Further Consultation on Disclosure Requirements Applicable to Discretionary Accounts

The Securities and Futures Commission (‘SFC’) in late November 2016 carried out a consultation on its proposals to enhance asset management regulation and point-of-sale transparency. In November 2017, SFC issued a consultation conclusion on the above. It also took the opportunity to further consult the public on the proposed disclosure requirements applicable to discretionary accounts.

In this further consultation, SFC suggests that if an intermediary is to receive and retain benefits for products purchased for their clients under discretionary portfolios prior to each transaction, it would be helpful for their clients to be made aware of it in advance in order to facilitate their choice of discretionary account manager. SFC therefore proposes two disclosure options for discretionary accounts. Under these options, intermediaries have different disclosure obligations. The SFC states that irrespective of which option is to be taken, the disclosures are to be made to investors at the account opening stage or prior to entering into a discretionary client agreement.

The further consultation and proposals were considered by Council with the assistance of the Investment Products and Financial Services Committee of the Law Society. The Council reviewed and supported those proposals made in this further consultation.

A copy of the submission in response to the further consultation is at http://www.hklawsoc.org.hk/pub_e/news/submissions/20180102.pdf