Asia and australia's sales practices

Best Practices on Selling, Compliance & the Implementation of the Securities and Futures Ordinance [Speech by Alexa Lam]
http://www.sfc.hk/sfc/doc/EN/speeches/public/surveys/05/report_on_selling_practices_of_ia_eng.pdf
http://www.sfc.hk/sfc/doc/EN/speeches/speeches/05/acl051027_eng.pdf
Thoughts about “best practices on selling, compliance and the implementation of the Securities and FuturesOrdinance”. I will focus more on “conduct-of-business supervision”, rather than “prudential supervision”.
four subjects:
• First, our regulatory philosophy;
• Second, corporate governance under the notion of “conduct-of-business supervision” (which brings out issues on management, supervision and internal controls);
• Third, appropriate selling practices; and
• Finally, some thoughts oncompliance with regulatory requirements.
Regulatory philosophy
We believe the wellbeing of investors is key to the healthy development of financial markets. It is imperative for us to ensure that our regulatory framework provides sufficient protection for investors, taking into account their degree of understanding and expertise, and at the same time, not to place too onerous a burden on marketoperators that would stifle flexibility and innovation.
Under the “honesty and fairness” principle, we expect financial intermediaries to act honestly, fairly, and in the best interests of their clients when conducting their business activities; to act with due skill, care and diligence.
Corporate governance – management, supervision and internal controls
We expect financial intermediaries to haveproper internal controls so as to reasonably assure that they have the ability to:
• carry on their business in an orderly and efficient manner;
• safeguard assets;
• maintain proper records; and
• comply with all applicable statutory and regulatory requirements.
Under “segregation of duties and functions”, financial intermediaries should have clear lines of responsibility to minimize and manageconflicts, provide efficiency and reduce margin for errors.
In managing and running the business of intermediaries in the financial markets, information is key. Under “information management”, we expect financial intermediaries to establish policies and procedures to ensure the integrity, security, availability, reliability and thoroughness of all information, including documentation andelectronically stored data.
Under “risk management”, we expect financial intermediaries to establish and maintain effective policies and procedures to ensure the proper assessment and management of risks to which they are exposed and the provision of timely and adequate information to their senior management to enable appropriate and timely action be taken to contain and adequately manage such risks.Under “operational controls”, which is particularly important to our discussion today, we expect financial intermediaries to establish and maintain effective policies and operational procedures and controls for their day-to-day business operations.
For certain specific regulated activities, we also expect financial intermediaries to implement specific “operational controls”. For instance, wherethe financial intermediaries are in the business of offering investment advice, we expect the financial intermediaries to have in place specific control measures, such as:
• establishing clear requirements and procedures relating to the adequacy of the research work and the preparation and retention of proper documentation supporting the recommendations made or advice given; and making sure thatthese requirements are complied with at all times;
• providing the clients with details of fees, charges and penalties applicable to the recommended financial products;
• documenting the rationale underlying the recommendations made or advice given, explaining and providing a copy of such report to the clients; and
• making sure that the recommendation made or advice given is suitable to the...