Implementation of amended professional investor rules

In our newsletter of June 2018, we reported on changes to the Securities and Futures (Professional Investor) Rules (PI Rules) which came into effect on 13 July 2018.

The amended PI Rules expand the categories of professional investors to include corporations which have investment holding as their principal business and are wholly-owned by one or more professional investors and holding companies of professional investors. 

On 13 July 2018, the SFC issued a circular to intermediaries to remind them that they should, as part of their know-your-client procedures, obtain confirmations that the shareholders of such holding companies have been informed of the corporation’s status as a professional investor before providing services to that company.

The circular further states that directors of holding companies should ensure that shareholders are properly informed of the implications of the amended rules. This includes, for example, information about those responsible for making investment decisions for the holding company and clarity about the circumstances in which shareholders should be informed of an investment decision or where their consent should be sought. It is likely that the SFC will expect intermediaries relying on the expanded categories of professional investors to satisfy themselves that the directors of such holding companies have provided the relevant information to their shareholders.