Watchdog to arm investors

The Securities and Futures Commission proposed to raise the bar for professional investors, who now will have to undergo a suitability test before making investments.
The watchdog is seeking to revamp the code of conduct for brokerages and wealth management firms during a three-month public consultation period starting yesterday.
Its move was sparked off by the 2008 Lehmanminibond saga.
The SFC recommends that intermediaries, when offering investment products to individual professional investors, conduct the so- called suitability test. This includes conducting product due diligence to ensure the products they are recommending match the clients' current conditions.
Intermediaries would have to meet such requirements when selling any financial product to professional investors.
They can, however, still take part in private placements.
The watchdog will require the suitability requirements be detailed in contracts signed between professional investors and financial institutions. The contracts will also have to list actual services provided by intermediaries to the client.
Stephen Po Wai-kwong, senior director for intermediaries supervision at the SFC, said the amendments would not raise compliance cost for financial institutions as most of the procedures are already being implemented.
It will ``give investors better protection, as they would be in better positions to claim upon misconduct because the responsibilities of the intermediaries will be written in black and white,'' Po said yesterday.
Individuals, together with their investment vehicles and family trusts, are considered professional investors if their total portfolio is worth HK$8 million or more.