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2022-10-21

Added 2026-06-21 · Updated 2026-08-16

Sale and Distribution of Debt Instruments with Loss-absorption Features and Related Products

The Hong Kong Monetary Authority issued this circular to provide registered institutions with updated and consolidated guidance on selling loss-absorption products. The document supersedes previous 2018 and 2019 circulars and refines rules for investment funds targeting such debt instruments. It also streamlines product information disclosure requirements to enhance customer experience and investor protection.

Hong Kong

Hong Kong Monetary Authority

Our Ref: B1/15C G16/1C 21 October 2022 The Chief Executive All Registered Institutions Dear Sir / Madam, Sale and Distribution of Debt Instruments with Loss-absorption Features and Related Products In light of the market development as well as the industry’s feedback, the Hong Kong Monetary Authority (“HKMA”) has reviewed the guidance on enhanced investor protection measures on sale and distribution of debt instruments with loss-absorption features and related products (“Loss-absorption Products”). This Circular provides registered institutions (“RIs”) with a set of updated and consolidated guidance and Frequently Asked Questions (“FAQs”) on sale and distribution of Loss-absorption Products with a view to enhancing customer experience while according protection to customers. This Circular supersedes the circulars and FAQs issued on 30 October 2018, 21 March 2019 and 8 July 2019 on Loss-absorption Products1 . The updated and consolidated guidance and FAQs are provided in Annex 1 and Annex 2 respectively. In particular, the guidance has been refined for the sale and distribution of investment funds which have a principal investment strategy and/or objective to invest in debt instruments with loss-absorption features; and the requirement on the disclosure of product information by RIs has been streamlined. 1 “Sale and Distribution of Debt Instruments with Loss-absorption Features and Related Products”, “Implementation Arrangements on the Enhanced Investor Protection Measures for Sale and Distribution of Debt Instruments with Loss-absorption Features and Related Products” and “Frequently Asked Questions on Sale and Distribution of Debt Instruments with Loss-absorption Features and Related Products”

2 - In case of questions on this Circular, please contact Mr Kevin Sham at 2878- 1594 or Ms Ailee Wong at 2878-1240. Yours faithfully, Alan Au Executive Director (Banking Conduct) Encl. c.c. Securities and Futures Commission (Attn: Ms Julia Leung, Deputy Chief Executive Officer and Executive Director (Intermediaries))