A majority of the respondents to the SFC consultation paper came out against adoption of the fee-for-advice model in Hong Kong. One warned of “severe unintended consequences” without any further explanation. Another noted that “more investor education would be needed” before it is adopted.
Most, however, supported enhancing point-of-sale disclosure of fees.
While backing away from the idea of banning commissions outright, the SFC stated it would adopt a two-pronged approach to address the issue, as initially outlined in the consultation paper in November 2016.
The regulator will forbid the use of the term “independent” when referring to financial advisors if they receive commissions or non-monetary benefits from product issuers. It will also mandate enhanced disclosure of monetary benefits received from product issuers, in particular trailer fees.
The amendments to the FMCC and the Code of Conduct for Persons Licensed by or Registered with the SFC, will become effective in 12 and nine months, respectively.
