JPMorgan is aiming to bring dealers and lawyers together this Thursday to discuss best practices for selling retail structured products. One lawyer said top tier firms are anxious to establish standards because they are wary of distributing through smaller firms willing to take more reputation risk when selling to individual investors.
In a letter of invitation, Tim Hailes, managing director and associate general counsel at JPMorgan in London, said the forum will focus on issues resulting from dealers selling products via third party distributors which will eventually be bought by individual investors. The firm has also invited the International Swaps and Derivatives Association, the International Capital Market Association and the Bond Market Association. Market officials said the forum could become a way of establishing best market practices for firms when selling products aimed at individual investors through third party distributors.
Hailes said the initial plan is to discuss as an industry how to better manage legal, regulatory and reputational risks of doing business in this space. He noted it is not yet certain what involvement the trade associations will have with the forum and whether anything concrete will come from the meeting. "Changes in the law have facilitated the delivery of these products to a wider and growing market," he said, referring to directives such as the Undertaking For Collective Investment In Transferable Securities, which allows certain derivative-based investment products to be wrapped in mutual fund format and sold to retail.
The forum, although based in Europe, could have global significance because many of the same problems of selling derivatives to retail are on Asian regulators' radar, Hailes said, and most European firms looking to stamp their mark in the U.S. are selling products through third party distributors.
