Intermediaries are not expected to rigidly apply the CPI Assessment and use a ‘tick-box’ approach when determining whether a Corporate Professional Investor satisfies the Assessment Criteria.  For example, the Commission does not set out any specific corporate model or specific background of the decision maker(s) that the corporation must have in order to meet the CPI Assessment.

The assessment has always been products and markets specific under the Code⁴.  Thus, an intermediary is expected to exercise its professional judgment to classify products and markets into different categories as appropriate and apply the relevant classification to the relevant Corporate Professional Investor when performing the CPI Assessment.

When conducting the CPI Assessment, an intermediary should take into account the products and markets under consideration (i.e., the relevant products and markets) including the nature, features and risks of such products and markets.  For example, an intermediary will be expected to apply higher thresholds when assessing Corporate Professional Investors for products that are inherently more risky and complex. 

Accordingly, being able to satisfy the CPI Assessment for one product or market may not necessarily mean being able to satisfy the CPI Assessment for another product or market.

An intermediary should take into account all reasonable and substantive considerations to assess how investment decisions are made by the Corporate Professional Investor.  An intermediary should exercise its professional judgment as to whether the Corporate Professional Investor has an appropriate corporate structure, investment process and controls (e.g., resources, systems, etc.) in place to make investment decisions and manage the risks of the investment portfolio as a financially sophisticated firm.  For example, a Corporate Professional Investor would be more likely to be regarded as having an appropriate corporate structure and substantive investment process and controls if it satisfies any of the following criteria:

1. has an in-house treasury, investment or similar function comprising competent and suitably qualified professionals responsible for its investment strategies and investment process;
   
   
2. has a designated investment committee comprising competent and suitably qualified professionals responsible for its investment strategies and investment process; and (i) such a committee makes investment decisions on behalf of the Corporate Professional Investor or (ii) the Corporate Professional Investor makes informed investment decisions taking into account the advice or recommendation of such committee;
   
   
3. engages an external investment advisory team comprising competent and suitably qualified professionals responsible for its investment strategies and investment process; and (i) such a team makes investment decisions on behalf of the Corporate Professional Investor or (ii) the Corporate Professional Investor makes informed investment decisions taking into account the advice or recommendation of such team, and in each case this external team is:
   
   (i)      independent of the intermediary that is conducting the CPI Assessment;
   (ii)     subject to regulatory oversight (where required); and
   (iii)    in an investment advisory capacity in advising the Corporate Professional Investor on investment strategies, advice and recommendations;
   
   
4. relies on and follows the investment strategies, advice and recommendations of its related corporation provided that such related corporation:
   
   (i)      has an in-house treasury, investment or similar function;
   (ii)     has a designated investment committee; or
   (iii)    engages an external investment advisory team that meets the conditions set out in paragraph 2(c) above,
   
   that comprises competent and suitably qualified professionals responsible for the investment strategies and investment process of the Corporate Professional Investor;  
    
5. is ultimately owned by or established for the ultimate benefit of an individual or individuals (such as family members) and it relies on competent and suitably qualified professionals to manage the investments of the Corporate Professional Investor, where either:
   
   (i)      the professionals are authorised to make investment decisions on behalf of the Corporate Professional Investor; or
   (ii)     the Corporate Professional Investor makes informed investment decisions taking into account the advice or recommendation of such professionals; and
   
   the professionals are responsible for the investment strategies and investment process of the Corporate Professional Investor. 

As regards the considerations that an intermediary should take into account in determining whether a person acting within the capacities mentioned in the subparagraphs above is competent and suitably qualified for investment strategies and investment process of the Corporate Professional Investor, please refer to Question 3 below.

In assessing the background of the person(s) responsible for making investment decisions on behalf of a Corporate Professional Investor and whether a person is competent and suitably qualified for investment strategies and investment process of the Corporate Professional Investor, the intermediary should ensure that such person is competent and suitably qualified in relation to relevant products and/or markets. The intermediary should take a holistic approach and take into account all relevant and reasonable considerations, such as:

1. investment experience and history (including personal investments and investments for the account of others) which is directly relevant and related to the relevant products and markets, taking into account the level of responsibility, for how long and how long ago;

2. work experience in the financial sector (including investment management, investment research, recommending or selling investment products), which is directly relevant and related to the relevant products and markets, taking into account the level of responsibility, for how long and how long ago; and 

3. academic or professional qualifications relating to the relevant products and markets.

Section 4 of the Guidelines on Competence issued by the Commission also provides some useful reference points for the expected standards.

It would not be acceptable for an intermediary to purely rely on a written representation from the Corporate Professional Investor confirming that it meets the Assessment Criteria (for instance via acknowledgements on the account opening documents).  Instead, an intermediary should holistically review and assess the information/documents provided by its client and make its professional judgment as to whether the Assessment Criteria are satisfied.

An intermediary should as far as possible obtain supporting documentation from the Corporate Professional Investor to evidence its CPI Assessment.  An intermediary should maintain proper audit trail of the enquiries made and information/documents obtained in the CPI Assessment and its assessment results, including that the intermediary should prepare a written account and conclusions of the final assessment based inter alia on discussions with the Corporate Professional Investor and the review of relevant supporting documentation.

An intermediary should assess whether the Corporate Professional Investor has the appropriate corporate structure, investment process and controls of a corporation.  If the necessary substantive investment processes and controls are lacking in a corporation and the corporation is effectively controlled by a single individual or a small number of individuals such as married couples, it is unlikely to be able to satisfy the CPI Assessment even though they themselves are financially experienced.  In general, a Corporate Professional Investor established primarily for tax planning or property or investment holding purposes with investment decisions being made by its shareholder(s) is less likely to be able to satisfy the CPI Assessment.