On 25 September 2014, Hong Kong’s Securities and Futures Commission (SFC) issued its Consultation Conclusions on the Proposed Amendments to the Professional Investor Regime and Further Consultation on the Client Agreement Requirements (“Conclusions”), following a public consultation launched in May 2013 on proposals to revise the existing professional investor regime in Hong Kong, and to introduce additional requirements for client agreements.
The focus of the proposals was on the treatment of those who are “professional investors” as defined in the Securities and Futures (Professional Investor) Rules (“Rules”), specifically with respect to private placement activities and regulation of intermediaries conduct when determining the level of protection to be afforded to individual and corporate professional investors. The SFC also proposed to enhance the minimum content standards for client agreements under the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (“Code of Conduct”), as well as reassess the role and adequacy of the suitability requirement as a core investor protection measure.
In response to a number of concerns and requests for clarification expressed by industry participants, the SFC has now introduced certain modifications and relaxations to some of these proposals. Notwithstanding, the Conclusions represent a significant change for the industry, both legally and functionally, with the greatest shift evident in the treatment of individual professional investors by intermediaries under the Code of Conduct.
We examine the key aspects of the Conclusions and the proposals adopted here.