Contract provisions

Types of contract

Describe the various types of private banking and wealth management contracts and their main features.

Broadly speaking, private banking and wealth management are commonly governed by client account terms and conditions that set out the contractual provisions for the access and use of account holders to the products and services of the private bank or financial intermediary. Where the services involve discretionary account management or specific investment management or an investment advisory or portfolio management arrangement, there shall be a specific written client agreement that contains appropriate authorisation for discretionary management, under the client account terms and conditions, or under a separate investment management agreement or investment advisory or portfolio management agreement. There is no mandatory requirement for such contracts to be governed by Hong Kong law. However, it is recommended to adopt Hong Kong law, since the private bank or financial intermediary is authorised or licensed in Hong Kong to conduct its business and provide the relevant products and services, and is subject to compliance with applicable Hong Kong law and regulatory requirements such as under the Code of Banking Practices or SFC Code of Conduct. The requirement to enter into a written client agreement and the minimum content requirements of a client agreement are set forth in the SFC Code of Conduct, as well as the SFC Fund Manager Code of Conduct with respect to discretionary account management (except where exempted).

Liability standard

What is the liability standard provided for by law? Can it be varied by contract and what is the customary negotiated liability standard in your jurisdiction?

Generally, there is no statutorily prescribed liability standard, and the liability of a private bank in its contractual obligations or duties to an account holder or client would fall to be determined by a court of law. The contract or client agreement would typically contain provisions on the standard of care as well as limits of liability.

Mandatory legal provisions

Are any mandatory provisions imposed by law or regulation in private banking or wealth management contracts? Are there any mandatory requirements for any disclosure, notice, form or content of any of the private banking contract documentation?

As noted in question 37, the requirement to enter into a written client agreement and minimum content requirements of a client agreement are set forth in the SFC Code of Conduct, as well as the SFC Fund Manager Code of Conduct with respect to discretionary account management (except where exempted).

In the context of the offer of financial products by a private bank or wealth management financial intermediaries, the SFC Code of Conduct specifically requires that there should be a mandatory provision on the obligation to ensure suitability in the solicitation or recommendation of financial products, which provision must appear in the exact prescribed form and cannot be abrogated by any other contractual provisions. Intermediaries are required to establish a client’s financial situation, investment experience and investment objectives, and to ensure suitability of a recommendation or solicitation of financial products, and to assess the client’s knowledge of derivatives. There are also requirements to disclose transaction related information, obtain written authority to effect transactions for a client without the client’s specific authority, and to disclose benefits receivable for effecting transactions for a client under a discretionary account.

Further, with effect from July 2019, unless an intermediary already complies with the suitability requirement in soliciting and recommending the investment, there are additional requirements under the SFC Code of Conduct when providing services in complex products (to be determined taking into account such criteria or factors as described in the SFC Code of Conduct or other SFC circular or guidance whether the investment is a complex product), to ensure that:

  • the transaction is suitable for the client in question in all circumstances;
  • sufficient information is provided on the key nature, features and risks of a complex product so as to enable the client to understand the complex product before making a decision; and
  • warning statements are provided to the client in relation to the distribution of the complex product, in a clear and prominent manner.
Limitation period

What is the applicable limitation period for claims under a private banking or wealth management contract? Can the limitation period be varied contractually? How can the limitation period be tolled or waived?

The general limitation period under Hong Kong law is six years for contractual or tort claims, except where otherwise prescribed or extended or where other specific circumstances apply for a longer or different limitation period, under the Hong Kong Limitation Ordinance.