Structured Products Guidelines Sep Riskpro, India

Transcription

1 Structured Products Guidelines Sep 2011 Riskpro, India 1

2 Structured Products SEBI Guidelines on enhancement of Disclosures Applicable to structured products / Market Linked Debentures listed on Stock Exchange Non Principal protected are not eligible for listing on stock exchange Issuer to have minimum net worth of Rs 100cr Ticket Size- No allotment / subscription less than Rs.10lakh in any issue All commissions to be disclosed in offer document Credit rating by any registered Credit Rating Agency shall bear a prefix PP-MLD denoting Principal Protected Market Linked Debentures Conditions for premature redemption shall be clearly disclosed in the offer document Structured Product Valuations Appointment of third party valuation agency mandatory - credit rating agency registered with SEBI Minimum weekly valuation of SP by the agency Latest and historical valuation for such securities shall be made available on the websites of the issuer AND of the valuer Valuation cost to be disclosed in offer document 2

3 Major Disclosures Requirements A step in the right direction A detailed scenario analysis/ valuation matrix showing value of the security under different market conditions such as rising, stable and falling market conditions shall be disclosed. Table Format & Graphical representation All returns denoted in % shall be only annualized. This is a big blow to the manufacturers of the structured products as it makes SP les attractive, a step in right direction in making these instruments transparent. Investors can easily compare attractiveness with other instruments such as FDs, FMP, Bonds etc. Inclusion of a new risk factor Model Risk To highlight that securities are created on the basis of complex mathematical models involving multiple derivative exposures. And to highlight that actual behavior of the securities selected for hedging may significantly differ from the returns predicted by the mathematical models 3

4 Structured Products Issuance Sep 2011 Guidelines Compliance requirements for Issuer Intermediary selling the security to retail investor shall be SEBI regulated entity The intermediary shall ensure that 1. Investor understands the risks involved, 2. Investor is capable of taking the risk posed by such securities 3. Security is suitable to the investor s risk profile Intermediary to compulsorily provide offer document to investors Suitability and Appropriateness check Stock Exchanges Ensure compliance of guidelines prior to granting approval for listing Education / information about structured products to companies and on website for general investors Cir. /IMD/DF/17/ Guidelines for Issue and Listing of Structured Products/ Market Linked Debentures - 28 September

5 Riskpro s views on the guidelines Right steps in the implementation of a framework to ensure Suitability and Appropriateness Non Principal protected instruments have not been banned. They are permitted, but not eligible for listing Onus of suitability and appropriateness is on the intermediary Minimum ticket size ensures that non professionals or un-knowledgeable retail investors are not targeted for SP sales. 5

6 Who is Riskpro Why us? ABOUT US Riskpro is an organisation of member firms around India devoted to client service excellence. Member firms offer wide range of services in the field of risk management. Currently it has offices in three major cities Mumbai, Delhi and Bangalore and alliances in other cities. Managed by experienced professionals with experiences spanning various industries. MISSION Provide integrated risk management consulting services to mid-large sized corporate /financial institutions in India Be the preferred service provider for complete Governance, Risk and Compliance (GRC) solutions. VALUE PROPOSITION You get quality advisory, normally delivered by large consulting firms, at fee levels charged by independent & small firms High quality deliverables Multi-skilled & multi-disciplined organisation. Timely completion of any task DIFFERENTIATORS Risk Management is our main focus Over 200 years of cumulative experience Hybrid Delivery model Ability to take on large and complex projects due to delivery capabilities Affordable alternative to large firms We Hold hands, not shake hands. 6

7 S E R V I C E S Risk Management Advisory Services Basel II/III Advisory Market Risk Credit Risk Operational Risk ICAAP Corporate Risks Enterprise Risk Assessment Fraud Risk Risk based Internal Audit Operations Risk Forensic services Information Security IS Audit Information Security IT Assurance IT Governance Operational Risk Process reviews Policy/ Process Review Process Improvement Compliance Risk Governance Corporate Governance Business Strategic risk Fraud Risk Forensic Accounting Other Risks Business/Strategic Risk Reputation Risk Outsourcing Risk Contractual Risk Training Banking E Learning Corporate Training Regular Risk Management Training Online Training material Workshops / Events Recruitment Virtual Risk Managers Full Time Risk Professionals Part time Risk Professionals Risk Managers on call free 7

8 Contacts and Office Locations Corporate Mumbai Delhi Bangalore Manoj Jain Director M Shriram Gokte Principal - Information Risk M shriram.gokte@riskpro.in Ahmedabad Pune Agra Maulik Manakiwala Associate Firm M Gourav Ladha Sap Risk Advisory M M.L. Jain Principal Strategy Risk M mljain@riskpro.in Rahul Bhan Director M rahul.bhan@riskpro.in Raj Sawhney Principal Business Risk M raj.sawhney@riskpro.in Alok Kumar Agarwal Associate Firm M Casper Abraham Director M casper.abraham@riskpro.in THANKS 8