicative market value is made available to you only as a reference and is not a prediction of the price at which the subject securities may trade in the secondary market, nor will it be the price at which we or our affiliates may buy or sell the subject securities in the secondary market,’ stated the bank.

The terms of the rescission offer are set in a prospectus supplement filed with the US Securities and Exchange Commission.

Taiwan allows banks to handle converted offshore shares from structured products

The Financial Supervisory Commission (FSC) in Taiwan on 17 July released the Regulations on Custody and Disposal of Equity-linked Offshore Marketable Securities Acquired by Customers through Physical Delivery of Onshore Structured Products or Structured Bonds (銀行保管及處分客戶因境內結構型商品或結構型債券實物交割取得之具股權性質外國有價證券作業規定), in an attempt to ‘enable investors to benefit from holistic investment and transaction management services and to enhance the R&D capabilities of banks’ financial products’.

Under the new rules, which went effective immediately, the existing offshore equity-linked structured products provided by banks onshore can be settled in cash or delivered physically at maturity. Previously, banks were required to transfer the physically-delivered securities into the client’s securities firm account.

If the client intended to dispose of the securities, they had to trade through the securities firm. As a result, the bank statement failed to reflect the marketable securities and profit or loss converted from the structured products. In addition, the inconvenience in managing customers’ portfolios, the bank was unable to help customers administer their assets through a ‘one-stop’ service prior to the new rule, according to the financial watchdog.

Click here to read the new FSC rules (in Chinese).

Great American Life adds ETFs plays to annuities range

Great American Life Insurance Company has expanded its fee-based product line with the launch of the new Index Achiever Advisory registered index-linked annuity (Rila).

Designed to complement clients’ existing portfolios, the new Rila offers market-linked exposure via four underlying options including the S&P 500 Index, iShares MSCI EAFE ETF; iShares US Real Estate ETF and SPDR Gold Shares ETF as well as reduced risk with three types of downside protection: -10% floor, 50% downside participation rate and 10% buffer.

Compared to Great American Life’s existing suite of fee-based solutions, the new product is targeted at retirement investors willing to take on additional risk in exchange for a potential greater return.

‘We recognise the importance of reducing downside risk while maintaining growth opportunity – and considering the record RILA sales we saw in 2021, we know that these solutions are fulfilling that need,’ said Tony Compton, Great American Life Divisional vice president of broker/dealer and RIA sales.

According to Limra’s Secure Retirement Institute (SRI), Rila sales broke records in 2021 – sales exceeded US$38 billion, up 61% from 2020.

India, Singapore exchanges extend derivatives trading link

The National Stock Exchange of India (NSE) and the Singapore Exchange (SGX) have launched a platform to trade and clear Nifty equity derivatives contracts for global institutions.

The platform, NSE ISFC-SGX Connect, will enable orders from trading members on the Singaporean exchange to be routed to NSE IFSC for execution, with post-trade requirements handled through NSE IFSC Clearing Corporation and SGX Group’s Derivatives Clearing as central counterparty.

The two exchanges state that NSE ISFC-SGX Connect provides a pathway through which international investors can build exposure to India’s growth, with SGX Group’s trading infrastructure in the Gujarat International Finance (GIFT) City enabling global investors to trade Nifty derivatives contacts listed on NSE IFSC, supported by global standards of risk management and clearing.

This solution will offer international investors real-time access to NSE IFSC market data to support their trading activities. Launched on 29 July, seven SGX trading members will be integrated in the first phase of onboarding, namely Deutsche Bank, Morgan Stanley Asia (Singapore) Securities, OCBC Securities, Orient Futures International (Singapore), Philip Nova, StoneX Financial and UBS.

Other trading members will be onboarded progressively to the new platform in subsequent phases.

NSE IFSC, which is a wholly owned subsidiary of NSE, was launched on 5 June 2017 and supports trading in Indian and global equity, index and currency derivatives, along with depository receipts and non-agriculture commodity derivatives. This also allows trading in a wide range of products traded on stock exchanges in FATF/Iosco-compliant jurisdictions, including equities listed outside of India, debt securities, interest rate derivatives and a range of exchange-traded products.