The Securities and Futures Commission (SFC) published its latest survey on the sale of non-exchange traded investment products, while at the same time, reminded financial institutions of their obligations when selling these types of products.
During the year ended March 31, 2018, the aggregate transaction amount for investment products came in at $508 billion. When compared to the prior year, this is an increase of 34 percent.
According to the statement released by the regulator, the uptick was largely driven by Mainland-based firms, with some of them significantly expanding their wealth management businesses during the year.
From the total transactional volume, structured investment products lead the way, contributing the largest share as it did last year. Following behind is fixed income products and collective investment schemes.
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Commenting on the survey results, Julia Leung, the SFC’s Deputy Chief Executive Officer and Executive Director of Intermediaries said: “Given higher market volatility and the deteriorating credit outlook for some bond issuers, investors should fully understand the features and risks of products before investing. Intermediaries are also reminded to comply with the requirements governing the distribution of complex products.”
According to the survey, the SFC conducted the survey to get a better understanding of the industry landscape. At present, the number of licensed corporations that are engaged in the sale of investment products increased to 252 from 244 two years earlier.
SFC Reminds Intermediaries of Their Requirements
In response to the survey, the securities regulator also issued a circular to intermediaries to restate the requirements when selling complex and high-risk products, such as bond and equity products.
The SFC reminds that from April 6, 2019 institutions will be: “required to ensure that a transaction in a complex product is suitable for the client in all circumstances irrespective of whether a solicitation or recommendation is made. Intermediaries will also be required to provide information and warning statements about the complex products to the client.”
You can read the rest of the requirements here.