The BCS Guide to Structured Products
Structured Products Standard Terms and Conditions
Please note
Disclaimer
The information contained on this website is subject to change. BrokerCreditService Structured Products PLC (BCS SP PLC) makes reasonable efforts to update the information, products, documents, and data (the “content”) on this website, we make no guarantees, warranties, or, representations whether expressed or implied, that the content on this website is complete, accurate or up-to-date.
DIRECT APPLICATIONS FROM INVESTORS ARE NOT PERMITTED. This website and its contents are intended for information purposes.
Financial Intermediaries-
This website is not intended to be considered as a solicitation to buy or sell any financial product or to take up any services, including to constitute or form part of an offer, to subscribe to products of services or as any recommendations, nor enter in to any legal relations, unless agreed otherwise in writing. BCS SP PLC, and this website does not offer investment or financial advice and you agree you are not treating this site to do so. If you are acting in an advisory capacity on behalf of an investor or facilitating their investment (for instance, on an execution only basis) in regards to a product listed on the BCS SP PLC website you must satisfy yourself about the terms, conditions and risks of the investment by referring to the full product documentation including any ancillary materials that BCS SP PLC may provide. You should familiarise yourself with the risks set out below and those included in our ‘Risk’ section of this disclaimer & our Guide to Structured Products as well as any product specific risks as described in product documentation
BCS SP PLC does not provide financial advice or any guidance for determining if a product is suitable for the individual circumstances of your investor(s) or whether the product is appropriate for their attitude to risk, investment objectives or market knowledge and experience.
Any previous performance of our products is not indicative of their future performance and should not be used for assessing/predicting the future returns or risks associated with your investor(s) investment. Structured Products are complex investments, difficult to understand & it’s possible to lose some, or the entire amount invested in any of the products described herein.
Financial Advice
Investors considering to invest in a BCS SP PLC product must read and understand the full product literature provided by a financial intermediary. It is important that the risks and potential rewards of each of the products are clearly understood before an investment is considered. You should note that BCS SP PLC insists that all applications to invest in BCS SP PLC products are placed through a regulated, qualified financial intermediary.
Risks
Below are some examples of risks, but are not complete in their totality as some products may have more specific risks than others. Advisers should refer to the Risk Description in the documentation specific to the structured product you intend to advise on (usually called the final terms in regard to the note issuance, or you can also see our risk disclosure on our website- www.bcs-sp.com).
Commodity Risk
Structured products using commodities as the underlying asset can be subject to much greater price fluctuations than traditional investments. Additionally, commodity markets may become subject to temporary illiquidity. This could result in a small or total loss of capital.Counterparty (Issuer of the product) Risk
Counterparty risk is the risk to the investor that the counterparty that issued the structured product becomes bankrupt, it will not be able to honour the contractual obligation of the structured product. The counterparty (Issuer) provides the securities designed to deliver the anticipated returns set out in the structured product may become insolvent and may not be in a position to return your funds if they were to default. If this occurs you could become the owner of an illiquid asset, or lose some or all your entire investment. The way to gauge the counterparty risk is to consider a counterparty credit score (also known as credit rating) from an external rating agency such as Standard & Poors.
Counterparty Credit Ratings
Financial investment products such as stocks, bonds and derivatives carry counterparty risk. Bonds are rated by ‘credit rating agencies’ such as Standard and Poor's (S&P). By using a ‘credit rating’ from S&P investors can gauge the level of counterparty risk. The S&P agency use a sliding scale from AAA (Investment Grade) to D (junk bond which is in Default).
Bonds with high counterparty risk offer higher yield premiums. When counterparty risk is low, the premiums or interest rates are low.
The counterparty used in many of our Structured Products is BCS SP PLC. Counterparty risk should be considered when evaluating a structured product to invest in. For example, if you purchase a capital protected product, the capital is only protected if the market counter party (BCS SP PLC) remains solvent, please read the risk chart to give you an indication of BCS SP PLC’s credit score.
| Bond Credit Ratings Quantifying Counterparty Risk | |
| Description | Standard & Poor's Investment Grade to Non-Investment Grade |
| Prime | AAA |
| High Grade | AA+ , AA , AA- |
| A+ , A , A- | |
| Lower Medium Grade | BBB+ , BBB , BBB- |
| BB+ , BB , BB- | |
| Highly Speculative | B+ , BB , BB- |
| CCC+ | |
| Extremely Speculative | CCC |
| CCC- , CC, C | |
| In Default | D |
Early Encashment (Cancellation) Risk
If an investor decides to encash (terminate) the investment before maturity, at any point during the term, they may lose some or a significant amount of their investment. This is due to a variety of factors such as the underlying assets may have decreased in value, the derivatives embedded in the product may have fallen in value or interest rates may have fallen (this is not an exhaustive list, but mentions only a few). In addition, administration charges for early encashment will also further increase losses.
Foreign Exchange Risk
The investor in the product is exposed to foreign exchange rate risk if the currency of the initial investment, the currency of the underlying’s and settlement currency are not identical, the value returned may vary greatly.
Hedging Risk
On or prior to and after the trade date, BCS SP PLC, through its affiliates or others, will likely hedge its anticipated exposure under the products by taking positions in the underlying, in option contracts on the underlying or positions in any other available securities or instruments. In addition, BCS SP PLC and its affiliates trade the underlying as part of their general businesses. Any of these activities could potentially affect the value of the Underlying, and accordingly, could affect the payout to holders on the products.
Inflation Risk
This is known as the risk that inflation will reduce the real value of your investment over time.
Investment Risk
The risk that the market(s) or underlying asset(s) to which your investment(s) are linked to, fall in value, which could cause you to lose some or all of your money.
No Rights from Underlying Assets (Reference Entities)
Structured product investments do not give the investor any of the rights normally associated with ownership of the underlying securities themselves. For instance, with ordinary shares, you would be entitled to vote at an annual general meeting, have subscription rights or be eligible to dividends, and it is these types of rights you would lose.
Pricing Risk
This is the risk that a financial institution with whom the underlying investments have been arranged may not be able to quote regular prices making it difficult to value your investment and delaying any early termination request you may make.
Product Risk
The risk that the product design could produce a return that is lower than a direct investment in the market(s) or asset(s) to which the product is linked or may produce no return at all.
Secondary Market Risk
The changes in the price of underlying asset(s) are not directly proportional, or immediately priced in to the price of the structured product trading in the secondary market. The relationship depends on the product type, underlying(s) and residual term left in the product and many other factors as well. The secondary market is also subject to supply and the demand, which may lead to a significant price differences between the bid and the offer (prices offered to buy or sell the product, also known as the bid offer spread) and could result in the failure to sell the structured product, causing the structured product to be illiquid.
Tax Risk
Any potential tax reliefs depend on individual investor circumstances, where they’re tax residence is and in addition are subject to any governmental changes to tax reliefs offered to investors.
Underlying Liquidity Risk
The underlying might be or become illiquid over the life time of the product. Illiquidity of the underlying may have negative impact on BCS SP PLC’s ability to provide a secondary market for the product. It may result in a temporarily or potentially even indefinitely increased bid/offer spread for the product or result in the early termination of the product. Any secondary market in the product will be made on a reasonable efforts basis only and subject to market conditions, law, regulation and internal policy. Even whilst there may be a secondary market in the product it may not be liquid enough to facilitate a sale by the holder.
Compensation (ICF)
All investors & advisers should understand that our structured products may not be eligible for compensation in the case of the insolvency of BCS SP PLC. For further information, please speak with your external financial advisor.
The Website
BCS SP PLC accepts no liability in regard to the use of the website or the use of the information contained in this website. No warranty is given or implied as to the accuracy or completeness of the information it contains and no liability is accepted for any omissions or errors. Where we have referenced links to third party websites, BCS SP PLC does not make any representation or endorsement about the third party or any material, information or products sourced through the third party link(s), or any result(s) that could be obtained from entering into a transaction with the third party.
If you reside outside of Republic of Cyprus
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