Posted inRegulation

SFC wants to widen definition of `professional investor’

Hong Kong’s Securities and Futures Commission is proposing to relax rules on determining whether a person is a HNW professional investor.


The SFC launched a consultation paper yesterday proposing to allow portfolios held in joint accounts (with persons other than the spouse or child) to be counted in determining if a person meets the monetary threshold to qualify as a “professional investor”.

Under current rules, one of the four categories of high-net-worth professional investors is an individual who, either alone with his or her spouse or children in a joint account, has a portfolio of not less than HK$8m ($1.03m), according to the paper.

The SFC said in the paper that certain intermediaries have indicated that it is common for family members other than associates, such as siblings, parents or grandparents and business partners to set up a joint account together.

Aside from joint accounts, the regulator is proposing to include investments to be counted in assessing whether a person meets the requirements to be a professional investor.

“Some intermediaries have indicated that some investors may use investment vehicles to hold their assets, hence, an individual’s portfolio or share of a portfolio held in an investment vehicle should be aggregated with the individual’s portfolio in assessing whether the individual meets the portfolio threshold,” the SFC said in the paper.

The SFC also suggests including any corporation that has investment holdings as their principal business and are wholly- owned by one or more professional investors, as well as corporations which wholly own another corporation that is already a qualified investor.

The SFC added that it also plans to allow alternative forms of evidence in determining whether an individual is a professional investor. They include public filings made under legal or regulatory requirements and certificates issued by custodians, auditors or certified public accountants.

“The proposed amendments are intended to enhance transparency and promote consistency in the application of the private investor rules,” Ashley Alder, SFC’s CEO, said in the statement.

“Our key consideration is that the proposals should cater for the business needs of intermediaries and their clients without compromising investor protection.”

The details of the proposed amendments are listed on the consultation paper. Comments and feedback have to be submitted by 3 April. 

Part of the Mark Allen Group.