Swiss federal law introduces prospectus for structured products

The new Swiss federal law on collective capital investments (KAG) is scheduled to come into force at the beginning of 2007. Under the law, the regulation for structured products (i.e. combined derivatives) will be enforced with two requirements. On the one hand only licensed institutes are allowed to issue and sell those instruments and on the other hand the investors will benefit from greater transparency with the issuance of a global prospectus.

With regards to this prospectus, the Swiss banks have declared they would be ready for next January. Urs Roth, the Director of the Swiss Bankers Association told the media that a project group was presently defining the general standards. Urs Roth said the prospectus should comprise four to seven pages of information “with only little small print”. The issuing financial institutions will still be given enough freedom to create their products, but they should observe a consistent terminology and define standard rules for classifying the risk profile. Furthermore, it should be stipulated clearly that structured products do not fall under the rule of separately regulated investment funds. As a consequence the investor will bear the risk if his counterparty (i.e. bank) suffers bankruptcy.

Source: Finanz & Wirtschaft





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