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Thursday, September 26, 2019 /02:18PM / By IOSCO
IOSCO
today published a Thematic Review report (Report) indicating that most of the participating jurisdictions have
implemented the necessary rules aimed at preventing the mis-selling of complex
financial products, consistent with IOSCO standards.
The
Thematic Review was conducted by the IOSCO Assessment Committee (AC), with the
participation of 29 IOSCO members from both developed and emerging market
jurisdictions.
A
Thematic Review offers a snapshot of implementation of IOSCO Principles, which
enables the AC to identify gaps in implementation and examples of good
practice.
The AC reviewed implementation of the nine Principles set out in the 2013 IOSCO report Suitability Requirements with respect to the Distribution of Complex Financial Products. The nine Principles are aimed at promoting robust customer protection by preventing the mis-selling of complex financial products. The Principles focus on the application of suitability and related disclosure requirements to intermediary services, including selling, advising, recommending and managing discretionary accounts or portfolios, as well as the regulator's role in supervision and enforcement.
The
Report includes several findings and observations from the Thematic Review,
including for instance, that most jurisdictions have standards for how to treat
customers fairly and for addressing conflicts of interest. In addition,
the majority of jurisdictions require intermediaries to distinguish between
complex and non-complex products despite the fact that what constitutes a
complex financial product differs among jurisdictions. Notably, none of the
participating jurisdictions reported having a suitability regime specifically
for complex products.
The
Report found that with respect to customer classification, most jurisdictions
allow intermediaries to classify certain types of customers as "non-retail" (or
its equivalent), based on the nature of the entity or specified monetary
thresholds alone. However, these practices do not consider the complexity and
riskiness of different products, as required by the Principles.
The
review also found that FinTech developments related to digital advisors and
online platforms have created new suitability-related challenges.
In
light of the findings and observations, the Report indicates that jurisdictions
must have effective supervisory and enforcement mechanisms to support
suitability regimes for complex products and to ensure that intermediaries take
corrective action where their behavior falls short of supervisory or regulatory
expectations. The Report also urges jurisdictions to consider enhancing disclosure
requirements to help customers make informed investment decisions and
understand the advice they receive from intermediaries.
IOSCO
will continue conducting other Thematic Reviews on topics that are relevant for
achieving the organization's objectives, including investor protection.
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