New Product Due Diligence and Approval

What this video covers

• The two regulatory pillars that create the new-product framework: the supervisory system requirement (establish, maintain, enforce written supervisory procedures) and the internal supervisory controls requirement (test, verify, and report annually)
• Who must sit on a new-product review committee and why at least one senior management member with formal decision-making authority is mandatory
• Why material modifications of existing products, including fee structure or embedded derivative changes, trigger the same full committee review as brand-new products
• The distinction between approval, conditional approval, disapproval, and tabling, plus why speculative-only restrictions must be enforced through automated controls, not just written supervisory procedures
• The eight required due-diligence documentation topics and why blank or boilerplate entries constitute a supervisory red flag
• Why complex product approval is product-by-product, not category-by-category, and why structured notes, reverse convertibles, and leveraged exchange traded funds (ETFs) trigger heightened due diligence
• The daily reset math trap: how leveraged and inverse ETFs diverge from their underlying index over multi-day holding periods due to compounding, and why written supervisory procedures must include holding-period alerts