SFC Issues Guidance on Giving Suitable Investment Advice

The SFC has issued guidance to help investment advisers meet the conduct requirements on giving suitable advice (Note 1).

The guidance concerns suitability obligations of investment advisers, who are expected to know their clients; understand the investment products they recommend; provide suitable recommendations by matching the risk return profile of each investment product with their clients’ personal circumstances, etc.

Speaking at a luncheon of the Institute of Financial Planners of Hong Kong, Mrs Alexa Lam, SFC’s Executive Director of Intermediaries and Investment Products, said that it was important for investment advisers to provide high quality services to the investors and maintain sound business practices.

Mrs Lam said: “First and foremost, it is essential for investment advisers to have good corporate governance. The board of directors and senior management should set a strong governance culture within their firms and ensure there is adequate management supervision, risk management and internal controls.”

She emphasised that the SFC would take rigorous regulatory action against those who committed serious breaches of the law, code and rules. Meanwhile, the SFC would continue to enhance investor education, she added.

Mrs Lam’s speech, “Towards Best Practice”, is attached.

Ends

Notes:

1. The guidance, in the form of questions and answers (FAQ), has been posted on the SFC website today. The FAQ aims to assist the licensed and registered persons who are engaged in financial planning and wealth management business activities relating to provision of investment advice, making of recommendations and/or solicitation to comply with the suitability obligations in paragraph 5.2 of the Code of Conduct.