SFC concludes consultation on online platforms and further consults on offline requirements for complex products

28 Mar 2018



The Securities and Futures Commission (SFC) today released consultation conclusions on proposed Guidelines on Online Distribution and Advisory Platforms (Note 1).

The guidelines provide tailored guidance to the industry on the design and operation of online platforms, including specific guidance on the provision of automated or robo-advice. The guidelines also clarify that the posting of factual, fair and balanced materials on online platforms should not in itself trigger the suitability requirement (Note 2).

"We hope that the clarifications and guidance will facilitate the growth of online platforms, giving investors greater choice of products and advice," said Mr Ashley Alder, the SFC's Chief Executive Officer.

The SFC will implement the requirement for platform operators to ensure the suitability of complex products (Note 3) sold, recognising that retail investors should be in a position to take responsibility for their decisions to invest in simple products which they can reasonably be expected to understand.

"The guidelines represent a balanced regulatory approach. They allow more flexibility for investors to manage their investments online, whilst providing them with additional protection in relation to complex products whose features and risks retail investors may have difficulty in fully understanding," Mr Alder added.

The guidelines will become effective 12 months after gazettal (Note 4). The SFC will publish frequently asked questions to provide further guidance to the industry.

The SFC proposes to apply the same requirement to ensure suitability to the offline sale of complex products and has commenced a two-month consultation on this proposal (Note 5).

The public is invited to submit their comments on or before 28 May 2018 via the SFC website (www.sfc.hk), by email to ComplexProducts_Offline@sfc.hk, by post or by fax to 2284 4660.

End

Notes:

  1. On 5 May 2017, the SFC issued a Consultation Paper on the Proposed Guidelines on Online Distribution and Advisory Platforms. The consultation period ended on 4 August 2017. A total of 34 written submissions were received from a range of stakeholders, including asset management firms, industry associations, robo-advisory and Fintech companies, law firms and individuals. The guidelines will be implemented with modifications and clarifications as detailed in the consultation conclusions.
  2. This refers to the requirement, as set out in paragraph 5.2 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct), that licensed or registered persons should, when making a recommendation or solicitation, ensure the suitability of the recommendation or solicitation for the client is reasonable in all the circumstances, having regard to information about the client of which the licensed or registered person is or should be aware through the exercise of due diligence.
  3. "Complex products" refer to products whose terms, features and risks are not reasonably likely to be understood by retail investors because of their complex structures. Under the Guidelines on Online Distribution and Advisory Platforms, online platforms are required to ensure that any transaction in a complex product (other than derivative products traded on an exchange in Hong Kong or in a specified jurisdiction) is suitable for the client in all circumstances, regardless of whether there has been any solicitation or recommendation. The list of specified jurisdictions will be published on the SFC's website.
  4. The final form of the guidelines will be gazetted on 6 April 2018 and is set out in Appendix 1 to the conclusions paper.
  5. The draft amendments to the Code of Conduct to give effect to this proposal is set out in Appendix 5 to the conclusions paper.


Page last updated : 28 Mar 2018