Regulators Keeping Close Eye on Alternatives and Complex Products

Feb 10, 2014

Earlier this year, the Financial Industry Regulatory Authority (FINRA) issued their 2014 Regulatory and Examination Priorities letter which outlines their annual goals to assist investors. The letter also included a number of product concerns. Among those products were alternatives and complex structure products.

Structured products have been on FINRA’s concern list since 2006. FINRA’s main concern with the sale of these products is that the complexity of the investment make it difficult for both the advisors and investors to completely understand the risks of the investment. FINRA is calling for advisors to receive enhanced training for those complex products.

Alternative investments, such as nontraded real estate investment trusts (REITs), can also be difficult for advisors and investors to understand. Nontraded REITs are among the alternative investments FINRA and the SEC are cautioning against. Both regulators are rallying for improved due diligence policies and procedures from brokers and their firms. They want to ensure brokers know exactly what they are selling to their client and explain it thoroughly so the client understands.

To read more, see these articles from Investment News:

Regulators train a close eye on alternatives

Finra keeping pressure on complex products in 2014


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