On 19 September 2008, the SFC issued a circular to all licensed corporations and registered institutions (Regulated Persons) involved in distributing retail structured and credit-linked notes to play a more proactive role in addressing investor concerns.
Under current market conditions, Regulated Persons should deal with enquiries and complaints from their clients in the best interests of their clients. In particular, Regulated Persons should ensure that their systems for handling complaints were in order so they could comply with the SFC’s Code of Conduct to:
- handle complaints in a timely and appropriate manner;
- take steps to investigate and respond promptly to complaints; and
- where a complaint is not remedied promptly, give the client advice on further steps that can be taken.
Regulated Persons must provide assistance to their clients with enquiries and complaints and explain the nature and characteristics of the investments that they sell. The SFC will monitor the performance of Regulated Persons to ensure this requirement is met.
In the event of a credit crisis or default resulting in early redemption, Regulated Persons are reminded that it is their duty to pass on the information to investors.
In light of the filing for bankruptcy protection of the Lehman Brothers Group, Regulated Persons were urged to approach on behalf of their clients the trustees of retail structured notes offered by the three Lehman-related entities and the arrangers of the credit-linked notes with Lehman Brothers as one of the reference entities. Regulated Persons are expected to set up sufficient telephone hotlines to answer clients’ enquiries.
A copy of the circular is available on the SFC website.