The Investment Bridge News Release
For Immediate Release
DROP “GUARANTEED” TO IMPROVE STRUCTURED INVESTMENT REPUTATION

The Investment Bridge says there is “no necessity, merit, integrity or
justification” for use of the word
London August 1st 2011 – The Investment Bridge, a specialist consultancy practice for the
financial services, investment management and financial planning and advisory industry, is
urging the structured investment industry to pre-empt and exceed regulatory guidance by
universally stopping using the word “guaranteed” in marketing material.
Its response to the FSA’s Consultation Paper, CP11/11, highlights a “significant opportunity”
for the industry to “exceed the regulator’s expectations through highlighting and suggesting
better practices that the industry could proactively and collectively adhere to”.
Responding to the 125 page quarterly consultation paper, in which section 5 details changes
that the FSA proposes to introduce that will provide guidance regarding the use of certain
terms, such as ‘guaranteed’, ‘protected’ and ‘secure’ in financial promotions The Investment
Bridge managing director Chris Taylor says that use of the word guaranteed by the
structured products industry lacks necessity, merit, integrity or justification.
The FSA paper details that the guidance it proposes to introduce will more explicitly clarify its
expectations in respect of firms meeting its ‘fair, clear and not misleading’ rule, in particular
‘making sure that firms know when using terms such as ‘guaranteed’ they must provide
information in their literature which makes it clear what such terms mean for the consumer’.
Input to the consultation paper is due by 6 August. If the FSA proceeds with its proposals
firms will have six months to comply with the new guidance.
The Investment Bridge’s Chris Taylor said, ‘‘Despite CP11/11 being an extensive
consultation paper, section 5, which is aimed at the structured investment industry, is
extremely succinct, with question 5.1 simply asking ‘Do you agree that the proposed
guidance on use of the terms ‘guaranteed’, ‘protected’ or ‘secure’ is appropriate?’.’’
‘‘The easy response for the industry to provide is nothing more than an equally succinct
‘Yes’, however if the industry chooses to provide such a simplistic answer it will, to my mind,
mean that the industry itself passes up a significant opportunity to exceed the regulator’s
expectations through highlighting and suggesting better practices - that many providers are
already following today - that all providers could be encouraged to adopt and adhere to,
either through the industry universally accepting what is clearly best practice of its own
accord, or through more prescriptive regulation, rules and/or guidance’’.
‘‘In fact, incredibly few structured investment providers use the term guaranteed today,
regardless of regulations allowing it to be used legitimately in respect of deposits and/or
where a strict 3rd party guarantor condition is met. However, despite the current regulatory
latitude to use the term, it is surely difficult to for any provider to reconcile use of the word
when counterparty risk always exists, even in respect of structured deposits, where FSCS
cover may apply.’’
‘‘It is also bizarre and worthwhile considering that deposit takers, ie banks and building
societies, do not usually feel the need to describe a normal interest paying deposit account
as guaranteed, but some still choose to do so when promoting stock market linked
structured deposits where, regardless of the risk to capital being identical, interest is
potentially dependent upon stock market or other asset class performance.’’
‘‘I see no reason for the regulator to continue to allow what now appears to be the scope for
nothing more than a distinct minority of firms to exploit what must surely be seen as light
touch regulation in respect of deposits.’’
Taylor also highlighted that he is concerned about a related issue, which is unadvised,
execution only sales of structured deposits via High Street providers, which he feels is now
the more pertinent issue for the regulator to consider.
He concluded, ‘‘Perhaps more important than the views that The Investment Bridge is
providing to the regulator, in response to CP11.11, is the suggestion that I would make to the
structured investment industry itself that it has a fantastic opportunity to firmly evidence and
demonstrate that it is already operating in ways that exceed the regulator’s rules and
guidance.’’
‘‘Actual use of the word ‘guaranteed’ is so minimal today that I would encourage the industry,
via its trade body and/or the dominant providers, to proactively and of its own accord
surpass FSA expectations by asserting that it already no longer uses the g-word and
therefore proposes that the regulator reacts to this industry position by prescriptively
amending its rules and guidance to make this mandatory.’’
‘‘With interest rates low and looking to stay lower for longer than anyone anticipated, with tax
high and rising, and with uncertain and unpredictable returns from stock market linked
investments the structured investment industry is going from strength to strength globally, as
it increasingly responds to and meets investor’s genuine investment interests and
requirements. However, and particularly in the UK, which is behind the curve in its use of
structured investments in a global context, greater adviser, investor and commentator
confidence in the industry’s integrity and approach is still needed and any move by the
industry itself to not just meet but to actually exceed regulatory expectations can only
contribute positively to this’’.
- Ends For more information please contact:
The Investment Bridge Limited: Chris Taylor, Managing Director,
Telephone: +44(0) 207 340 8565
Email: [email protected]
Website: www.theinvestmentbridge.com
> For further background Information and key industry facts, including the latest data
on sales and market volume (including comparisons of the UK market with Europe,
the US and Asia) please see the attached powerpoint presentation.
{The information contained in this press release is intended solely for journalists.}