Today I would like to highlight a few more controversial issues about staff dealing.
Spouse accounts
An employee should identify all related accounts which are supposed to be under his control or influence (e.g. minor child a/c, company a/c, etc). How about spouse accounts? Nowadays a couple could be quite financial independent from each other. Obliging your spouse to disclose his/her personal dealing accounts may a pose a family problem! Many firms allow their staff to declare independence of their spouses to avoid disclosure.
Employees of another licensed / registered firms
SFC discourages, but not prohibit (except for Type 3 licensees), employees of a licensed / registered firm to deal with another firm. When opening an account for any employee (even unlicensed / unregistered) of the other firms, you should obtain his / her employer's letters of consent.
But how about if the client is working in a bank which is also a registered institution? Normally most of the staff of a retail bank are not engaging in regulated activities. Would it become unduly burdensome to request for the letter of consent from a bank employee working under credit card department? My suggestion is that such request should only be made to bank staff registered with HKMA and all of those staff supporting the investment service operations (e.g. securities settlement).
Dealing in unlisted funds
Should dealings in unlisted funds (which are also regarded as securities) be monitored by the senior management and/or compliance? SFC does not mention about this, but obviously such dealings in general would not create any conflict of interest problem. Some firms choose to waive unlisted fund transactions from the pre-approval requirement.
In connection with spouse accounts, the Code states only that accounts of minor children and accounts in which the employee has “beneficial interest” be identified. The MA however demand also that spouse accounts be declared and monitored as well. (They have stringent requirement than the SFC) Therefore, so long as an employee says he has no beneficial interest in the spouse’s account, than he is not required to declare it as a related account (unless you work in a registered institution)
ReplyDeleteRegarding employees of a bank, usually a bank has bank-wide staff dealing policy that applicable across the board, hence even a janitor has to follow the staff dealing policy. Besides, the bank’s staff dealing policy usually requires employees (regardless of their positions) to solicit mgt’s approval for opening/maintaining outside investment account, there are standard forms for them to fill in. The bank’s practice will give a little bit help as (1) the bank employee knows what you are talking about and (2) he just goes back and fills in the standard form and gets it approved by say the compliance dept or HR or dept head. I have advised colleagues responsible for opening accounts to ask the bank employee to go back and check with their compliance dept or internal staff dealing policy and so far we have not met with too much difficulties regarding bank employees who have nothing to do with investment.
Somehow I am still uncertain whether transactions in future contracts have to be reviewed like stock trading as I believe it is difficult for a staff member to have influence on the future market or there is the issue of conflict of interest. (?????)
The problem of spouse accounts reminds me of the requirements of para. 16 of the Code.
ReplyDeleteAn analyst (in fact the SFC requires every licensed rep.) should disclose the fact whether he and/or his associate has a financial interest in the commented stocks (16.9(a)(iii)).
Should an analyst (licensed rep.) be entitled to request his assciates to disclose their financial interest? Shoud the analyst bear in mind his associates financial interest?
Para. 16, while entitled "Analysts" and applicable to analyst (16.1), the SFC in the SFC has expressed the view in the FAQ (point 1) that dealer representatives have to follow (in relation to appearing in the mass media which includes publication of ariticles). Why the SFC did not state their real intention in the Code so as to make the requirements clear???
What about people licensed for RA2 but comments on securities? What about people licensed for RA9?
I dont have a clue.
Since analyst is considered by SFC as a more "sensitive" function, he is required disclose his associate's financial interest in the stocks he has a research coverage.
ReplyDeleteAs "analyst" is not a license type, SFC should specify under what conditions a person is regarded as an analyst and subject to Paragraph 16.
It is illegal for a person licensed only for RA2 or RA9 to advise on securities. But he is allowed to make commments on securities in mass media without license (just like financial journalists). Since he is a licensed rep, he needs to follow Paragraph 16 when appearing in media.