The existing “enhanced measures to the sale of investment products" originally had been published in January 2009 and implemented a few months later, as part of recommendations made by the HKMA in the wake of problems with structured products connected to Lehman Brothers.
The new measures are expected to be implemented no later than 20 May 2012, the HKMA said in an HKMA circular on its website, which may be viewed by clicking here.
According to a Norton Rose Group note to clients on the rules revision, the HKMA defines a “private banking customer” in this instance as any individual who maintains “a personalised relationship with the AI, [who] receives personalised banking or portfolio management services from the AI, and [who] has assets under the AI’s management of at least $1m”.
“However, the HKMA expects this financial threshold to be observed reasonably and, in exceptional circumstances, will allow private banks to have clients below $1m,” the note points out.
The note continues:
“Given the differences between private banking and retail customers, the changes set out in the revised version include:
- The separation of the customer risk profile assessment from the sales process is no longer mandatory when dealing with private banking customers;
- documenting the basis upon which a product is considered suitable for a private banking client may be permissible as an alternative to audio-recording;
- private banks are excepted from introducing a mystery shopper programme; and
- steps to ensure clearer differentiation between traditional deposit-taking activities and retail securities business [are] no longer necessary."
Despite these revisions, private banks are still expected to ensure that adequate controls are in place for the sale of investment products and comply with relevant regulatory codes and guidelines, including the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, Norton Rose points out.
Separately, the HKMA and Securities and Futures Commission (SFC) have also issued new guidelines on anti-money laundering and counter-terrorist financing, to help companies and institutions comply with new anti-money laundering and counter-terrorist financing legislation, with take effect on 1 April.
The SFC guidelines replace the SFC’s existing Prevention on Money Laundering and Terrorist Financing Guidance Note (click here to view), while the HKMA guidelines (click here to view) supersede its Guideline on Prevention of Money Laundering, and Supplement to the Guideline on Prevention of Money Laundering and Interpretative Notes.
