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Structured disclosure – commercial sensitivity versus commercial sense

Last week Money Marketing attempted to get a little closer to understanding the cause of the latest structured products debacle rather than finger-pointing and focusing on the symptoms of the problem.

Unsurprisingly this ruffled some feathers in the dizzy world of structured investments but it also encouraged some providers to improve the disclosure offered in their current product plans.

In the days that followed our column, Blue Sky chief executive Chris Taylor supplied Money Marketing with detailed examples of communication which had been sent to advisers with clients who had capital at risk from breaches to the provider’s PIP I and II plans. Market closed at 4.30pm and by 11.30pm on September 16 the company had sent out comprehensive confirmation of relevant details, which provided a half-year banking review on the 5 major UK banks, including the breached HBOS stock, a spreadsheet showing underlying price information barriers and details of closing prices.

Taylor says it has been made aware that other providers have been more lacking in both promptness and calibre of inputs provided and needed, either proactively or in response to specific requests.

Blue Sky is unveiling two new plans this week and has responded to the current environment by disclosing the counterparty backing ‘upfront and transparently’. Taylor says it will, with the agreement of counterparties, endeavour to provide counterparty information at the point of marketing at launch and not just in the post-offer period.

Blue Sky has clearly recognised the value of offering up counterparty names on plan issuance, something which not all providers have been quite so forthcoming with.

According to Arc product development manager Chris Powell the firm is prevented from publicly disclosing the counterparty by the issuing financial institutions and says doing so can ‘back the provider into a corner.’ He says: “It would be a great help to us if we could disclose the counterparty, particularly in the current environment. But if the counterparty is mentioned it becomes a public offer for sale which has various other implications. IFAs and individuals should be asking the question and generally they will be told who it is but putting it on paper puts us in a very difficult situation.”

Morgan Stanley is understood to have recently put in place an arrangement where providers can, on a product by product basis and with permission, use its name. Arc has not pursued this as yet.

Chelsea Financial Services head of investment products
Matthew Woodbridge says the disclosure debate comes down to commercial sensitivity but warns providers are likely to be forced to reveal their counterparties or risk losing IFA custom.

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