Investors, Look Before You Leap: The Suitability Doctrine is Not Suitable for OTC Derivatives Dealers
This Article examines the derivatives market, its regulation and the concept of suitability as it applies--and should be applied--to the derivatives market. The Article first provides an overview of the derivatives market. Next, the Article reviews the existing regulatory framework to which derivatives transactions and derivatives dealers are subject and also discusses the various legal actions that can be brought based on suitability claims. The Article argues against the imposition of suitability rules to OTC derivatives dealers and instead emphasizes the need to view OTC derivatives transactions as arm's length transactions. Finally, the Article identifies ways of achieving policy objectives concerning counter-party losses.
Willa E. Gibson, Investors, Look Before You Leap: The Suitability Doctrine is Not Suitable for OTC Derivatives Dealers, 29 Loyola University Chicago Law Journal 527 (1998).