If you claim yourself to be a professional accountant, I would expect you are quite knowledgable in the accounting discipline or even have obtained a relevant qualification. If a customer is named as a Category-B PI, should I expect he is (say) a CFA or at least an investment expert? Of course not! They are PI just because they are wealthy. If they are investment experts, how come you can act as their investment advisers?
When you sell those complicated products (e.g. hedge funds) to a "rich dad", you believe you don't need to ensure suitability because they are Category-B PI. However, when they sue you for mis-advising and demonstrate to the judge that they are ignorant of investing, don't you think you can escape all liability?
Somebody argued that an ignorant PI can protect himself by appointing a professional to advise him. This is a circular argument. If you are the professional adviser, how could you advise your client to prevent from being cheated by you!?
In conclusion, my recommendations to SFC are:
- Rename "professional investor"; and
- Remove the Code of Conduct waivers available to Category-B PI.
Outside
ReplyDeleteAs retail wealth management business becomes more and more competitive, many intermediaries will try their best to convince ignorant wealthy "retail" customers to upgrade to "PI" (customers are convinced that they are "VIPs" (?!)that very "unique" or "tailor made" or even "limited version" products will be offered to them!?) so as to faciliate "cold calling" and selling sophisticated but unauthorized investment products
The Cat B PI is only a way for intermediaries to cold call or to sell unauthorised products. The intermediaries do not want the procedural relaxation. At least one bank I worked for used Cat B PI for selling purpose only.
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