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ASIC updates disclosure guidance for capital protected products


The Australian Securities and Investments Commission has released a report outlining its key findings from a review of selected product disclosure statements for capital protected products and other structured or derivative products marketed to retail investors.

The report is the result of a programme commenced by ASIC in January 2009 and has involved the review of 64 product disclosure statements for adequacy of disclosure.

ASIC focused on capital protected products as investors may be attracted to these investments due to a perception of capital safety without fully comprehending the inherent risks.

The report also reviews structured and derivative products marketed to retail investors given increased retail participation in these complex products where associated risks and costs may not be anticipated or understood.

ASIC recommends issuers: clearly explain counterparty risk, and include supporting financial information, to ensure retail investors can assess the issuer’s financial ability to meet its counterparty obligations of capital protected products; ensure disclosure is sufficient so that investors can assess the likelihood of early termination or any other significant limitations of these products; and provide better disclosure of break costs that may apply where an investor seeks to terminate or redeem a product before its maturity date.

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