25.11.2014

Making innovative investments easier to understand and more accessible for ordinary investors

In the year 2006 five banks got together and founded the SSPA. This was prompted by the looming statutory amendment (2007 amendment of the Swiss Collective Investment Act) and associated concerns about “excessive regulation” in the field of structured products. Reason enough to set up a dedicated industry association. Eight years and sundry statutory and ordinance amendments later, regulation remains one of the main topics shaping the agenda and the activities of the industry association. In fact today, with “FIDLEG”, “FINIG” and “FinfraG”, we are looking at the most far-reaching shake-up of the financial market architecture that the Swiss financial sector has ever seen.
What a lot has happened since 2006! The financial crisis of 2007/2008, for example, with the momentous collapse of an issuer. For many years our industry has been wrongly carrying the can for that. The losses were not the result of the packaging as a structured product, but instead the insolvency of the debtor – how often over the intervening years have we patiently explained the facts of the matter? Sometimes people have listened, sometimes not. Yet necessity is the mother of invention. For example, the industry created asset-backed COSI products. This global innovation was created to largely eliminate the issuer risk. The structured products industry has come together on many occasions over the past eight years, and has actively addressed the tabled topics and concerns of its stakeholders.

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In the interim, the SSPA has grown to encompass around 20 members. It has established itself amongst its stakeholders as an expert interlocutor, and its views are heard – although we had to fight for this in the early years. The association’s proud list of achievements include in particular the Swiss Derivative Map, the harmonisation of product names, the risk parameters and the various measures and instruments for disseminating knowledge (book, informative videos, knowledge test etc.). While there have been pressures to subject structured products to even tougher regulation, or even to prohibit such instruments outright, these pressures have been averted in good time. Standardisation, transparency and ease of understanding have advanced to become some of the most important elements of industry efforts, and have promoted the association’s credo – knowledge and competition offer the best investor protection. The association’s recently announced voluntary move to disclose distribution fees is another sign of the industry’s determination to combat prejudice and misunderstanding. In addition to the already well-known performance transparency, which is valued by investors, this will also make structured products broadly cost-transparent.

Over the years, the dynamic economic and regulatory environment has forced the structured products industry to innovate on numerous occasions – and this situation is not likely to change any time soon. Thanks to the work of the association, the industry’s efforts have been effectively bundled. It is only if we work together and are united that we will be able to strengthen the foundations of a prosperous future for structured products. I am proud to have been able to contribute towards the development of the association over the past eight years. It has been a very interesting, challenging and at the same time instructive period. I am confident that the association today is well equipped to tackle future challenges, and that the benefits offered by structured products as innovative investment instruments will become even more widely recognised and valued in future.

Daniel Sandmeier, former President SSPA

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