Prop index growth sparks legal fears
Proprietary indexes are one of the few remaining hot spots for product structuring, but with banks churning out new investments from one week to the next, lawyers are increasingly worried that some product tweaks could inadvertently expose issuers to harsher regulation. Lukas Becker reports
Question: when is a debt security not a debt security? Answer: when it does not offer principal protection, contains early redemption clauses or is acting as a pass-through conduit for an underlying index.
That may have the rough form of a joke, but lawyers who work for big structured products houses in London are not laughing. Some fear the safe harbour provided by the UK’s collective investment scheme (CIS) regime – which gives banks broad freedom to sell derivative-based products to retail
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