On March 19, 2019, the Securities and Futures Commission (“SFC”) announced a 3 month delay (from April 6, 2019 to July 6, 2019) in the introduction of updates to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”) which require licensed and registered persons to ensure that, when providing services to a client in a complex product:
they ensure that any transaction in that product is suitable for the client in all the circumstances;
they provide sufficient information on the key nature, features and risks of the product; and
they provide warning statements in relation to the complex product.
This update to the Conduct of Conduct represents a major change in regulatory suitability requirements in that suitability requirements will apply even in the absence of any solicitation or recommendation and even where a product is not a derivative product. More information on the update is available in our earlier article "SFC Imposes Restrictive Code Of Conduct Updates Upon Intermediaries To Combat Mis-Selling”.
It is understood that the reason for the delay in the implementation of the new requirements is that industry participants have expressed the need for more time to comply. If they have not already done so, investment advisers, asset managers, private wealth managers and other firms licensed or registered with the SFC should consider whether or not their sales processes comply with the updated requirements under the Code of Conduct, including as to processes for determining whether products are complex products, the provision of adequate information on and warning statements for such products and the assessment of suitability.
We will be hosting a lunch time seminar on April 8, 2019 to provide our perspective on these new requirements and how to minimize the risk of claims of mis-selling going forwards. For further details or to register about the seminar, please click here
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