Beware RCV misselling – latest SEC order

Post Date: 04/10/2016

What is the problem with RCV selling? 

Misselling in the financial services industry continues to be in the regulators’ spotlights, most recently with UBS selling Reverse Convertible Securities (RCVs) to unsophisticated investors, please see the Order for details.

Order Instituting Administrative Proceedings Pursuant to Section 15(b)(4) of the Securities Exchange Act of 1934. 

In this case, UBS was fined USD15million.


The order suggests that some customers’ investment experience, objectives, income and net worth are sometimes not being given sufficient consideration relative to the complexity of the RCV product being sold.


How do Banks ensure they are not fined by the SEC? 

The SEC suggests that the industry needs to improve its provision of education and training so that representatives understand the products so as to form a suitable judgement about what is and what is not suitable for certain customers.  Although there can be causes of misselling other than deficient education and training the regulator is clearly highlighting what they wish to see.


How big is the RCV market? 

To see RCV flows over the last 12 months go to the Data Sheet and select the following criteria:  
Report Type = By Currency

Output Type = Issuance

Report currency = USD or EUR as you like.

Start date = 30/09/2015 and End date = 30/09/2016

Frequency = Monthly

Structure Group = Equity Linked

Structure = Here you can select from the following types:

- Equity Reverse Convertible (Basket)

- Equity Reverse Convertible (Best of)

- Equity Reverse Convertible (Fund)

- Equity Reverse Convertible (Index)

- Equity Reverse Convertible (Single Stock)

- Equity Reverse Convertible (Worst of)

Select all the structures you wish to include in your result.
Scroll down and click on 'Search' and the information will appear on the right hand side.