Posted inRegulationNews

SFC extends ‘complex product’ regs deadline

The original deadline in April has not given much time for distributors and fund managers to implement changes.

The Securities and Futures Commission (SFC) yesterday announced that it has extended the effective date for three months to 6 July for finalizing online and offline product distribution, which includes the thorny issue of defining “complex products”.

“The SFC considered feedback from the industry and agreed to extend the effective date. From the effective date, additional protection will be provided to investors when they purchase a complex product without a solicitation or recommendation,” the regulator said.

In October, the SFC released its conclusions to an earlier consultation that seeks to align requirements for the sale of complex products, which should create a level-playing field for both online and offline distributors.

One of the new requirements is around how distributors satisfy the suitability assessment to make sure that the product being sold or recommended is appropriate for an investor.

A suitability assessment for investors has been required since the global financial crisis erupted in 2008. What has changed is the introduction of a set definition of a “complex product”.

The SFC left it up to the players to work out the reporting details. Distributors and asset managers will have to work together to decide whether an investment product fits the SFC’s definition of a complex product.

Not yet ready

A number of distributors, as well as fund managers, had previously said that they might not be ready for the new regulations by April, according to Jeff Floro, Hong Kong-based sales director for Asia at Fund Info.

“It hasn’t given much time for all parties to implement changes in their systems.”

Only a few respondents agreed with the original deadline, according to public comments that were included in the conclusions issued in October.

“While a few respondents agreed with our proposed six-month transition period [from October 2018 to April 2019], others suggested a longer transition period of 12-to-24 months to allow time to review and amend products lists, enhance systems and controls, revise policies and procedures and provide staff training,” the SFC said.

Part of the Bonhill Group.