Q1 : Are intermediaries required to obtain documentary evidence to support information provided by a client in assessing whether the client qualifies as a sophisticated professional investor (“SPI”)?
Q2 : Where a client does not have the requisite level of knowledge or experience to qualify as an SPI, can intermediaries rely on the knowledge or experience of the client’s representative (eg, one appointed under a power of attorney) to qualify such client as an SPI?
The requisite level of knowledge or experience can be either demonstrated by the SPI’s academic or professional qualifications or work experience, or accumulated from their trading experiences by executing at least five transactions within the past three years in the same category of investment products. For the avoidance of doubt, an SPI may accumulate the requisite trading experiences by executing transactions through eg, a power of attorney; and/or through transactions executed in joint accounts.
Q3 : What are the considerations for intermediaries when categorising investment products into different Product Categories?
For instance, intermediaries should categorise the following types of product into specific Product Categories so as to differentiate them from products of different characteristics, nature and extent of risks, and/or to comply with existing product-specific regulatory requirements – (i) accumulators/decumulators, (ii) collective investment schemes whose investment objective or principal investment strategy is investing in insurance-linked securities, (iii) debt instruments with loss-absorption features and related products, (iv) virtual assets (“VA”) and (v) VA-related products1.
Q4 : What kinds of information should the Product Category Information Statement cover?
Q5 : What should an SPI consider when specifying a Streamlining Threshold?
Q6 : How should intermediaries monitor compliance with the Streamlining Threshold?
If a designated account is used for monitoring compliance with the Streamlining Threshold, the intermediary should review such Streamlining Threshold with the SPI (i) before new fund is added to the designated account, or (ii) at least during the annual review.
For the avoidance of doubt, where such gross exposure (or part thereof, except cash) was transferred out of the designated accounts, such gross exposure (or part thereof, except cash) shall nonetheless continue to be regarded as “the gross exposure arising from investment transactions executed under the Streamlined Approach” for the purpose of monitoring compliance with the Streamlining Threshold.
That said, intermediaries are not expected to reduce/unwind the gross exposure for the purpose of complying with the Streamlining Threshold. Where the gross exposure in the designated account is above the Streamlining Threshold, intermediaries may continue to operate (and to execute transactions in) the designated account restricting any top-up or deposit; or alternatively, execute investment transactions without applying the Streamlined Approach (eg, outside of the designated accounts).
Q7 : Could intermediaries execute leveraged transactions for and/or provide margin trading to an SPI under the Streamlined Approach?
Notwithstanding, intermediaries are required to establish effective systems and controls to ensure the gross exposures (including the effect of leverage) arising from investment transactions executed under a Streamlined Approach remain at or below the amount specified by the SPI when monitoring compliance with the Streamlining Threshold.
1 “VA-related products” refers to investment products which: (a) have a principal investment objective or strategy to invest in virtual assets; (b) derive their value principally from the value and characteristics of virtual assets; or (c) track or replicate the investment results or returns which closely match or correspond to virtual assets.
Last update: 28 Jul 2023