SPA at the New York Hilton on Oct 25.

The SPA released the latest agenda and list of speakers for the October 25 Structured Products Distribution Summit at the New York Hilton.   The 40-plus speakers for the Summit represents a compelling group of industry experts with a first-time emphasis on the challenges and opportunities on the distribution side.

This latest draft reflects several substitutions, confirmations and time-shifting requests.  (A few of the participants are still awaiting internal confirmations, and may not be able to participate.)

Click here for the  DRAFT AGENDA – SPA SUMMIT – 25-October-2011

Eric Greschner

On Monday, October 24, the SPA’s highly-reviewed single-day training program shifts into high gear with presentations from four global experts.   Held at the offices of Morrison & Foerster, this comprehensive session will feature the twin perspectives of renowned experts Tim Mortimer and Eric Greschner.   Also, Lloyd Harmetz and Remmelt Reigersman of Morrison & Foerster will provide Legal-Regulatory-Compliance and Tax considerations for attendees.

Go to spa.eventbee.com and use the code SPA150 to get the special discount.

Date:  Monday, October-24-2011 

Location:  Morrison & Foerster, 1290 Avenue of the Americas, #41, New York, NY

Registration:  8:15 AM – 9 AM

Agenda Overview:

• Introduction
• The market for structured products
• Structured product building blocks
• Complete survey of structured product types
• BREAK
• Worked example of main product types
• Recent issued product examples part 1
• Regulation of structured products
• LUNCH
• Analysing and rating structured products
• Structured products in financial planning
• Structured products in asset allocation and portfolio management
• How products are structured
• BREAK
• Taxation issues for structured products
• Recent issued product examples part 2
• Modelling theory and trading reality
• Conclusion
• COCKTAIL RECEPTION

Tim Mortimer is a Managing Director of Future Value Consultants, a research, product design and analytics consultancy, specialising in structuring products.

FVC has established itself as the premier structured products analysis company in the UK and Europe over the last 10 years. It has operated an independent whole of market research service in the UK during that time for brokers and advisers and since 2007 has been covering the US market with thousands of individual products analysed through its website www.structurededge.com.

Mr. Mortimer has worked for 18 years in structured products, previously as a Quantitative Analyst at Paribas, UBS and Zurich Capital Markets before founding FVC in 1998.

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Eric A. Greschner, Registered Investment Advisor, is a founding partner of Your Financial Coaches™ and Regatta Research & Money Management, LLC.  along with his partners Rudy Blanchard and father George Greschner.

Regatta Research & Money Management was named by Goldline research and listed in Forbes Magazine at the “Top Ten Most Dependable Wealth Managers in the Southeastern United States” in 2007 and 2008. Only 20% of the firms selected in 2007 made the list again in 2008. Regatta was also named three years in a row to Bloomberg’s list of “America’s Top Wealth Manager Superstars.

Eric is also the co-author with Rudy Blanchard on the “Win in Any Market” book series. Regatta Research and Eric and Rudy’s new book has been featured on  the “Economic Report” on Fox and CNN Headline News. Eric has also worked on Wall Street as an institutional research analyst and market strategist for a leading firm. Eric provided analysis to clients such as Oppenheimer, T. Rowe Price, Fidelity Investments, institutional pension funds, and hedge funds, etc. He also played an integral role in advisory meetings and conference calls with portfolio managers of Morgan Stanley Dean Witter, 1838 Investment Advisors, etc. on stock market strategy and individual stock selection. Eric was also a stockbroker with a NYSE member firm.

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Lloyd Harmetz focuses on securities offerings and other corporate transactions for U.S. and non-U.S. companies. His experience includes public offerings, private placements and PIPEs offerings of equity and debt securities, in which he represents both issuers and underwriters.

Mr. Harmetz’s practice focuses on securities offerings by financial institutions, including investment grade securities and structured products linked to equities, commodities, interest rates and other underlying assets. His practice also specializes in structuring continuous offering programs that are registered under the Securities Act, or that are exempt from registration under Regulation S, Rule 144A and Section 3(a)(2) of the Securities Act.

Many of the transactions in which Mr. Harmetz has participated have involved companies in technology-driven industries, such as internet infrastructure and content, computer software development, life sciences, medical care products and telecommunications. His counseling practice includes advice with respect to all aspects of the U.S. securities laws, corporate governance and other corporate matters.

Mr. Harmetz previously was based in Morrison & Foerster’s Tokyo and Hong Kong offices, and between October 1998 and May 1999, he was seconded to the firm of Fischer, Behar, Chen & Co., in Tel Aviv, Israel.

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Remmelt Reigersman focuses on federal and international tax matters in Morrison & Foerster’s New York office. Mr.Reigersman regularly advises on complex cross-border investment and financing transactions.

Mr. Reigersman’s areas of expertise further include transactional work for capital markets transactions, corporate mergers, acquisitions, reorganizations, and joint ventures, as well as tax planning in connection with inbound and outbound investments.

The Structured Products Association is pleased to announce a distribution-focused Structured Products summit on Tuesday, October 25, 2011 at the New York Hilton.

The event is entitled “Structured Products Distribution Summit – The Buyside Speaks,” and it brings together the best minds in the financial services industry for an up-to-the moment perspective on structured investments – this time with a majority of speakers from the distribution side – with 30 buyside speakers confirmed so far (and 10 awaiting internal approvals).  The list of speakers includes:

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The list above is a summary of potential speakers who have expressed interest in participating in the industry summit – it’s important to note that not everyone on the list is fully confirmed to participate – many are subject to internal approvals and scheduling concerns.

You can register for the lowest rates by clicking here. Your participation in the upcoming conference will provide unparalleled networking opportunities – with invitations out to 60 distribution firms. For speaking and sponsorship opportunities, contact structured.products.events@gmail.com.

DRAFT AGENDA
Structured Products and Derivatives
Buyside/2011 Summit
Tuesday, 25 October 2011
New York Hilton, New York, NY

9:05 –  9:25 a.m.
Keynote Address: “Mainstreaming of Structured Products”
TBD

9:25 – 10:00 a.m. – Panel 1
Stream 1 – Institutional Money Management

Stream 2 – Family Office and Structured Investments

10:00 – 10:40 a.m. – Panel 2
Stream 1 – Pensions / Foundations / Tax-Exempts

Stream 2 - Private Banks and Structured Investments
10:40 – 11:00 a.m.
Networking break

11:00 – 11:40 a.m. – Panel 3
Stream 1 – Investment Company Opportunities

Stream 2 – Bank Advisory Channel
11:40 – 12:15 p.m. – Panel 4
Stream 1 – UITs / ETFs / Closed End Funds

Stream 2 - RIA Channel / Fiduciaries
12:15 – 1:30 p.m.
LUNCH
Speaker TBA

1:30 – 2:10 p.m. – Panel 5
Stream 1 – Insurance Company Opportunities

Stream 2 - Broker-Dealer Distribution
2:10 – 3:30 p.m. – Panel 6
Stream 1 – Mutual Funds

Stream 2 - Independent Platforms
2:50 – 3:30 p.m.
Networking break

3:30 – 4:15 p.m. – Panel 7
Legal – Regulatory – Compliance – TBD

4:15 – 5:00 p.m. – Panel 8
International Perspective

5:00 – 5:15 p.m.
Closing Speech

5:15 – 7:00 p.m.
·         Cocktail Reception

Between 1985 and 2010, the RPI increased at an average rate of 3.4%. So in 2011 we have inflation above the average.

With traditional inflation-proofing investments delivering below-inflation returns, this creates a dilemma for investors who are looking for growth but are unwilling to take greater risks with their capital.

Index-linked National Savings Certificates have been stalwarts in the fight against inflation in the past, but were withdrawn from the market in July 2010 and only relaunched in May. Not surprisingly, demand was very high, but for a five-year term paying just 0.5 per cent above the RPI with a maximum investment per person capped at £15,000, terms are not as good as previous issues.

Corporate bonds have been another means of generating yields above inflation, although one-year performance figures show many are barely scraping above inflation. High-yield bonds and emerging market bonds are better performers, but these come with higher risks attached. And, of course, yields fluctuate so there is no guarantee they will beat inflation over five years.

Commercial property has been another mainstay investment in the past, but property prices and rental yields, perhaps with the exception of London, have been flat or falling in 2011.

Gold has risen massively in recent years – it is now over £1000 an ounce – and if global economic uncertainty continues it could rise further. However, the market seems to have many people believing we are in a “gold bubble” and the commodity is near or above its peak price.

Finally, the stock market has been volatile in 2011, dogged by a steady and, it seems, ongoing flow of bad economic news coming from the US, China, Europe and elsewhere, creating uncertainty over the global economy that looks set to be with us for some time.

Well, almost finally, one strategy that is often overlooked as a means of potentially achieving inflation- beating returns is the use of structured investments. These contracts usually last five or six years and offer a set rate of return if a stock market, such as the FTSE 100, is at or above the level it started at in year one. An investor buying a structured investment that offers a defined return of, say, 60% after six years if the FTSE is above where it is now, gives the investor a good potential margin on inflation.

Should the underlying stock market fall, then most structured investments will protect capital either at 100% or until the stock market drops more than 50%, preserving original capital to that point. While receiving capital back intact does not protect the investor against inflation over the six years, many structured investments have the potential to provide better returns than direct equity investments when stock markets do badly.

In addition, structured investments looking to achieve growth will normally attract capital gains tax (CGT) and, since the maturity date of each investment is already known, using structured investments and careful financial planning can make the most of an individual’s CGT allowance each year.

Volatile markets can often allow these contracts to be favourably priced. The downside to the investments is that the rate of return is fixed (this is the cost of the protection element), so if the stock market has risen strongly in six years then the investor will not achieve the additional returns above their pre-determined fixed level. However, an investor may decide that this is a price worth paying, as there is no guarantee where stock markets will be and under the terms of many structured products, even a 1% increase in the stock market between day one and the end of the term will see them receive their defined return of, say, 60%.

The flexible nature of structured investments means they can be designed to meet specific demands. The market has already responded to the dilemma investors are experiencing around inflation.

For example, in January, as UK inflation continued to rise towards the 5% mark, Jubilee Financial Products released its Inflation Linked Income Plan, giving the previous year’s increase in the RPI year on year plus 2%. And with the RPI still at 5%, Morgan Stanley has recently launched an inflation focused product that gives a fixed income payment of 5.25% in year one, then four annual gross income payments of 1.5 times any year on year increase in the RPI (July to July), with the return of original capital in full unless the FTSE 100 has fallen more than 50% from the initial index level.

It should be noted here that the capital investment and the contract to deliver the returns is held with a counterparty, usually a bank, and if that bank fails or is otherwise unable to meet its contractual obligations, investors could lose their investments. This is where careful selection of the counterparty is necessary, to help mitigate this risk.

Of course, structured investments should not be used in isolation to combat inflation. However, blended in a well-diversified portfolio, they can allow the investor to benefit from the best of both worlds … an inflation- beating upside when markets rise, as well as defined downside protection, mitigating losses when they fall.

:: Ian Lowes is managing director of Lowes Financial Management, based in Jesmond, Newcastle.

This article originally appeared in the Newcastle Journal & Evening Register.

In illustrating each type of note, this article will present multiple examples. The following assumptions will be made for each structured note example in order to permit easy comparison of the examples:

1. The underlying of each note is the S&P 500 Index.
2. Each note has a term of two years.
3. Each note is issued by a highly rated financial institution.

Please note that the assumptions, as well as the specifi c numbers used to illustrate the return profi les of each of the notes presented, do not characterize the full variety of notes issued in the marketplace. For example, prevailing market conditions may provide return profiles that are more favorable than the examples in this article and, importantly, financial institutions tend to always offer structured notes that range from terms of just a few months to many decades.

Click here to read the full article.

Judge Kaplan’s decision addressed a number of matters relating to the issuer’s disclosures and other issues raised in the litigation. In respect of the principal-protected notes, the decision notes that none of the named plaintiffs actually purchased securities in the principal-protected notes offerings, and as a result have no standing to bring Section 10(b) and Rule 10b-5 claims in respect of offerings in which they did not purchase securities. However, the Court concluded that the plaintiffs’ other allegations in respect of the principal-protected notes were sufficient to state a claim and should be allowed to proceed. Plaintiffs argued that the statements included in the offering materials were “false and misleading because (1) the PPNs did not protect investors’ principal and were no different than ordinary bonds, and (2) the PPN Offering Materials failed to disclose that repayment of principal depending on Lehman’s solvency.” Although the Court noted that there were disclosures regarding credit risk and that the “statements would have made the nature of these securities clear to a careful and intelligent reader,” on balance the statements regarding principal protection were more prominent and frequent than the statements regarding Lehman credit risk.

The Court was addressing a motion to dismiss for failure to state a claim, and was not resolving the question of whether the Lehman Brothers offering documents were in fact misleading as a matter of law.  However, the decision serves as another warning to market participants that disclosures about “principal protection” must be appropriate and balanced.  Disclosures as to the related credit risk of the issuer that investors face should be as prominent, or even more so. Issuers and underwriters of structured products have been making an effort to do so during the last several years, and it remains advisable to be cautious about these disclosures.

Original source:  Lexology.com

Washington, DC, July 27, 2011 – The Securities and Exchange Commission staff today issued a report identifying common weaknesses seen in sales of structured securities products and describing measures by broker-dealers to better protect retail investors from fraud and abusive sales practices.

The report summarizes the results of a sweep examination of the retail structured securities products business of 11 broker-dealers, covering a cross-section of the industry. Structured securities products generally do not represent ownership of a particular asset (such as stock in a manufacturing company); instead, the products promise returns to investors based on the performance of one or more underlying assets.

Summary: Broker-dealers have long offered a range of structured securities to institutions and wealthy individuals. Certain structured securities products have been increasingly marketed to retail investors in recent years (referred to here as “SSPs” or “retail SSPs”). Total U.S. sales of SSPs (to both retail and institutional investors) had risen from approximately $32 billion in 2004 to in excess of $100 billion in 2007. The demise of Lehman Brothers Holding Co. and its associated default on many SSPs it had issued and distributed, as well as its default on other of its structured products had a sobering effect across the SSP market in 2008. Nonetheless, SSPs seem to have resumed an overall upward sales trend in 2009 and 2010, and SSP sales to retail investors have, on an estimated basis, risen from $34 billion in 2009 to $45 billion in 2010.

Click here for the Report:  SEC Summary Report on Sales of Retail Structured Products, 27-July-2011

Click here for the SEC Press Release.

The boundless adaptability of structured products is part of what makes these complex alternative investments so appealing.

But it also makes them controversial.

In the current market environment — represented by low interest rates, nervous investors and growing macroeconomic uncertainty — the structured-products industry has turned to various forms of low-yielding, principal-protected products.

One increasingly popular product is the callable step-up note, a fixed-income-linked strategy with a steadily increasing annual coupon payment.

Whether it is held to maturity, which can be as long as 20 years, or if the issuer exercises the option to buy the bonds back, the investor’s principal investment is returned.

The risks, as with most structured products and bonds in general, is that the issuer could default, costing the investor both future coupon payments and principal.

Those fears came to reality in 2008 when Lehman Brothers Holdings Inc. went bankrupt, leaving investors in the investment bank’s structured products holding worthless paper.

The Lehman collapse is the kind of debacle from which the structured-products industry has been fighting to recover, while an emboldened force of structured-products critics remains determined to keep the industry in check and under more regulatory scrutiny.

“I think we have not gone far enough to protect investors, because this is a high-risk area and it should involve a wider scope of disclosure,” said Louis Straney, an expert witness and founder of Arbitration Insight LLC.

But while opponents such as Mr. Straney campaign for more disclosure and reduced retail investor access, the financial advice industry is generally moving toward structured products as a viable alternative strategy.

Through the first half of 2011, about $30 billion of structured products were sold in the U.S., putting the industry on track to eclipse the $53 billion in sales for all of last year.

By contrast, less than $33 billion worth of structured products were sold during all of 2007, which was considered a good year for the then-burgeoning structured-products marketplace.

Since 2007, market trends have changed little. In terms of issuance, 63% of issued products were income products at that time and 35% were categorized as growth products.

Through June of this year, 58% of issued products were income products, with 40% considered growth products.

During both time periods, 2% of the products were categorized as growth and income blends.

Principal protection, whether linked to the health of the issuing firm or through a structured certificate of deposit, is appealing to Rudy Blanchard, a portfolio manager at Regatta Research & Money Management LLC.

Mr. Blanchard, whose firm has $140 million under advisement, likes the comfort of principal protection for his clients even if it means limiting the upside return over the term of the product.

“It minimizes the behavioral-finance errors,” he said. “Both investors and professionals make numerous repetitive errors in their investment decision-making process — for example, selling at the bottom and buying at the top. But if a client invests in a principal-protected product, holds it to maturity and there is no default by the issuer, then market risk can be effectively managed.”

Structured products are created by investment banks, which often use derivatives instruments to enhance or modify the performance of an underlying investment such as a stock or bond.

Most are sold with commissions of up to 3%, but the industry is also creating fee-based versions of many of the products.

Unlike investment pools such as mutual funds, exchange-traded funds and hedge funds, structured products are created and offered continuously, have specific life spans and can be customized to fit a variety of investment objectives.

One product that continues to draw fire from critics, including regulators, is the reverse convertible, a high-yielding short-term note that can convert to an underlying stock under certain conditions.

In the most basic sense, a reverse convertible is a securitized put option; investors receive a guaranteed coupon payment, regardless of how the underlying stock performs during the duration of the instrument. At the end of that period, in addition to the coupon automatically earned, the investor gets back the amount originally paid for the investment as long as the stock price hasn’t fallen below a present “knockout” level.

If that happens, the investor ends up with the coupon payment and the value of the stock at whatever level it happens to be trading.

Of course, in the world of structured products, things can get as complex or as simple as an adviser or investor desires.

“There’s no free lunch out there, so you always need to take on some risk if you want some return, but we like the plain-vanilla products,” said Scott Miller Jr., managing partner at Blue Bell Private Wealth Management LLC.

Mr. Miller, whose firm has $270 million under advisement, said he is using structured products for his clients but won’t buy any product pegged to something he wouldn’t want to own.

“Make sure you understand how the product works and that you would be willing to buy the underlying investments,” he said.

Mr. Miller, who will allocate up to 20% of a client’s portfolio to structured products, pools client assets to between $2 million and $5 million in order to shop around the investment banks for the best price on whatever product he is considering.

While the industry has been making major strides toward education at the financial intermediary level, there is no denying the inherent complexity of many structured products.

For starters, the dozen or so investment banks creating the products use no uniform nomenclatures.

Even a relatively straightforward product designed as a cash management alternative has at least three different names in the marketplace.

Marketed as annual-income products, income generators and yield generators, these investments are designed and promoted as an alternative to low-yielding money market funds and certificates of deposit.

The specific structures vary depending on the issuing firm, but the basic idea is to earn income based on the performance of an underlying basket of 10 to 20 stocks.

The nomenclature issue is particularly frustrating to Keith Strycula, president and founder of the Structured Products Association.

“There has been a major improvement of one sort in terms of the jargon used,” he said. “They used to leave the naming to the marketing desk, and everyone kept creating clever acronyms based on animals or planets, but now the lawyers have taken control and it seems to be going in the opposite direction, so you can see that we definitely need some generic standard descriptions.”

Mr. Strycula, who admits that the industry includes “examples of people and products we would prefer not to see in this business,” said that structured products will never be for everyone.

“Structured products are between a plain-vanilla mutual fund and an alternative product, and probably closer to the alternative end,” he said. “But if somebody has an issue with the transparency or the way the performance is calculated, they should probably steer clear of structured products, and if you’re unable to understand or become conversant, then this is probably not for you.”

Source:  Investment News