January 05, 2018

HKMA published a circular on enhanced disclosure requirements on sale of structured products not regulated by the Securities and Futures Ordinance (SFO). Authorized institutions should implement the enhanced disclosure requirements set out in this circular before the end of 2018.

Senior management of authorized institutions has the responsibility to review and put in place adequate controls and practices, in addition to providing sufficient training and guidance to staff to ensure compliance with regulatory standards. As set out in the circular of December 20, 2012 entitled “Applicability of the SFC’s regulatory requirements to sale of structured products that are not regulated by the SFO,” HKMA expects authorized institutions to continue to apply consistently high standards and act in best interests of their customers in the sale of investment products. In selling investment products that are not regulated by the SFO, authorized institutions are reminded to follow similar standards as those applicable to SFO-regulated investment products.

In particular, HKMA expects authorized institutions to apply revised paragraphs 8.3 and 8.3A of the Code to their sale of structured products not regulated by the SFO, including but not limited to products that are linked to currency(ies) and/or interest rate(s). Following the revised paragraph 8.3(b)(ii) of the Code, where monetary benefits received or receivable by an authorized institution and/or any of its associates from a product issuer (directly or indirectly) for distributing a non-SFO-regulated structured product are not quantifiable prior to or at the point of entering into a transaction, the authorized institution should disclose the existence and nature of such monetary benefits, and the maximum percentage of such monetary benefits receivable per year prior to or at the point of entering into the transaction. The disclosure should be made on a transaction basis.

 

Keywords: Asia Pacific, Hong Kong, Securities, Disclosures, Structured Products, SFO, HKMA