21 May 2012
To facilitate the establishment of the Financial Dispute Resolution Centre Ltd (FDRC) and enhance the regulatory framework (Notes 1 and 2), the Securities and Futures Commission (SFC) released a set of consultation conclusions today announcing amendments to the Code of Conduct for Persons Licensed by or Registered with the SFC (code of conduct).
Upon amending the code of conduct, financial institutions regulated by the SFC and the Hong Kong Monetary Authority (HKMA) will be required to participate in the Financial Dispute Resolution Scheme (FDRS) (Note 3) and inform their clients about their rights to refer disputes to the FDRC (Note 4).
Other amendments, which aim to combat market misconduct and improve regulatory oversight of financial markets, have been substantially remodelled following careful consideration of comments and feedback from the industry and the public (Note 5). The amendments include:
- extending the retention period for telephone recordings for client orders from three months to six months;
- banning the use of mobile phones to accept client orders in the workplace;
- requiring written authorizations to allow third parties to place orders in client accounts;
- requiring financial institutions to report to the SFC suspected breaches by clients of market misconduct provisions in Parts XIII and XIV of the Securities and Futures Ordinance; and
- requiring financial institutions to permit their employees to provide expert witness services to the SFC and the HKMA when they wish to, unless there is a reasonable basis to prevent them.
“The SFC is in full support of the Government’s initiative in setting up the FDRC. We believe that the establishment of FDRC will further strengthen investor confidence in the financial industry,” said Mr Ashley Alder, the SFC’s Chief Executive Officer, “Other enhancements to the Code of Conduct will also enhance investor protection in Hong Kong.”
The FDRC-related amendments will take effect on 19 June 2012 (Note 6), while the others will come into force on 1 December 2012 (Note 7) to enable the industry to make the necessary adjustments to their systems. The amendments will be gazetted on or before 1 June 2012.
Notes:
1. On 9 February 2010, the Government published the consultation paper entitled “Proposed Establishment of an Investor Education Council and a Financial Dispute Resolution Centre.” In the conclusions paper published on 13 December 2010, the Government announced its decision to establish the FDRC by mid-2012.
2. On 8 November 2011, the SFC issued the consultation paper on proposals to amend the Code of Conduct for Persons Licensed by or Registered with the SFC in relation to the establishment of the FDRC and the enhancement of the regulatory framework. The two-month public consultation ended in January 2012.
3. The FDRC will be responsible for administering the FDRS to handle monetary disputes not exceeding $500,000 (per case) between financial institutions and their clients by way of mediation and, failing which, arbitration.
4. The FDRC will commence operations in June 2012 and provide investors with a relatively speedy and affordable means of resolving financial disputes with financial institutions through mediation and/or arbitration.
5. The SFC received written submissions from 27 respondents, including industry practitioners, financial institutions and trade and professional associations. Summaries of the submissions and the SFC’s responses are in the consultation conclusions paper. Publishable submissions are posted on the SFC website.
6. FDRC-related amendments are made under paragraphs 12A, 12.3(c) and (d), 12.5(g) and 12.6 of the Code of Conduct.
7. Other miscellaneous amendments are made under paragraphs 3.9(b) and (c) and their explanatory notes, 7.1(a) and (b), 12.5(f) and 12.7 of the Code of Conduct and paragraphs 1A and 1B and their explanatory notes of Schedule 4 and paragraph 37 of Schedule 6 of the Code of Conduct.
Last update: 7 Aug 2012