July 29, 2011
SEC Staff Report Finds Lack of Supervision in Selling Structured Products to Retail Investors
The SEC released a staff report identifying common weaknesses seen in sales of structured securities products and describing measures by broker-dealers to better protect retail investors from fraud and abusive sales practices. The report summarizes the results of a sweep examination of the retail structured securities products business of 11 broker-dealers, covering a cross-section of the industry.
Among other things, the staff observed that broker-dealers might have:
- recommended unsuitable structured securities products to retail investors;
- traded at prices disadvantageous to retail investors;
- omitted material facts about structured securities products offered to retail investors;
- engaged in questionable sales practices with customers.
The report notes that there appears to have been a lack of training requirements for supervisors and registered representatives that market structured products to their customers. The report contains recommendations for improved surveillance of sales practices and enhanced training for sales and supervisory personnel.
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