Regulation
If you are unsure about how the regulations apply to you, please contact your usual supervisory contact at the FSA.
- Risk warning, relevant for all brokers
- Client suitabliity
- Authorisation
- Training and competence
Potential action required
If you do not have permission to advise or trade in derivatives you will need to apply to the FSA for a variation to your permissions before participating in the covered warrants market.
Risk warning, relevant for all brokers.
A risk warning must be given to clients, prior to any dealing or advice being given, providing an explanation of all the key risks. Note: A company warrant risk warning is not sufficient.
A one way risk warning may be acceptable, but only if the firm can demonstrate that the client has received the risk warning before an initial purchase and had a proper opportunity to consider its terms. Electronic signatures may be appropriate.
The risk warning between broker and client may cover the initial execution and all subsequent transactions in instruments with a similar risk profile.
Regulation table
| Client suitability | |
| Execution only | Advisory |
| A broker can market services in, and the availability of, securitised derivatives to any client. | A broker can market services in, and the availability of, securitised derivatives to any client. |
| Suitability checks are not required, unless the marketing takes the form of a direct offer of financial promotion (i.e. one that allows the client to enter into an investment agreement). | Suitability checks are required. |
| Authorisation | |
| Execution only | Advisory |
| If a firm does not have permission to trade in derivatives then it will need to seek a variation to its existing permission. | If a firm does not have permission to advise in derivatives then it will need to seek a variation to its existing permission. |
| Training and competence | |
| Execution only | Advisory |
| There are no specific training and competence requirements for the execution of a transaction, but firms should be aware of their general duty to ensure that those carrying out a particular activity are competent to do so. | Training and competence checks will be made by FSA. Amongst other things, this will require brokers to have staff, which have passed relevant derivatives exams, or securities and derivatives exam. |
Downloads
Consultation notice (
file pdf - 108 KB)
To find out more about offering Structured Products to your clients, or about becoming an issuer of Structured Products, please contact: