Circular to Licensed Corporations
Selling of complex bonds and high-yield bonds

25 Mar 2014



From our recent on-site inspections, we have identified some common issues suggesting that certain areas of the selling process for bonds with special features1 and high-yield bonds (collectively referred to as “Complex/HY Bonds”) need better attention of some LCs. The Commission reminds all licensed corporations (“LCs”) that sell Complex/HY Bonds of their obligations to: 

LCs should pay due regard to the issues and guidance set out in the Appendix, and critically review their policies and procedures to address any issues that are relevant to their firms with a view to improving compliance.

The Commission will take appropriate regulatory action against LCs found to have breached the selling practices requirements and will continue to use a range of supervisory tools, including inspections and mystery shopping programmes, to monitor compliance.

Should you have any queries regarding the contents of this circular, please contact Ms Seine Luk at 2231 1696.

Intermediaries Supervision Department
Intermediaries Division
Securities and Futures Commission

Enclosure

End

SFO/IS/012/2014

1 Examples of special features include perpetual, subordinated, callable, variable and/or deferral of interest payment terms, extendable maturity dates, convertible/ exchangeable, contingent write down or loss absorption feature, etc.

2 Please see also the circular “Regulatory Compliance regarding Cross-border Business Activities” issued by the Commission on 28 January 2014 should the LCs conduct business activities in other jurisdictions.


Click here to download the document

Supplementary document:
Appendix


Page last updated : 25 Mar 2014