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US ethics watchdog hails SFC plan

Financial planning body says tougher rules on insurance-linked products will benefit investors

PUBLISHED : Monday, 22 April, 2013, 12:00am
UPDATED : Monday, 22 April, 2013, 2:50am

A plan by the Securities and Futures Commission to tighten rules on investment-linked insurance products will bring the city into line with international efforts to prevent mis-selling and promote investor protection, according to an international financial planning expert.

Noel Maye, the chief executive of the Financial Planning Standards Board (FPSB), a US non-profit organisation that sets qualifying examinations and ethical standards for financial planners worldwide, said many Western countries had since 2008 enforced tougher disclosure requirements for salespeople.

"Hong Kong is heading in the right direction in introducing measures to prevent mis-selling of investment and insurance products. It's important for salespeople to clearly explain to investors the risks of the products they are selling as well as the fees involved," Maye said on a trip to Hong Kong, where the FPSB is arranging a meeting this week for financial planners from 14 countries to exchange views.

SFC chairman Carlson Tong Ka-shing said last month the regulator would tighten the rules on investment-linked insurance, products, particularly sales processes.

Such products, which allow investors to choose how their premium will be invested, are currently not regulated by the securities watchdog. Neither are salespeople required to obtain an SFC licence.

Maye said FPSB required all its financial-planner members to follow certain requirements for safeguarding the interest of their customers.

Under these requirements, financial planners should only sell products that fit the need and risk appetite of customers and the salespeople must disclose the fees and commissions they make.

He said the regulator must also monitor the firms that produce investment products.

"Regulation on the sales process alone is not enough to protect investors' interest," he said. "It is also important to prevent bad investment products [from reaching] the market."

Besides the SFC, the city's pension regulator, the Mandatory Provident Fund Schemes Authority, is also working on a plan to curb fees and improve disclosure among pension funds.

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