The Swiss Structured Products Association (SSPA) has announced that from March next year Swiss issuers will state product distribution fees in their marketing materials, a move to further improve fee transparency in structured products.
The trade body said that mandatory disclosure is part of the new guidelines issued by the SSPA together with the Swiss Bankers Association (SBA) on enhancing transparency around structured products.
"In a significant first step, distribution fees included in the product price will be stated, as investors should be aware of distributors' financial incentives for marketing the products concerned," said SSPA president, Daniel Sandmeier.
Sandmeier said that from March 1, 2015 distribution fees as a percentage of the issue price will be stated in all simplified prospectuses. Distribution fees include fees structured products issuers include in the issue price, such as compensation paid to distribution partners.
The SSPA said it has discussed for some time ways to render structured product prices more transparent and readily understandable and that discussions by the association's committee regarding structured product key figures, including total expense ratio (TER) and issuer estimated value (IEV), are part of the process.
European cost index
The SSPA also said that it is participating in Europe-wide cost transparency discussions with the European Structured Investment Products Association (Eusipa) to develop a new, cross-European, investor-friendly, easy-to-understand index figure recognised by supervisory authorities.
In a second phase, the SSPA, in cooperation with Eusipa, will launch an industry-wide cost index that "clearly and openly states product costs included in product prices".
"Current efforts are a good start for creating a cost index," said the SSPA's vice-president Georg von Wattenwyl. "Past experience helps optimise the index as a European industry standard that renders structured product costs and performance ever more transparent and understandable for investors."
A Europe-wide cost index will make the structured products industry one of the most transparent in the financial markets, said the SSPA.
SSPA members are free to issue presently available key cost figures for their products.
Related stories:
European SP trading volume takes a dive
Eusipa: Consob initiative distorts EU level playing field
Swiss Mifid-like rules draft expected shortly
Association chiefs differ on thorny issue of 'fair value'
Innovation and transparency the key to Swiss market recovery