The Code of Conduct provides principles-based guidance relating to the practices and standards with which intermediaries are ordinarily expected to comply in carrying on regulated activities for which they are licensed or registered. The SFC’s codes and guidelines represent high-level articulation of what it expects intermediaries to do. Intermediaries should decide how best to align their business objectives within the boundaries of applicable rules and regulations.
In general, the “client” means all of the scheme participants, shareholders or unitholders (as applicable) of the relevant CIS collectively.
Code of Conduct
Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct)
Type 13 regulated activity (RA 13)
Q1 :
How should an RA 13 intermediary apply requirements in the Code of Conduct to providing depositary services for a relevant collective investment scheme (CIS)?
Who should be regarded as the “client” for an RA 13 intermediary?
Q2 : If an OTC derivative transaction is entered into in the name of an RA 13 intermediary in its capacity as a trustee for a relevant CIS, is it responsible for implementation of the risk mitigation requirements and margin requirements stated in paragraph 4.3A of the Code?
Q3 : For the know-your-client requirement, is an RA13 intermediary required to establish the true and full identity of the scheme participants, shareholders or unitholders of the relevant CIS under paragraph 5.1 of the Code? Can a relevant CIS be classified as an Institutional Professional Investor under paragraph 15.2 of the Code?
An RA13 intermediary can be regarded as compliant with paragraph 5.1 of the Code in respect of a relevant CIS if it complies with the Customer Due Diligence (CDD) requirements under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Please refer to the respective FAQ for the relevant CDD requirements.
A relevant CIS is an Institutional Professional Investor (IPI) under paragraph 15.2 of the Code. An RA13 intermediary is automatically exempt from the provisions set out in paragraphs 15.4 and 15.5 in its provision of depositary services to a relevant CIS.
Q4 : What would constitute “client assets” of an RA13 intermediary under the Code?
One of the core functions of an RA13 intermediary is custody and safekeeping of relevant CIS property in the course of conducting Type 13 regulated activity. For the purpose of GP8 and paragraph 11.1(a) of the Code, client assets refer to relevant CIS property.
In respect of relevant CIS property received or held overseas, there is no need for an RA13 intermediary to provide the disclosure under paragraph 11.1(b) of the Code as a relevant CIS is an IPI.
Q5 : How should an RA13 intermediary handle a complaint against a relevant CIS for which it provides depositary services?
If an RA13 intermediary receives a complaint from a scheme participant, shareholder or unitholder of a relevant CIS to which it provides depositary services, and the complaint is related to (i) the custody and safekeeping of the relevant CIS property or (ii) the oversight of the relevant CIS to ensure that it is operated in accordance with its scheme documents, the RA13 intermediary should handle the complaint in accordance with paragraph 12.3 of the Code.
If the complaint is related to activities conducted by the fund manager or another relevant operator in relation to the relevant CIS to which the RA13 intermediary provides depositary services, the RA13 intermediary should have measures or controls in place to ensure that the fund manager or the relevant operator handles the complaint in a manner consistent with paragraph 12.3 of the Code.
Last update: 30 Sep 2024