{"id":435416,"date":"2026-05-19T18:39:08","date_gmt":"2026-05-19T18:39:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/435416\/"},"modified":"2026-05-19T18:39:08","modified_gmt":"2026-05-19T18:39:08","slug":"finra-launches-review-of-higher-risk-structured-products","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/435416\/","title":{"rendered":"FINRA Launches Review of Higher-Risk Structured Products"},"content":{"rendered":"

The Financial Industry Regulatory Authority is launching a review of how firms handle higher-risk structured products, including \u201cworst-of\u201d structured notes that can threaten principal investments.<\/p>\n

According to a notice released Tuesday<\/a>, FINRA\u2019s review will examine firm conduct from January 2022 through the end of last year, focusing on how companies supervise the oversight of structured notes\u2014particularly their compliance with Regulation Best Interest and FINRA rules.<\/p>\n

Structured products typically combine traditional securities with a derivative component that doesn\u2019t include an underlying portfolio of investments (unlike a mutual fund or exchange traded fund). Instead, the issuer promises to pay returns based on formulas incorporating how certain reference assets perform.<\/p>\n

These products can be designed for growth, income or risk management and could generate higher returns, but are often significantly more complex than a typical mutual fund.\u00a0<\/p>\n

Related:SEC Ends Decades-Old \u2018Gag Rule\u2019 in Enforcement Settlements<\/a><\/p>\n

According to a report from the Financial Planning Association<\/a> with market data from Structured Retail Products, the U.S. structured note market stood at $149.5 billion in 2024, a 50% jump from the prior year.<\/p>\n

Particularly, the \u201cworst-of\u201d notes are typically tied to the worst-performing reference asset in a select group; according to FINRA, the notes can put the principal at risk of being reduced on maturity, and can also risk \u201ca reduction or cessation in interest payments.\u201d FINRA claimed it had found \u201cmultiple instances\u201d in which firms concentrated clients\u2019 assets in these products.<\/p>\n

\u201cStructured notes can expose investors to losses not correlated with overall market conditions,\u201d the statement read. \u201cSome investors have lost significant portions of their portfolios through such concentrated positions.\u201d<\/p>\n

FINRA accompanied the statement\u00a0with questions it will ask<\/a>\u00a0select firms about their supervision of \u201cworst-of\u201d structured notes, including the limitations it places on recommendations for such notes (such as concentration limits) and the supervisory alerts\/exceptions the company has in place.<\/p>\n

Regulators also want to know how firms train reps in structured products, how they compensate those who sell structured notes, and how the company \u201cidentifies and mitigates product-related conflicts of interest\u201d associated with recommending the products.<\/p>\n

While FINRA acknowledged its review would only impact \u201ca subset\u201d of member firms, it encouraged all firms recommending the products to review the questions and reassess their training, guidance, controls and supervisory structure when making recommendations.<\/p>\n

Related:Victims Claim JPMorgan, Bank of America Should Have Caught Signs of $328M Crypto Scam<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The Financial Industry Regulatory Authority is launching a review of how firms handle higher-risk structured products, including \u201cworst-of\u201d…\n","protected":false},"author":2,"featured_media":426171,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[138,246,111,139,69,244,245],"class_list":["post-435416","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-new-zealand","tag-newzealand","tag-nz","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/435416","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=435416"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/435416\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/426171"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=435416"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=435416"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=435416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}