For three years, the Federal Reserve interest rate has stayed below 0.25 percent, a fact that Bloomberg writer Matt Robinson says is responsible for the increased consumer demand for derivatives-linked certificates of deposit (CDs). According to the Feb. 7 article, at least 1,271 of the products were sold in 2011, which is a U.S. record. Now, because of the increase in sales, the Financial Industry Regulatory Authority (FINRA) is set to examine investors’ ability to understand the potentially “complex” products. In January, FINRA issued a regulatory notice that advised firms of the necessity for “heightened supervision of complex products.” In the notice, FINRA provided a list of features that would render a product “complex,” which included (among other features) “products that include an embedded derivative component that may be difficult to understand.” While derivative-linked CDs were not specifically named in the notice, Bloomberg writer Matt Robinson wrote in the Feb. 7 article that FINRA’s lawyers are concerned about investors’ ability to understand the products “given their increasing complexity and lengthening maturities. FINRA has advised firms that sell complex products to increase supervisory control over the products’ sale by making sure brokers and sales staff check the suitability of the products before recommending them to a particular client, checking the products’ actual performance and risk profiles against current marketing pitches, and considering whether a less complex or costly product would better suit the client’s needs. “The decision to recommend complex products to retail investors is one that a firm should make only after the firm has implemented heightened supervisory and compliance procedures,” wrote FINRA in the notice. “Firms should rigorously monitor the extent to which these procedures address the various investor protection concerns raised by the recommendation of complex products to retail investors. Firms also should monitor the sale of these products in a manner that is reasonably designed to ensure that each product is recommended only to a customer who understands the essential features of the product and for whom the product is suitable.” For more information about derivative-linked CDs or regulatory concerns about them, read the full Bloomberg article here or see FINRA’s January regulatory notice.