The Financial Supervisory Authority (FFSA) has announced that it has found shortcomings of varying degree in the marketing materials of nearly every distributor of structured notes. FFSA urges the issuers and distributors of structured notes to critically review their marketing processes to ensure that the marketing materials are up to standard. Special attention should be paid to the comprehensiveness and fair description of the product risks to ensure that the notes are not marketed by giving inaccurate or misleading information or otherwise unfairly or contrary to good practice.
According to the FFSA, marketing is misleading, if investors’ attention is focused entirely on the benefits of the product and if risks are mentioned only by reference to the prospectus. For example, any mention of principal protection should be accompanied by a description of the risks related to the repayment of the notes. A description of the risks is especially important when notes are marketed to investors who are not classified as qualified or professional investors.
The FFSA’s announcement coincides with the press suggesting that Finnish retail investors would have lost millions in investments in structured notes issued by Lehman Brothers. According to allegations in the press, the Finnish distributors had in their marketing materials neglected to inform the investors of the potential risks associated with the notes.