JP Morgan has proposed an industry standard for US retail structured products that would increase transparency, alleviate investor confusion...

JP Morgan has proposed an industry standard for US retail structured products that would increase transparency, alleviate investor confusion and make comparison easier among various investments.

The proposal, submitted to the Structured Products Association, would create a standard classification system for structured products, allowing investors to quickly separate prospective investments by their respective features. The nomenclature project is expected to be adopted by other leading issuers and implemented as a pilot program in 2007.

“We have found that a significant hurdle to increased acceptance of structured investments in the United States is the difficulty for investors to compare products among different providers – and we want to help change that,” said Scott Mitchell, vice president of structured investments at JP Morgan.

“A classification system with standard definitions will better serve investors as they learn about these products,” he said.

Retail structured products are increasingly popular investments in the US: according to the SPA, approximately $50 billion of structured products were issued in the US in 2005, up by more than half from a year earlier. Specifically, JP Morgan has significantly expanded its offerings and currently distributes its structured products through more than 125 brokerages, up from 30 at the beginning of 2006.

“Many investment firms have adopted proprietary names for structured investments, resulting in a confusing array of terms for nearly identical products,” said Keith Styrcula, chairman and founder of the SPA.

“Having the major structured product issuers rally around a proposal that creates more transparency is positive for both investors and the industry.”