Financial Court, Structured Bonds ``Insufficient Information Disclosure''

On the 6th, the Financial Services Agency held a meeting of the Financial System Council's "Working Group on Market Systems (WG)" to discuss information disclosure on structured bonds, which are bonds that incorporate derivatives (financial derivative products). . It was pointed out that the information on the fee structure was inadequate, and the committee members who attended the meeting expressed their opinion that it should be corrected.

Structured bonds composed by securities companies have exchange and stock price options and swaps incorporated into the bonds, so that the price of the principal fluctuates according to market fluctuations. Because of the higher risk, you can expect higher yields than regular bonds.

The Financial Services Agency is asking financial institutions to increase the transparency of the products they sell by using a common document "Important Information Sheet" to make it easier to compare sales commissions. He pointed out that while investment trusts are being introduced more and more, there are no cases of structured bonds being introduced.

Insufficient explanations from financial institutions may cause customers to suffer disadvantages, and information disclosure of structured bonds is spreading in Europe and the United States. A member who participated in the working group argued about structured bonds, "The structure is often difficult to understand, and a format that financial institutions can easily disclose is necessary."

Securities companies and banks are increasing their sales while the investment destination is limited due to low interest rates. According to the Financial Services Agency, sales at securities companies in fiscal 2020 were 2.5 trillion yen, up 25% from the previous year. Sales at regional banks also increased by 40% to 700 billion yen.

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