Hong Kong's securities regulator said on Wednesday that it will proceed with its plan to refine the requirements for proving high-net-worth professional investor status by taking a principles-based approach.
The amended Professional Investor Rules (PIR) will provide firms with more flexibility over the methods they use to assess whether an investor meets the relevant asset amount or portfolio threshold to qualify as a professional investor. This is on condition that firms keep records of the assessment process.
The Securities and Futures Commission (SFC) aims to preserve the existing methods set out in the current PIR, but will extend the scope of the PIR to any corporation wholly owned by one or more trust corporations, individuals or corporations/partnerships who would qualify as a professional investor.
'High-net-worth professional investors' under the existing PIR include: a trust corporation with total assets above HK$40 million or its equivalent; an individual with a portfolio of more than HK$8 million; a corporation or partnership with either a portfolio more than HK$8 million or total assets above HK$40 million; or a corporation whose principal business is to hold investments and which is wholly owned by an individual owning a portfolio more than HK$8 million.
However, some market participants had raised the issue that certain evidential requirements have caused difficulty in ascertaining and treating clients as professional investors. The SFC launched a public consultation in October to address the issue, and has reviewed 16 written submissions from market participants and professional bodies since then.
Upholding the philosophy of a principles-based approach, the regulator has decided not to adopt some respondents’ suggestions to provide additional guidance on the standard and methods for assessing investors’ portfolio levels.
The SFC also feels it is unnecessary to provide additional guidance on circumstances under which it would be appropriate to accept self-certification and a sample statement or check-list for self-certification, as requested by one respondent.
Meanwhile, some respondents’ had called for a relaxation of the requirement to use a specific date in the assessment process as being "logistically impracticable", but the regulator declined. In any case, most respondents had agreed to this requirement.
