On 20 Dec 2024, the HKMA proposed streamlining audio-recording requirements for video-conference investment sales by adopting a risk-based approach aligned with face-to-face processes, reducing triggers to complex products or specific solicitation scenarios. The proposals also establish regulatory expectations for alternative digital compliance measures, mandating equivalent customer protection and evidence reliability while excluding PLP products from this framework.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 20 Dec 2024, the Hong Kong Monetary Authority (HKMA) issued a circular setting out streamlined audio-recording requirements for investment and insurance product sales and regulatory expectations for alternative compliance measures, following a review of technological advancements and industry feedback.
Streamlined Audio-Recording Requirements for Video-Conference Sales
The HKMA proposes to apply a risk-based approach to audio-recording requirements for investment transactions conducted via video-conference, aligning them with the existing face-to-face sale process for retail banking customers. Under the proposals, audio-recording will only be required for (i) distribution/advice on complex investment products, or (ii) solicitation/recommendation of non-complex products, exchange-traded derivatives, or standardised structured deposits involving risk mismatch. The existing opt-out arrangement for non-retail banking customers and non-vulnerable customers will also apply to video-conference contexts. Authorized Institutions (AIs) must implement controls to ensure customer protection, including identity authentication, alternative channel confirmation when in doubt, and secure video-conference facilities, even where recording is not triggered.
Regulatory Expectations for Alternative Compliance Measures
The HKMA permits AIs to deploy digital tools (e.g., mobile app/online banking interactions) as alternative measures to audio-recording for investment and annuity insurance product sales, provided they meet two core standards: (i) deliver at least equivalent customer protection as audio-recording, including clear presentation of information and customer acknowledgment; and (ii) serve as reliable evidence for dispute resolution. AIs must ensure alternative measures are appropriate for customer capability (e.g., excluding customers unable to use digital tools), product complexity (e.g., excluding complex insurance products), and implement robust policies, staff training, monitoring, and compliance with other regulatory requirements (e.g., Code of Conduct). The proposals explicitly exclude Protection Linked Plans (PLP), which remain governed by the HKMA’s 30 August 2023 circular.
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