Proposals to Enhance Asset Management Regulation and Point-of-Sale Transparency

The Securities and Futures Commission (the “SFC”) in late November 2016 issued a consultation paper on its Proposals to Enhance Asset Management Regulation and Point-of-Sale Transparency. Under the consultation, the SFC proposed changes to the SFC’s Fund Manager Code of Conduct (“FMCC”) and the Code of Conduct for Persons Licensed by or Registered with the SFC (the “Code of Conduct”).

The main changes the SFC has considered included the following:

  • under the FMCC, the proposed amendments were mainly for securities lending and repurchase agreements, custody of fund assets, liquidity risk management, and disclosure of leverage by fund managers;
  • as for the Code of Conduct, the proposed amendments were to address the potential conflicts of interest in the sale of investment products and to enhance disclosure at the point-of-sale by:
    • restricting an intermediary from representing itself as “independent” or using any term(s) with a similar inference if the intermediary received commission or other monetary or non-monetary benefits or it had links or other legal or economic relationships with product issuers which were likely to impair its independence; and
    • requiring an intermediary to disclose the range and maximum dollar amount of any monetary benefits received or receivable that were not quantifiable prior to or at the point of sale. 

With the assistance of its Investment Products and Financial Services Committee, the Law Society has reviewed the consultation paper. It acknowledged the policy objectives underlining the proposal (ie, to enhance Hong Kong’s position as a major international asset management centre, and thus it was important to ensure that the related regulations were properly benchmarked to evolving international standards). Further comments were provided.

The detailed submission of the Law Society on this consultation can be found at: