Suitability Requirement to Become Mandatory Provision of Hong Kong Client Agreements under SFC Code Amendments
Introduction
The Securities and Futures Commission (SFC) published its Consultation Conclusions on the Client Agreement Requirements (the Consultation Conclusions) on 8 December 2015.
After extensive consultation, the SFC has published a new clause which intermediaries are required to include in all client agreements. The new clause (New Clause) requires that intermediaries ensure that any financial product solicited for sale or recommended to a client is reasonably suitable for the client having regard to its financial situation, investment experience and investment objectives. It is based on, but distinct from, the obligation on intermediaries to ensure the reasonable suitability of recommendations or solicitations for clients (the Suitability Requirement) under paragraph 5.2 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code). The New Clause will give investors a contractual right to claim damages under the client agreement where the intermediary does not comply with the requirement. Read more