The Hong Kong Monetary Authority and the Securities and Futures Commission received feedback from intermediaries regarding compliance with suitability obligations when dealing with sophisticated professional investors (SPIs). They updated their guidance documents to clarify the expected standards for suitability assessment and product disclosure processes for SPIs. Intermediaries can use a Streamlined Approach to tailor point-of-sale procedures to the personal circumstances of SPIs, based on information obtained during onboarding or know-your-client reviews. The Streamlined Approach does not require intermediaries to match the SPI’s risk tolerance level, investment objectives, or investment horizon, or to assess the SPI’s knowledge, experience, or concentration risk at the transaction level. Intermediaries should have effective systems and controls in place to guard against misuse and detect red flags arising from applying the Streamlined Approach.
Streamlined approach for compliance with suitability obligations when dealing with sophisticated professional investors:
https://apps.sfc.hk/edistributionWeb/api/circular/openAppendix?lang=EN&refNo=23EC35&appendix=0
Frequently Asked Questions on streamlined approach for compliance with suitability obligations when dealing with sophisticated professional investors:
https://apps.sfc.hk/edistributionWeb/api/circular/openAppendix?lang=EN&refNo=23EC35&appendix=1
Resource:
https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/suitability/doc?refNo=23EC35