Stefan Sonnerstedt, formerly head of structured products at Nordea Markets in Stockholm, took the helm of the Structured Products in Sweden (SPIS) association as head of secretariat in May 2014. SRP spoke to him about the role of SPIS in voicing the industry’s position on regulation, the Swedish structured products market and his plans to set up ties with other associations.
How would you define SPIS’s role in the market? What are your goals in the short term?
SPIS play an important role not only when it comes to the work regarding standardisation and transparency of products. SPIS is also the discussion body for the players in the market. Ideas and challenges that affect the market get channelled via SPIS and [the association] makes it possible for the market to speak with one voice. It´s also very important that media have a source for receiving correct/accurate information about the [structured products] market. Too many times we have seen articles in the media creating misunderstanding and undeservedly bad publicity for these products.
SPIS's overall objectives are to increase clarity, transparency and understanding for the products and in the end increase the number of clients investing in the product. Today 90% of the arrangers in the Swedish market are members which clearly shows that they believe SPIS´s work actually adds value.
How far-reaching and effective do you think the collaboration between SPIS and other trade bodies such as Eusipa and its members actually is?
Today the interaction is limited. European markets are different when it comes to product distribution, client demand and so forth but even so I think it´s important that structured products trade bodies have a close collaboration, sharing information, learn from each other. And most important: find ways to jointly address and educate regulators about our products and how we work to increase investor protection and so forth.
I joined SPIS in May and it has not been on the top of my agenda but to establish contacts with other trade bodies such as Eusipa will definitely have a higher priority going forward.
What is SPIS’s view on recent regulatory initiatives and how they impact the Swedish market?
Looking at Mifid II and the guidelines we have seen so far from Esma I would say that the Swedish market in general already has adopted [new requirements] and complies in many areas. I believe that the work done in SPIS with the fairness code (Branschkod) is one factor together with the discussions taking place between the Swedish regulator Finansinspektionen and the arrangers individually.
The new regulatory set up will with no doubt call for stronger controls when it comes to bringing new products to the market, the sales process and internal control. I don´t know if ‘extra burden’ is the correct word but it will demand more resources both in systems and people. The bigger players can manage the situation easier compared to the smaller ones and it´s not a wild guess that we will have a stronger concentration of firms in the coming years.
How have things changed since the launch of SPIS, and what direction is the association going in now?
At the beginning most work was on establishing a Swedish fairness code (Branschkod) for structured producs in Sweden and the standardisation on name conventions. Our activities for the near future and most likely for the coming years as well will focus on legal work. Part of that work involves education and communication towards legal authorities, especially the Swedish FSA (Finansinspektionen) with focus on what Esma rolls out.
What are the main achievements of the association? What’s the next item on the agenda?
All members of the association have agreed on how to calculate and present a risk indicator for all products. The risk indicator will be mandatory for all members and this will be implemented hopefully within a couple of months. We are still awaiting the formal blessing from the regulatory authorities. We are also looking at how to provide more quality market data and make it more available for media, distributors, investors and legal authorities. In the discussions with Swedish FSA the goal is off course to implement the Mifid II requirements so we end up with conditions for a functioning market after the implementation.
What do you think is the general state of the Swedish market at the moment and what do you think the future holds?
I believe that the structured products market in Sweden is behaving well. Arrangers have adopted principles for good practice agreed upon at SPIS. Unfortunately I feel that the industry so far has not received full credit for the efforts and progress that has taken place. This is of course one of the missions for SPIS, to educate and have a close dialog with the Swedish FSA and the media. The blame culture for this market persists and the products as such often get hit when problems with unhappy clients arise [when in fact this] is due to bad advice.
We are in favour of increased client protection but how to reach that should not only focus on the products but rather on how to make sure that the right client gets the right product. The road to minimising the conflict of interest between investors and distributors/financial advisers must be carefully chosen so that there is an environment with sound competition among firms and products, and where investors regardless of the size of their portfolios get access to high quality financial advice.