Hong Kong Consults On Investor Regime Enhancements
Monday, May 20, 2013
The Securities and Futures Commission (SFC) has begun a three-month consultation
on proposals concerning the professional investor regime in Hong Kong and the
client agreement requirements in its Code of Conduct.
The key proposals would require intermediaries to comply with all Code of Conduct
requirements, including the Suitability Requirement that should ensure the suitability
of a recommendation or solicitation for a client is reasonable in all circumstances,
when dealing with all investors who are individuals, including their wholly
owned investment vehicles and family trusts.
The proposals would also streamline the criteria under the Code of Conduct
in assessing the knowledge and experience of corporate professional investors
by removing specific tests (for example, the 40 transactions per annum requirement);
and require that the Suitability Requirement be incorporated in all client agreements
as a contractual term, that client agreements should not contain provisions
which are inconsistent with the Code of Conduct, and that client agreements
should accurately set out in clear terms the actual services to be provided
to the client.
However, no changes are proposed to the laws concerning access to private placements
of investments by those who fulfill existing wealth criteria.
"Our consultation aims to identify those investors who, we believe, require
full protection under our Code of Conduct, and those who don't," said the
SFC's Chief Executive Officer Ashley Alder. "The Suitability Requirement
is a cornerstone of investor protection which is why we believe that no individuals,
regardless of wealth, should be classified as Professional Investors under the
Code, depriving them of this vital safeguard."
He added that "the proposals also seek to align the contents of client
agreements used by intermediaries with the services actually agreed to be provided
to customers. This is intended to keep intermediaries 'honest',
as is our proposal to embed the Suitability Requirement in the client agreement."