Regulatory Alerts2010-09-02
Added · Updated
Circular Issued by the Securities and Futures Commission Regarding Code of Conduct Requirements with respect to Derivative Products
The Securities and Futures Commission issued a circular reminding licensed corporations to strictly comply with the Code of Conduct when providing services on derivative products such as derivative warrants and exchange-traded funds. The regulator mandates that intermediaries must ensure transactions are suitable for clients, verify client understanding of product risks, and confirm sufficient net worth to bear potential losses. Additionally, a new requirement effective June 2011 obliges intermediaries to explain risks to clients characterized as lacking derivative knowledge, even in non-solicited exchange-traded transactions.
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