There is a growing trend in a number of countries to impose obligations on issuers and distributors of structured and other complex products to ensure that the investor is experienced enough or qualified to invest.
These obligations are in addition to any obligation on financial advisers to ensure that their advice is appropriate. This article compares the tests in Europe, Hong Kong and Australia. It revisits the “Suitability tests for investment products - a nanny state or sensible protection?” article.
Hong Kong and Australia are moving towards the European model where additional requirements apply in relation to complex products. The test and range of products it applies to varies. The table below summarises the tests and products.
Click here to see table
There are a number of issues to be worked through in Hong Kong and Australia in relation to the new requirements. It will be interesting to see whether these additional requirements will result in any substantial increase in investor protection and whether the increased protection justifies the additional costs. Looking forward, will there be a more consistent global approach to product classification in the context of enhanced client on-boarding and selling requirements?