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Bank Structured Product Creators Warn About Draft European Rules

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Oct. 29 (Bloomberg) -- An industry body representing banks that create structured products for individual investors said draft regulation from the European Commission may leave investors misinformed about the risk of the products.

The Joint Associations Committee on Retail Structured Products, which counts banks including Barclays Plc, BNP Paribas SA and Citigroup Inc. among its members, published today a response to the Commission’s July 3 proposals for “key information documents.”. While the concise documents explaining a product’s main characteristics and risks may be a useful resource for investors, they should not be used in isolation, the JAC said.

European regulators focused on structured products after the 2008 collapse of Lehman Brothers Holdings Inc., a big issuer of the securities. Regulators are in particular focusing on the quantity and quality of information provided to investors by product creators and distributors.

“I am concerned by the idea that the KID should be a free-standing document on which investment decisions can be solely made,” said Tim Hailes, JAC chairman and associate general counsel at JPMorgan Chase & Co. in London. “You can’t invest sensibly in these products based on just two pages.”

To contact the reporter on this story: Alastair Marsh in London at amarsh25@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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