This FAQ provides further guidance on the requirement for intermediaries and authorised institutions to prepare and sign client asset acknowledgement letters as set out in the circular, “New measure to protect client assets”, issued by the Securities and Futures Commission on 8 July 2019.
Are intermediaries required to procure client asset acknowledgment letters for overseas accounts which hold clients’ assets?
As explained in the 8 July 2019 circular, intermediaries are required to put in place client asset acknowledgement letters for their client accounts and trust accounts holding client assets at authorised institutions. These are accounts opened in accordance with the Securities and Futures (Client Money) Rules and Securities and Futures (Client Securities) Rules to hold client money and securities in Hong Kong (Client Asset Accounts).
Whilst overseas client assets might fall outside the ambit of the Securities and Futures (Client Money) Rules and Securities and Futures (Client Securities) Rules, intermediaries should perform due diligence to assess and ensure that client assets held overseas are adequately protected by the relevant rules and regulations in the corresponding jurisdiction.
Intermediaries are reminded of their regulatory obligations to ensure that client assets are adequately safeguarded, pursuant to paragraph 11.1(a) of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
With reference to clause (f) of the client asset acknowledgement letter template, may trade-related charges (eg, transaction levies or brokerage commissions) and charges incidental to corporate actions be deducted from Client Asset Accounts?
Clause (f) aims to prevent charges incidental to the servicing and maintenance of Client Asset Accounts from being offset against client assets. Account-level fees (such as minimum balance fees and fund transfer charges) should not be deducted from Client Asset Accounts.
In cases where securities trading or custodian accounts are designated as client or trust accounts, then brokerage or other proper charges in connection with dealing in securities and futures on behalf of clients (such as trade-related charges and charges incidental to corporate actions) may be deducted from Client Asset Accounts.
Last update: 30 Oct 2020