Consultation Conclusions on Guidelines on Marketing Materials for Listed Structured Products

19 Sep 2006



SFC today releases the Consultation Conclusions on the Draft Guidelines on Marketing Materials for Listed Structured Products.

The Guidelines is one of the proposals in the Six-Point Plan proposed in the November 2005 Report on the Derivatives Warrants Market in Hong Kong. A copy of the draft guidelines was attached for comment in the SFC’s March 2006 paper “Hong Kong’s Derivative Warrants Market – the Way Forward, Results of the Consultation on the SFC’s Six-Point Plan”.

The overriding principle in the Guidelines is that marketing materials should not be false, biased, misleading or deceptive and should include appropriate risk warnings. This principle is supported by several sub-principles regarding contents, risks warnings, presentation, legibility and prominence of relevant information.

In releasing the Consultation Conclusions, Mr Martin Wheatley, SFC’s Chief Executive Officer, said: “Together with the other measures taken under the Six-Point Plan, we believe the Guidelines will, over time, increase investors’ awareness of the risks and features of investing in structured products and contribute to the development of a healthy warrants market for investors to make informed investment decisions.”

“Listed structured products issuers and all persons responsible for marketing materials will be required to comply with the Guidelines. The regulators take breaches of the Guidelines seriously and will take necessary action against the offending party where appropriate. A breach of the Guidelines may also reflect adversely on the offending party’s fitness and properness,” he said.

The Consultation Conclusions takes into account the five submissions received. The respondents generally supported the principle-based approach in the Guidelines. The final form of the Guidelines is substantially the same as the draft put out for consultation. A few changes have been made to reflect comments received.

The amendments include the deletion of a proposed requirement for structured products issuers to disclose to the SFC any commercial or business relationship they have with a person who appears on any audio or audiovisual programme, seminar or lecture or writes to promote particular listed structured products, where their relationship with the person is such that that his objectivity or independence may be called into question. This requirement was deleted in light of the potential practical difficulties in implementing and enforcing the requirement. The SFC believes that this would not significantly affect the Guidelines’ ability to address possible conflicts issues.

The Guidelines will supersede the current guidelines set out in the SFC’s letter to derivative warrants issuers and their legal advisers dated 21 December 2001.

The Guidelines will be gazetted under Section 399 of the Securities and Futures Ordinance and will come into effect on 1 October 2006. Marketing materials produced by 1 October 2006 that comply with the current guidelines may be used until 30 November 2006.

The SFC has published on its website a set of frequently asked questions to clarify and elaborate certain issues in relation to the Guidelines.

The Consultation Conclusions paper is available at the SFC office and on the SFC website.

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