Changing the balance of protection for non-professional investors — the SFC’s proposals with regard to client agreements

In October 2012, the Securities and Futures Commission (SFC) in Hong Kong published a report that considered, among other things, the appropriateness of the use of so-called ‘exclusion’ clauses in client investment agreements. The SFC noted that such clauses could be misused and stated that it would issue an appropriate response to address its concerns.

In May of this year, the SFC published a consultation paper on proposed amendments to the Professional Investor Regime and the Client Agreement Requirements. Among other matters, the SFC proposed that: the SFC’s Suitability Requirement should be incorporated into all client agreements as a contractual term; and it would represent a breach of a regulatory obligation for an intermediary to conclude a contract that contains a clause that is either inconsistent with its obligations under the code or that describes inaccurately the actual services to be provided to the client.

Those involved in the financial services sector in Hong Kong will be considering the consultation in earnest and will no doubt voice their views…

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