As foreshadowed in the Consultation Conclusions on the Proposed Amendments to the Professional Investor Regime and Further Consultation on the Client Agreement Requirements issued by the Securities and Futures Commission (SFC) on 25 September 2014, the SFC has conducted a detailed study (including the gathering of industry views) of the requirement under paragraph 5.2 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code) that persons licensed by or registered with the SFC (collectively, Intermediaries) should, when making a recommendation or solicitation, ensure the suitability of the recommendation or solicitation for the client is reasonable in all the circumstances (Suitability Requirement).
In light of that study, the SFC issued the following further guidance to Intermediaries on 23 December 2016:
In an SFC announcement that was also issued on 23 December 2016, Ms Julia Leung, the SFC's Executive Director of the Intermediaries Division, said that the Suitability Obligations are "the cornerstone of investor protection" and that the circulars "aim to provide clarity on what may trigger the Suitability Obligations, particularly when brokers or distributors deal with clients in person, by telephone or by other direct means of communication, and on what needs to be done when such obligations are triggered".
On 28 December 2016, the Hong Kong Monetary Authority (HKMA) also issued a circular to draw the attention of authorised institutions (AIs) to the SFC circulars above and to remind them of their own suitability obligations.
Please click here to read our briefing on the new guidance under the Updated Suitability FAQs (as compared to the 2007 Suitability FAQs), the Suitability Triggers Circular and the Suitability Triggers FAQs referred to above.