SFC Inspection Update

The SFC announced recently in its 2011-2012 budget that SFC staffing levels will be increased by 10%. In particular, more people will be added to the Intermediaries Supervision Department to help the SFC to conduct routine inspections and thematic reviews more frequently, so SFC "inspection readiness" should continue to be a priority for responsible officers and compliance officers.

Based on recent comments by senior members of the SFC, intermediaries' selling practices are still a focus in routine inspections. Distributors should read the SFC's comments and findings in relation to the recent mystery shopping exercise carefully (see the above article) and consider whether any of the SFC's observations could apply to their own practices. The SFC has said it will continue to use the mystery shopping exercise as one of its regulatory tools to assess the industry's compliance with requirements in terms of selling practices.

It is important to note the new point of sale disclosure requirements in paragraphs 8.3 and 8.3A of the revised Code of Conduct had not come into operation when the mystery shopping programme was conducted but which are now in force and paragraph 5.1A (investor characterization) when it comes into effect on 4 September 2011.