SFC highlights compliance failures in product selling practices

25 Jan 2018



The Securities and Futures Commission (SFC) today issued a circular to licensed corporations (LCs) on the standards it expects of them when they sell fixed-income and structured products.

The circular reminds LCs of their obligations to comply with the suitability requirement (Note 1) and, in particular, draws attention to the SFC’s expected standards for product due diligence, measures to identify whether any suitability obligation has been triggered, assessment of suitability framework and the retention of compliance records.

"Suitability obligations are a cornerstone of investor protection," said Ms Julia Leung, the SFC's Executive Director of Intermediaries. "The SFC will continue to monitor selling practices and will take action against delinquent firms."

LCs are expected to review the areas discussed in the circular and take immediate action to rectify any deficiencies. In addition, the senior management of LCs, including relevant Managers-In-Charge of core functions (Note 2), are reminded to maintain adequate oversight of the firm’s business activities and put in place appropriate systems and controls to ensure full compliance with the regulatory requirements governing the distribution of investment products to clients.

End

Notes:

  1. As set out in paragraph 5.2 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, licensed or registered persons should ensure the suitability of the recommendation or solicitation they make for the client is reasonable, having regard to information about the client of which they should be aware through due diligence.
  2. The SFC introduced the Manager-In-Charge regime in a circular issued to licensed corporations on 16 December 2016. See the press release.


Page last updated : 25 Jan 2018