International Organization of Securities Commissions Review of Suitability Requirements for Complex Products
09/26/2019The International Organization of Securities Commissions has published a report, "Thematic Review on Suitability Requirements with respect to the Distribution of Complex Financial Products". The report summarizes the outcome of the review IOSCO undertook of a sample of member jurisdictions' implementation of the IOSCO 2013 Suitability Requirements for the Distribution of Complex Financial Products, which aims to prevent mis-selling of complex products. The Suitability requirements comprise nine principles relating to classification of customers, general duties regardless of customer classification, disclosure requirements, customers protections, incentives and enforcement.
The review found that the majority of IOSCO members have implemented the principles of the Suitability Requirements, generally in line with the principles and that jurisdictions generally have complexity-neutral suitability regimes. However, jurisdictions have different approaches to classifying complex products. In addition, the review found that most jurisdictions have standards for dealing with customers fairly and for dealing with conflicts of interest. The review found that many of its member jurisdictions do not require intermediaries to consider product riskiness or complexity when classifying some customers. IOSCO recommends that where jurisdictions apply bespoke requirements for complex products, they should establish clear criteria for distinguishing complex products from non-complex products.
The report also highlights that national regulators have encountered new suitability challenges in relation to digital advisors and online trading platforms due to the rise of financial technology.
View the report.
View the IOSCO 2013 Suitability Requirements for the Distribution of Complex Financial Products.
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