The Construction of Suitability Obligation of Financial Institutions when Selling Structured Products: From Comparative Law Perspective

• Main Author: CHEN, Christopher Chao-hung
• Format: text
• Language: Chinese
• Published: Institutional Knowledge at Singapore Management University 2011
• Subjects: Suitability; appropriateness; conduct of business; comparative law; investment advice; structured notes; derivatives; structured products; Asian Studies; Banking and Finance Law; Commercial Law; Comparative and Foreign Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/1033; http://ssrn.com/abstract=1832126
• Institution: Singapore Management University

The purpose of this article is to examine the suitability rules regarding structured products under Taiwan law from a comparative law perspective. After the global financial crisis, Taiwan has imposed specific suitability obligations on financial institutions when they promote derivatives and structured products. However, the suitability rule is only placed in administrative regulations and its scope is also limited. In addition, Taiwan law does not distinguish different types of relationships between a financial institution and a client. Furthermore, the biggest challenge to the suitability rule is to define the meaning of ‘suitable’. This article argues that the starting point is the analysis of risk suitability. However, the analysis of return aspect should not be ignored. As to product due diligence, regulators must further venture into the review of documentation and offer more detailed guidelines to financial institutions in order to serve the purpose of the suitability rule and create an efficient mechanism for investor protection.