How ready are you for the new PI regime?
The new professional investor regime will come into effect on 25 March 2016, less than four months away. Please refer to our earlier client alert on the SFC’s consultation conclusions on the changes to the regime.
The SFC published frequently asked questions (FAQs) on the assessment of corporate professional investors in January 2015.
Licensed companies should consider how to amend their existing policies, procedures and documentation for dealing with individual professional investors and corporate professional investors post March 2016.
The Consultation Conclusions mentioned that the SFC would conduct a detailed internal study of the suitability requirement. The SFC has recently clarified that this does not necessarily mean that further guidance on the suitability requirement will be provided. For clients who have been waiting to update their policies and procedures, this means the time to do this has now arrived.
Licensed companies should continue to consider the SFC’s various circulars and publications on suitability for guidance. We have listed a few examples:
- FAQs on Suitability obligations of licensed and registered persons who are engaged in financial planning and wealth management business activities
- Guidance to Licensed Corporations and Registered Institutions in relation to Derivative Products under the Code of Conduct
- Circular Regarding Self Examination of Controls and Procedures on Suitability Obligations
- Circular to Licensed Corporations and Registered Institutions - Selling of Fixed Income Products
- Circular to Licensed Corporations Selling of complex bonds and high-yield bonds
- Circular to Licensed Corporations and Registered Institutions Compliance with Suitability Obligations
From 13 November 2015, the SFC is only issuing printed licence certificates to licensed companies (and printed certificates of registration to registered institutions) and firms will continue to need to display these in a prominent place. They have stopped issuing any licence certificates to individuals so reference will need to be made to the SFC’s public register to obtain the licence details of individuals. See Circular at:http://www.sfc.hk/edistributionWeb/gateway/EN/circular/intermediaries/licensing/doc?refNo=15EC58.
What to do with existing individual licence certificates?
The SFC is encouraging the industry to return all individual licence certificates for Responsible Officers and Licensed Representatives to them (the Licensing Department) as soon as possible. We recommend firms assist the SFC in this regard by locating all relevant licence certificates and returning them to the SFC. If any of the certificates cannot be located, the individuals may wish to provide the SFC with the usual form of statutory declaration to make clear that the certificate is out of their control but we are not aware that the SFC has been making this request.
Conviction for providing false information
On 12 November 2015 the SFC issued a press release about an individual who was convicted for making false or misleading representations in his application to the SFC. Please refer to our article back in 8 March 2013 emphasising the importance of full, frank and accurate disclosure in dealings with the SFC.