Structured items, structured laws

Whether bankers are a responsible lot generally could be a matter for debate, but talking with them this week I found that there are certain concerns here about an unregulated marketplace.

All kinds of investment products are available, apparently without barrier to entry. Even if it is not investor-friendly, and perhaps is high-risk, it does seem to have to be approved on a product basis or a blanket basis.

So I could just create my own fund, domicile it on any location like Bermuda and Luxemburg and start selling it here. As one banker I spoke to said, the attitude is: let the buyer beware of the risk, usually without onus on the seller.

So, for starters, there is a view that there should be some sort of filter to ensure that products emerge in a proper shape, with adequate infrastructure to address misuse when it happens.

Next, in the West, only when the regulatory bodies are comfortable with the quality of the product and associated information can it be mass-marketed, while a more complex product, tailor-made, can alternatively go through the private placement route.

Restrictions apply as to the number of clients who can buy through that method, maybe 50 or 100.

Another area of disquiet concerns the quality of sales people approaching private clients, and the extent of their training. As one banker put it, "This market is having problems with manpower anyway. So the pressure on banks to acquire market share and make money is [so] immense that not everyone who is selling this [type of] product is actually qualified, even [to the point that] they do not know what they are doing."

Qualification

There is an absolute lack of any programme of qualification, as is the case in the US or the UK, where there are exams to be passed.

It is not that the person clutching their certificate becomes very efficient and will never do anything wrong, but core of conduct rules are applied, and, with more industry pressure, if the individual does go astray they can become an outcast.

Here, instead, if someone loses a job because of some wrongdoing or lapse, they will probably find another in a few days. Such a situation has been described to me as "a mockery".

In respect of the structured products market, most of the time it is the foreign banks which are very active. So, even if the local markets are unregulated, the foreign banks have their own global standards to follow. It may be different for different banks depending on the country.

But that does not seem anything like enough. It keeps a check on the manufacturing part of it. But it doesn't keep any check when we distribute at the retail end.

And finally, is there any body here where investors can go with complaints? In India, by comparison, there is a banking ombudsman, or the Securities and Exchange Board of India. Those with a grievance can go to these bodies and expect that they will investigate.

It's time for the relevant authorities to look into these concerns and resolve to act. After all, we hear all the time that Dubai is fast becoming a global financial centre.

Reputation is quickly compromised if regulations are not in place, leaving the door open for irregularities and unsatisfied clients.

There is a viewthat there shouldbe some sort offilter to ensurethat products emerge in a proper shape, with adequate infrastructure to address misuse when it happens.