Rules have been changed so that the Swiss structured products sector becomes more transparent, two leading financial sector groups have announced.

Rules have been changed so that the Swiss structured products sector becomes more transparent, two leading financial sector groups have announced.

The Swiss Bankers Association has amended its guidelines for informing investors about structured products. These amendments were realised for the first time together with the Swiss Structured Products Association and are therefore effective for both associations, a statement from the groups has said.

Even before the 2008 crisis, which exposed flaws in the industry, there had been concerns that structured products, such as those offering yield enhancement or capital protection, were hard to understand and that their fee structure was opaque. In recent years, there have been calls for the industry to simplify its offerings and give out clearer information to clients.

 The revised guidelines incorporate the amendments made to the Federal Act on Collective Investment Schemes and also increase transparency over the fees associated with distributing structured products.

The changes, which take effect from 1 March, were approved by the Swiss Financial Market Supervisory Authority, or FINMA.

New rules say that a so-called “preliminary” simplified prospectus must be offered free of charge to any interested person prior to subscription and before conclusion of the contract. This obligation is a supplement to the existing obligation that the “definitive” simplified prospectus is to be offered upon issue or upon conclusion of the contract. In addition, the revised guidelines also dictate that the simplified prospectus must be structured according to the following three main categories: “Product description”, “Profit and loss prospects” and “Important risks for investors”.

According to the revised guidelines, “all fees for the distribution of a product that are included in the issue price or in an up-front fee by the issuer at the time of issue of a structured product” must now be indicated. This obligation to disclose also includes sales commissions which are paid to “distribution partners“. Distribution fees are to be indicated as a percentage of the nominal value of the individual structured product.