IOSCO Examines Efforts To Prevent Mis-Selling Of Complex Financial Products

Author:Mr Steven Lofchie
Profession:Cadwalader, Wickersham & Taft LLP

IOSCO examined member regulators' progress toward implementing suitability standards designed to prevent the mis-selling of complex financial products.

IOSCO published the findings in a final report, "Thematic Review on Suitability Requirements with respect to the Distribution of Complex Final Products," following an assessment of 29 IOSCO members from various developed and emerging market jurisdictions. Among other things, IOSCO found that:

none of the participating jurisdictions reported having a separate suitability regime for complex products;

most jurisdictions have established standards for treating customers fairly and addressing conflicts of interest;

most jurisdictions mandate that an intermediary distinguish between complex and non-complex products even though, as IOSCO pointed out, what constitutes a complex financial product differs among jurisdictions;

the majority of jurisdictions permit intermediaries to categorize certain types of customers as "non-retail" based on (i) the nature of the entity or (ii) specific monetary thresholds without considering the complexity or riskiness of the relevant product; and

new suitability-related challenges have emerged as a result of FinTech developments concerning digital advisors and online platforms.

Additionally, IOSCO...

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