Hong Kong’s SFC gives firms more time to comply with new rules for complex products

Maria Nikolova

The SFC has considered industry feedback and agreed to extend the effective date for the new rules by three months to July 6, 2019.

Hong Kong’s Securities and Futures Commission (SFC) is granting more time to industry to comply with new requirements for the sale of complex products.

In a Circular published earlier today, the regulator reminds the licensees that in March 2018, theSFC) issued new Guidelines on Online Distribution and Advisory Platforms. Amongst other requirements, Chapter 6 of the Guidelines provides for additional protective measures for the sale of complex products in an online environment. Further, in October 2018, the SFC announced that under a new paragraph 5.5 of the Code of Conduct, the additional protective measures will also apply to the sale of complex products in an offline environment.

Both the Guidelines and paragraph 5.5 of the Code of Conduct were initially due to become effective on April 6, 2019. However, the SFC considered feedback from the industry and agreed to extend the effective date by three months to July 6, 2019.

From the effective date, additional protection will be provided to investors when they purchase a complex product without a solicitation or recommendation. If an intermediary solicits the sale of or recommends a financial product to a client, it should comply with paragraph 5.2 of the Code of Conduct and ensure that the product is suitable for the client regardless of whether it is complex or non-complex.

The additional protective measures will apply, for instance, when the sale of a complex product is concluded with a client face-to-face, over the telephone or via other forms of interactive communication. The suitability of complex products will need to be ensured and clients will need to be provided with product information and warning statements. These are the same protective measures which will be introduced for the distribution of complex products on online platforms.

“We have aligned the requirements for intermediaries to conduct suitability assessments of clients in the sale of complex products so that they are the same both online and offline,” said Ms Julia Leung, the SFC’s Deputy Chief Executive Officer and Executive Director of Intermediaries. “This levels the playing field, provides better protection for customers and prevents regulatory arbitrage.”

Read this next

Digital Assets

CoinEx fined $2 million in Québec, Canada

“This new decision follows the important decision obtained in XT.com earlier this year and is part of the AMF’s offensive against crypto asset trading platforms operating illegally in Québec that have not entered into pre-registration undertakings.”

Industry News

FINRA fines BofA Securities $24 million for spoofing in US Treasuries

BofA Securities failed to detect spoofing due to inadequate supervisory systems. These systems were not equipped to identify manual spoofing by traders.

Retail FX

Belgium regulator blacklists FXP360, Appex Finance, and Wise-Markets

Belgium’s financial watchdog, the Financial Services and Markets Authority ‎‎(FSMA), has issued a warning against the unauthorized activities of multiple ‎ platforms that are offering investments in the country without ‎complying with Belgian financial legislation.‎

Digital Assets

MicroStrategy piles on Bitcoin, acquiring 0.90% of circulating supply

MicroStrategy, the world’s largest Bitcoin corporate holder, has further increased its holdings of the primary cryptocurrency. According to a recent filing, the company acquired an additional 16,130 bitcoins between November 1 and November 29, spending $593.3 million at an average price of $36,785 per bitcoin.

Digital Assets

Paxos gets nod to issue dollar-backed stablecoins in UAE

Stablecoin issuer Paxos has received preliminary approval from Abu Dhabi’s Financial Services Regulatory Authority to issue U.S. dollar-backed virtual currencies and provide crypto-brokerage and custody services.

Digital Assets

Flare Labs Begins Testing FAssets on Coston Testnet Paving Way for Non-Smart Contracts to Flare

Flare Labs has introduced FAssets on the Coston testnet, enabling the integration of non-smart contract tokens like BTC, XRP, and DOGE into the DeFi ecosystem.

Digital Assets

Philippine bars access to Binance, citing unregistered operations

The Philippines’ Securities and Exchange Commission (SEC) is moving to block access to Binance due to regulatory concerns, citing the platform’s operation without proper registration and authorization in the country.

Digital Assets

FTX cleared to sell investments in Grayscale and Bitwise funds

Bankrupt cryptocurrency exchange FTX has received approval from the bankruptcy court to start selling its stakes in digital trusts managed by Grayscale Investments.

Digital Assets

Nexo launches Dual Investment for yield earning and price prediction

“Dual Investment revolutionizes how users engage with BTC and ETH, offering a flexible, intuitive, yet sophisticated platform for predicting asset price movements, all while securing high yields.”