Summary

OTC Derivatives: Additional Oversight Could Reduce Costly Sales Practice Disputes

GGD-98-5  October 2, 1997

Full Report (PDF, 153 pages)   

The extent to which federal sales practice requirements would protect over-the-counter purchasers of complex financial instruments known as derivatives depends in part on whether these products are considered securities, futures, or neither. This report examines the use of these instruments and suggests steps to determine whether federal sales practice requirements should be implemented. GAO discusses the (1) federal sales practice requirements applicable to these products and the dealers marketing them; (2) extent of end-user satisfaction with sales practices, product use, and related disputes and the costs of these disputes; (3) views of end-users and dealers on the nature of their relationship and responsibilities; (4) steps that dealers and end-users have taken to reduce the potential for sales practice disputes; and (5) steps that regulators have taken to address sales practice issues.

Subject Terms

Banking regulation
Derivative securities
Futures
Information disclosure
Interagency relations
Losses
Mortgage-backed securities
Securities arbitration
Securities fraud
Securities regulation