The Financial Industry Regulatory Authority has announced a review of member firms’ practices for higher-risk structured products, focused on non-principal protected worst-of structured notes. The review will assess how firms supervise customer concentrations in these products and how they meet Regulation Best Interest and FINRA requirements when registered representatives recommend them to investors. FINRA said it has identified multiple cases in which representatives concentrated customer assets in complex structured products with features such as no principal protection and worst-of payoffs, where returns depend on the worst-performing asset in a specified group. It said these concentrated positions can heighten risk, including losses that are not correlated with overall market conditions, and noted that some investors have lost significant portions of their portfolios. The review will affect only a subset of member firms, but FINRA encouraged all firms that recommend these products to examine the questions in its letter and review their training, guidance, controls and supervisory structures.
Financial Industry Regulatory Authority2026-05-19
United States Financial Industry Regulatory Authority launches review of firm supervision of non principal protected worst of structured notes
The Financial Industry Regulatory Authority has launched a review of selected member firms’ practices for higher-risk structured products, focusing on non-principal protected worst-of structured notes. The review will assess supervision of customer concentrations and compliance with Regulation Best Interest and FINRA rules, after FINRA observed concentrated positions in complex, non-principal protected products leading to significant investor losses, and urged firms recommending these products to reassess their training, guidance, controls and supervision.