Significant changes to the professional investors regime in Hong Kong are now effective, from 25 March 2016. This reform to the professional investor regime is brought about 18 months after the Hong Kong Securities and Futures Commission (the “SFC”) published its “Consultation Conclusions on the Proposed Amendments to the Professional Investor Regime” and “Further Consultation on the Client Agreement Requirements” on 25 September 2014 (the “New Professional Investor Regime”). The reform brings about new changes with respect to professional investors who are individuals, and also corporate professional investors.
All individual investors will now need to be treated in the same way as retail investors, whereby intermediaries will be required to ensure the suitability of a recommendation or solicitation of investment products. When dealing with all individual investors, financial intermediaries must establish the client’s financial situation, investment experience and investment objectives, assess the client’s knowledge of derivatives and characterize the client based on his knowledge of derivatives, and to enter into a written client agreement.
Previously, financial intermediaries could be exempted from these obligations when dealing with individual professional investors, by asking such individual investors to waive the related investor protection provisions and confirm the willingness to be treated as professional investors. Correspondingly, for investment vehicles, family trusts and “corporate professional investors” that are not institutional investors, intermediaries may only “dis-apply” certain investor protection provisions if the investor passes a new set of assessment criteria on its investment knowledge and sophistication.
For details, please refer to our Client Update:
