Dealing with clients

Given that this practice is already well established in the marketplace, on the basis that the authenticity of the instruction is not compromised by the different way of communication, the SFC shall take instructions received by Platform Operators via their on-line platform as equivalent to instructions in writing.

Q2 : What procedures and controls should Platform Operators implement when handling client’s instruction for change of client particulars?

Platform Operators should, amongst other things:

ensure any change of client particulars are supported by client written instructions and supporting evidence (eg, address proof) (where appropriate) and subject to independent verification if necessary;
maintain an audit log of change in client particulars for management review on a regular basis; and
review clients’ addresses shown in the client database for anomalies, such as use of same address by different clients and follow up on any anomalies.

(Key references: Paragraphs 9.5 and 9.8 of the VATP Guidelines)

Q3 : If a Platform Operator’s practice (as specified in a client agreement) is only to allow the account holder and all of the account holder’s authorised representatives (if any) to place or originate instructions, can the Platform Operator regard the account holders and their authorised representatives as “persons ultimately responsible for originating instructions” and will this comply with paragraph 9.8 of the VATP Guidelines?

This practice appears acceptable in the ordinary course of events. However, the Platform Operator should go beyond these steps where there are suspicious circumstances by making further inquiries or by refusing the business.

Generally, a Platform Operator’s duty is to be satisfied on reasonable grounds about the persons ultimately responsible for originating an instruction. The Platform Operator in question may consider including the following terms in its client agreement:

warranties that the account holder is the only person with a beneficial interest in the account;
specific contractual terms that the Platform Operator only accepts instructions from the account holder and its authorised representatives; and
an undertaking from the account holder along the lines that it will take efforts to ensure that only it or its authorised representatives will place instructions with the Platform Operator in relation to its account.

(Key references: Paragraph 9.8 of the VATP Guidelines)

Q4 : According to paragraph 9.30 of the VATP Guidelines, a Platform Operator should, upon request, provide clients with a copy of the latest audited balance sheet and profit and loss account. Must all Platform Operators comply with this requirement taking into account that the information is of a sensitive nature? Can a Platform Operator request its clients to sign a declaration to preserve confidentiality of such information?

All Platform Operators are required to comply with paragraph 9.30 of the VATP Guidelines in providing their latest audited balance sheet and profit and loss account to their clients. Platform Operators can request their clients to sign the confidentiality declaration if they so desire.

(Key references: Paragraph 9.30 of the VATP Guidelines)

Q5 : What procedures and controls should Platform Operators implement over dormant accounts?

A: Platform Operators should review trading activities and other transactions in dormant accounts on a regular basis for irregular movements and take appropriate follow-up actions as necessary.