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SFC Publishes Consultation Conclusions on Client Agreement Requirements


Jan 25, 2016

In an earlier article on this website, we reported on the Securities and Futures Commission (SFC) publishing its consultation conclusions on the Professional Investor Regime and Client Agreement Requirements(i).

At that time, the SFC had concluded that SFC registered intermediaries should be required to include a "Suitability Requirement" in all client agreements; and they had circulated a further consultation paper on the form of wording that this would take.

The "Suitability Requirement" is the proposed requirement under the SFC's Code of Conduct(ii) that client agreements include specified wording that any solicitation or recommendation of a financial product by the intermediary must be reasonably suitable for the client having regard to the financial situation of the client and its investment experience and objectives.

Last month the SFC published the results of this latest consultation(iii).

Despite some objections from respondents, the SFC has decided to keep its proposed wording for the Suitability Requirement from the consultation paper so that all client agreements must incorporate the specified wording concerning the suitability of the relevant financial product.

The form of Suitability Requirement clause set out by the SFC also states that any clause or other agreement that contradicts or attempts to dilute this requirement will not be effective.

In light of the accusations of mis-selling of financial products in recent years, the mandatory Suitability Requirement is clearly an attempt to try and ensure that a further degree of responsibility is placed on the intermediary in dealing with the client.

There is an 18 month transition period before the amendments must be put into effect, although the SFC say in the Consultation Conclusions that they do expect intermediaries to start reviewing and revising their client agreements immediately.

 

Publication date: 25 January 2016

 

For more information on securities and futures related matters in Hong Kong, please contact:-

Chris Lambert | clambert@robertsonshk.com | +852 2861 8417

 

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