Distribution of preferred shares among retail clients

Abstract

The financial crisis has highlighted the opportunistic conduct of some banks, which have taken advantage of the trust relationship with their clients to place them unsuitable products. In Spain, the distribution of preferred shares among retail clients has created a problem of enormous proportions. Preferred shares are a high-risk complex financial instrument, with which you can lose all the capital invested. Despite its complexity and risk were offered by credit institutions, mainly savings banks, as an alternative to time deposits, without reporting risks.

This article identifies the problem of indiscriminate distribution of preferred shares among retail clients of credit institutions. After identifying the problem, its review the legal framework applicable to the sale of preferred shares, to propose changes to improve investor protection. To end with mitigation measures that could be applied to give a fair and equitable treatment to most affected clients.

Keywords: preferred shares, mis-selling, investor protection, financial education, financial crisis

JEL Classification: K22, K42, G18, G24