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HKMA, SFC issue joint circular on sophisticated professional investors

According to the joint circular, intermediaries may apply a streamlined approach when dealing with SPIs.
Container ship in Victoria Harbor of Hong Kong

Hong Kong’s securities regulator and de facto central bank have issued a joint circular, outlining how intermediaries should handle suitability obligations when dealing with sophisticated professional investors (SPIs).

Suitability requirements cover requirements that intermediaries such as banks ensure that complex products are suitable for the client in question.

SPIs are defined as sophisticated investors who possess higher levels of net worth and knowledge or experience.

In the joint circular, the Securities and Futures Commission and Hong Kong Monetary Authority said that where an intermediary is satisfied a client qualifies as an SPI, it may apply a streamlined approach when dealing with the investor.

“In essence, under the streamlined approach, the intermediary is not required at a transaction level to match the SPI’s risk tolerance level, investment objectives and investment horizon, or to assess the SPI’s knowledge, experience and concentration risk,” it said.

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