The Securities and Futures Commission (SFC) announced the change will come into effect in November next year.
Fine-tuning
The restriction of the use of the term “independent” will address conflicts of interest in the sale of investment products and will enhance disclosure of trailer fees, commissions and other monetary benefits, the SFC said.
Under the new definition, an intermediary cannot represent itself as independent, or use any term with a similar reference, if they receive commission, monetary or non-monetary benefits from distributing an investment product.
“A majority of the respondents [to a consultation] agreed with the proposal to restrict intermediaries from representing themselves as being ‘independent’ if they receive monetary benefits from other parties and to require disclosure of their independence or non-independence,” the SFC said.
“In light of the comments received, we have fine-tuned the definition of ‘independence’ and have also provided more guidance to clarify this concept,” it added.
The governance of the term “independent” and the ability of intermediaries to use it is are outlined in the SFC’s consultation conclusions on asset management regulation and point of sale transparency, released on 16 November.
Additionally, the consultation papers look at proposed disclosure requirements applicable to discretionary accounts.
International standards
SFC chief executive Ashley Alder said the consultation has been necessary to make sure Hong Kong’s regulations meet international standards.
“The approach we have adopted to address conflicts of interests and incentives is calibrated to Hong Kong’s current market conditions. We will however actively consider the merits of pay-for-advice models in light of local and international market and regulatory developments,” he said.
