We reviewed how firms sell complex exchange traded products (ETPs) to retail consumers.
Complex ETPs are a subset of the wider ETP market and include high-risk investment strategies that can be difficult for retail consumers to understand.
We assessed how firms of different sizes and business models evaluate these products, communicate key risks and monitor outcomes under the Consumer Duty.
Given the complexity and risk profile of ETPs, it is essential firms make sure investors have the knowledge they need to make informed investment decisions.
We found some firms demonstrated detailed processes for:
- Defining target markets.
- Assessing customer knowledge.
- Monitoring outcomes.
Others had weaker controls or limited assessments of a customer’s investment experience and knowledge. We also saw unclear disclosures, making it harder for consumers to understand risks.
We want firms to put consumers first by making sure products and services meet their needs, and communications are clear to support understanding.
What firms should do
Firms should review their processes and make sure they are meeting the Consumer Duty requirements. This includes addressing gaps in appropriateness checks and clearly communicating risks to retail investors.
The review supports our broader work to protect consumers and enable a fair and thriving investment culture in the UK.
More information
ETPs include a wide range of products, from more vanilla investments to high-risk offerings. For example, crypto exchange traded notes (cETNs), which are high-risk investments linked to cryptoassets, are a type of ETP.
Complex ETPs are high-risk investments that make up a small subset of the wider ETP market. They include products with leveraged and inverse strategies.
Complex ETPs contain unique features that can be difficult for retail consumers to understand, such as the potential impact of holding them longer than recommended holding periods.
It will also be helpful for firms to understand our latest Policy Statement (PS25/22)[3] and Discussion Paper (DP25/3)[4], which aims to help firms make investments easier to understand and access.