Securities & Futures Commission of Hong Kong

Non-complex and complex products

Set out below is a non-exhaustive list of examples of investment products that are considered to be "non-complex". The SFC is in a better position to provide examples of investment products that are subject to the SFC's remit as non-complex in this list of examples.

For overseas products, a Platform Operator should determine whether an overseas product to be sold on its platform is non-complex or complex having regard to the factors set out in paragraph 6.1 of the Guidelines on Online Distribution and Advisory Platforms  (Guidelines) and this list of examples. For offline transactions, intermediaries should also have regard to this list of examples and the factors set out in the notes under paragraph 5.5 of the Code of Conduct1 to determine whether an overseas product is non-complex or complex.    

It may be possible for a Platform Operator to treat an overseas product as non-complex after carrying out the above assessment with due skill, care and diligence, for example, where the product is of the same type as a non-complex product in this list of examples and is regulated in or traded on an exchange in a specified jurisdiction.

The SFC may revise the list of non-complex products from time to time where appropriate:

Non-complex products

  1. Shares traded on the SEHK2;
  2. Non-complex bonds (including callable bonds without other special features) (please refer to the definition for "complex" bonds below);
  3. Non-derivative3 funds authorized by the SFC under the UT Code4;
  4. SFC-authorized non-derivative3 ETFs traded on the SEHK;
  5. SFC-authorized REITs traded on the SEHK; and
  6. Any other investment product the SFC may specify from time to time.

Set out below is a non-exhaustive list of examples of investment products that are considered to be complex products:

Complex products - Derivatives traded on an exchange (where paragraph 6.5 of the Guidelines is applicable)

  1. Futures contracts traded on the HKFE5;
  2. Equity derivatives traded on the SEHK (eg, DWs, CBBCs and listed share options);
  3. Synthetic ETFs and futures-based ETFs authorized by the SFC and traded on the SEHK;
  4. L&I products authorized by the SFC and traded on the SEHK; and
  5. Any other investment product the SFC may specify from time to time.

Other complex products

  1. Complex bonds. Complex bonds are bonds with special features (including, but not limited to, perpetual or subordinated bonds, or those with variable or deferred interest payment terms, extendable maturity dates, or those which are convertible or exchangeable or have contingent write down or loss absorption features, or those with multiple credit support providers and structures) and/or bonds comprising one or more special features;
  2. Funds authorized by the SFC under the UT Code which are derivative6 funds;
  3. Funds authorized by the SFC under 8.7 of the UT Code (ie, SFC-authorized hedge funds);
  4. SFC-authorized unlisted structured investment products (including SFC-authorized equity-linked deposits, equity-linked instruments/investments, etc.);
  5. Other non-exchange-traded structured investment products;
  6. Security tokens, and 
  7. Any other investment product the SFC may specify from time to time.

A flowchart illustrating the determination of whether an unauthorized fund is a complex product or not is provided for reference.

1 Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission
2 The Stock Exchange of Hong Kong Limited
3 A non-derivative fund or ETF is one with a net derivative exposure of up to 50% of its NAV under the UT Code effective on 1 January 2019 (subject to transition arrangements). Please refer to the Guide on the Use of Financial Derivative Instruments for Unit Trusts and Mutual Funds, as updated from time to time, for guidance on the calculation methodology of the net derivative exposure of a fund.
4 Code on Unit Trusts and Mutual Funds
5 Hong Kong Futures Exchange Limited
6 A derivative fund is one with a net derivative exposure of more than 50% of its NAV under the UT Code effective on 1 January 2019 (subject to transition arrangements). Please refer to the Guide on the Use of Financial Derivative Instruments for Unit Trusts and Mutual Funds, as updated from time to time, for guidance on the calculation methodology of the net derivative exposure of a fund.

 

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