Recently in the office we have had several inquiries from customers asking us about the advantages and disadvantages of savings and investment products that had been recommended in their respective financial institutions. Well, in most cases, the client does not know at all the product they were offering him and a lot of cases, I doubt that even the commercial bank knew the content of such products. I am referring to structured products which, although they can be very interesting products for the people who knows and operate them, can also be very unwise products for individuals who do not have that knowledge.

Rule # 1 Investor "Do not invest in a product that you do not know"

Well, in this sense, the CNMV with the ESMA, have decided to take a note to the financial institutions in this regard.

Here are some criteria to be taken into account by financial institutions:

1. When entities believe that the product is not the best for the client "should refrain from recommending the purchase, or even to market."

2. You have to identify the target audience of the product and the customers for whom not appropriate.

3. A methodology should be established to set the price of the product.

4. Recommends using simulations on the expected performance.

5. The CNMV considers that structured products and derivatives not traded on a regulated market, as contracts for difference or CFD- distributed in the field of counseling, which involves more controls, such as the suitability test, plus the convenience market is mandatory in complex products.

6. Banks should ensure that "staff has the knowledge necessary to understand the characteristics of the products sold."

7. The customer should be informed about the total cost of the product in hard cash, rather than a percentage, for example.

8. Marketers must give "an indication of the value of the instrument divestment immediately after the transaction."

9. Should be warned of the risks of illiquidity and potential consequences of trying to sell or early cancellation of the financial instrument.

10. It is considered good practice, if the market is illiquid (as with most of the structured products), "is to offer clients the opportunity to advance to cancel your investment, if you define startup methodologies objective and generally accepted for calculating the redemption price. "

11. Customer must return all scenarios that occur, rather than the typical "return of up to 7%." It should be noted, therefore, what is the real likelihood that give the best scenario for the customer.

12. It should be noted prominently the possibility of incurring losses and negative assessments.

13. Names must avoid confusion as to the nature or characteristics. The CNMV considered inappropriate use of terms like "structured deposit". For example, it is preferable to "structured product" or simply "structured".

14. The entity should regularly monitor the products and must assess whether they remain appropriate for the interest of investors or if necessary to make a change in the distribution policy.

15. The CNMV wants banks to report quarterly to clients the value of structured products, either at market prices or, where not possible, by estimating the fair value of the instrument at the reference date of information.

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Have a good weekend!