The Securities and Futures Commission (SFC) today released conclusions to its further consultation on requirements applicable to the offline sale of complex products (Note 1).
Under these requirements, additional protective measures will apply to the sale of complex products in an offline environment, for example, when the sale is concluded with a client face-to-face, over the telephone or via other forms of interactive communication. The suitability (Note 2) of complex products will need to be ensured and clients will need to be provided with product information and warning statements. These are the same protective measures which will be introduced for the distribution of complex products on online platforms (Note 3).
"We have aligned the requirements for intermediaries to conduct suitability assessments of clients in the sale of complex products so that they are the same both online and offline," said Ms Julia Leung, the SFC’s Deputy Chief Executive Officer and Executive Director of Intermediaries. "This levels the playing field, provides better protection for customers and prevents regulatory arbitrage."
Amendments to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission reflecting these additional measures will become effective on 6 April 2019 (Note 4).
Notes:
- On 28 March 2018, the SFC issued Consultation Conclusions on the Proposed Guidelines on Online Distribution and Advisory Platforms and Further Consultation on Offline Requirements Applicable to Complex Products. The consultation period ended on 28 May 2018. A total of eight written submissions, including submissions from various industry associations, were received.
- Intermediaries should refer to guidance published by the SFC (which may be updated from time to time) on how to comply with the suitability obligations. For example, see the Circular to Intermediaries - Frequently Asked Questions on Compliance with Suitability Obligations.
- The additional protective measures, together with other requirements in the Guidelines on Online Distribution and Advisory Platforms, will become effective on 6 April 2019.
- The amendments, set out in Appendix A to the consultation conclusions paper, will be gazetted on 5 October 2018 and will take effect six months later on 6 April 2019.
