The HKMA intends to simplify the list of investment products introductions, but complex products must be labeled red

The HKMA recommends that the product introduction list be modified to help retail investors better understand the main information of the product. For example, listing the main product features on the first page, and it is also recommended to adopt the form of "question and answer" to allow investors to better grasp the factors that need to be considered.

Cancel mandatory consultation on complex products but product knowledge evaluation is required

The HKMA noted that with clearer product labeling and clearer product introduction lists, investors have the ability to make well-thought-out and wise investment decisions.

A spokesperson for the HKMA said that this review is also in line with the overall goal of the securities market review team, which is to improve the vitality of my country's securities market by simplifying regulations and empowering investors to identify.

At the same time, the HKMA plans to introduce Product Knowledge Assessment (PKA) as an alternative to assessing whether investors have sufficient knowledge of complex products. The assessment content includes the main characteristics and risks of the product. The HKMA believes that this is also a tool for investors to self-evaluate and increase risk awareness.

The HKMA publicly solicited opinions from the market on Tuesday (July 1). It said: "Our goal is to strengthen the disclosure-based system to work, so that investors can make their own decisions, while requiring appropriate intervention for consumers who need more help."

However, investors aged 62 and above, who are not familiar with English, or have an education diploma below O or N, if they meet two of these conditions, they must still consult professional opinions before purchasing complex products. This is to ensure that investors who meet these conditions are still protected under the regulations of the HKMA. For example, during the consultation process, a trustworthy person is present and before deciding to invest, he receives a call for further confirmation.

As financial services are increasingly digitalized, investors can obtain information on investment products and invest on their own from more and more channels. The Monetary Authority of Singapore therefore recommends simplifying the Product Highlights Sheet (PHS). However, if complex investment products are involved, they must be clearly marked with a red label to remind investors to seek professional consultation. A product introduction list must also be provided after the investment policy.

A spokesperson for the HKMA said in response to the enquiry of Lianhe Zaobao that the authorities regularly review the regulatory framework based on market changes and feedback. The suggestions put forward this time were also included in the feedback from the Securities Market Review Team. "Our suggestion is intended to respond to some of the main feedback, that is, retail investors want a more readable list of product introductions that help them identify the most relevant and critical information about their investment products. In addition, there is room for simplification for investment processes for complex products, based on disclosure and information."

In conjunction with the revision of the product introduction list, the HKMA also proposed to simplify the safeguards for the distribution of complex products, one is to cancel the requirement of compulsory investment consultation.

Under the collective investment scheme of the HKMA, financial institutions must provide investors with product introduction lists when providing investments such as stocks, bonds and trust units.

For complex products, financial institutions need to evaluate the educational level, work and investment experience of retail investors. If the investor does not have sufficient knowledge or experience, he must complete a course in advance or be mandatory for investment advice.

Those who intend to feedback on the above suggestions can submit them to the HKMA before September 1.

In order to help retail investors better understand the characteristics and risks of complex products before investing, the HKMA launched the complex product framework in 2012, dividing capital market products into "complex" and "non-complex" products.

For complex products, it is recommended to clearly indicate them with red labels to remind investors to consider whether they need to seek professional consultation. The HKMA also recommends that a product introduction list must be provided after investment and investment insurance policies.

The HKMA regularly reviews the above frameworks based on market changes and feedback. The HKMA believes that over the past 10 years, the ways for retail investors to obtain relevant knowledge of investment products have improved.