Evidential requirements for professional investor status – rules gazetted

Following a public consultation last year, the Securities and Futures Commission (SFC) has gazetted the SFC (Professional Investor) (Amendment) Rules 2011 which will introduce a more flexible approach to the requirements for evidencing whether a person qualifies as a professional investor in Hong Kong.

The amendments are in response to comments received from market participants during a previous SFC consultation which indicated that participants find it difficult in practice to treat high net worth clients as professional investors, as the current rules have very specific evidential requirements.

Accordingly, the SFC will allow intermediaries to use any method to establish whether different types of high net worth investor (whether a trust corporation or an individual or a corporation/partnership) meet the relevant assets or portfolio threshold at the relevant date. The existing evidential requirements are also being preserved to cater for firms that do not want to change their current compliance practices. The SFC will rely on the professional judgement of intermediaries to decide the methods by which they can satisfy themselves that their clients have the required net worth at the relevant date. The SFC expects proper records of the assessment process to be maintained.

In addition, the SFC is extending the rules to cover investment companies which are wholly-owned by trust corporations, individuals, corporations or partnerships that qualify as professional investors.

The amendment rules are expected to take effect on 16 December 2011.