Mystery Shopping Programme

Following the Minibond incident, both HKMA and SFC have proposed the use of mystery shopping to detect sales malpractices. Last week they jointly issued an invitation to tender for the Mystery Shopping Programme (MSP) for the sale of unlisted securities and futures investment products in Hong Kong.

Scope:

• The MSP is a market wide exercise focusing on the retail market and capturing experiences from different types of Intermediaries in the banking sector and the securities sector selling investment products.
• The regulators want to ascertain if the sales consultants follow their rules and regulations during the sales process, including but not limited to making of recommendations and/or solicitation on investment products. The MSP will focus on a number of areas, including "know your client" procedures, risk disclosure and suitability of investment recommendation.In addition to the audio recordings, all completed questionnaires and materials received by the shoppers must be handed over to the service provider, which will in turn, be provided by the service provider to the regulators at the conclusion of the MSP. No copies may be retained by the shoppers or the service provider. The regulators may require the service provider to certify that all the audio recordings, completed questionnaires and materials received by the shoppers have been returned to the Regulators. During the MSP, the regulators may request for documents and audio-records of particular samples for testing or review purpose.
• The MSP will cover shoppers of various age groups and with specific investment objective, investment experience, financial position and attitude to risks.

Sample size:

• The target Intermediaries will be determined by the regulators and the sample size will cover (i) the banking sector which includes large, medium and small banks; and (ii) the securities sector which includes securities brokers and investment advisers.
• The exact number of target Intermediaries and sample size are to be determined but tenderers should give separate quotations in multiples of 50 samples starting from 400 up to 700 samples (total for both banking and securities sectors).

Methodology and main duties of the MSP service provider:

• All shoppers are to be sourced, recruited and trained by the MSP service provider. It is expected that the shoppers will use their real personal identity and act as potential clients. In relation to the method of initial approaches to the sales consultants within targeted Intermediaries, it is expected that there will be a mix of approaches from "walk in", telephone and/or responding to advertising or marketing.
• The regulators may request all mystery shopping interviews to be audio-recorded and the recordings to be handed over to the regulators. No copies may be retained by the shoppers or the service provider.
• The service provider will undertake to comply with the Personal Data (Privacy) Ordinance in performing the MSP.
• A shopper questionnaire will be designed by the regulators and mandatory for shoppers to complete and to submit the same to the regulators upon request. This questionnaire will document the shoppers' experiences and consist mainly of closed-end questions requiring yes/no answers with some open-end questions requiring opinions from the shoppers.
• Training provided by the service provider should cover posing as potential clients. The service provider should also provide training and simulations on how to audio-record mystery shopping interviews, carry out assessment process, complete questionnaire, etc.
• All the mystery shopping meetings must be face-to-face. It is expected that a number of meetings may be conducted before reaching a point where investment recommendation on investment products will be provided, and the shoppers would not be required to make any investment. In the event that a shopper makes an investment out of his own volition, the shopper has to bear his own costs and risks. The regulators will under no circumstances be liable for any investment and related expenses and for any loss or damage incurred by the shopper.
• During the mystery shopping exercise, the service provider will perform on a regular basis quality control on the completed questionnaires, which will include reviewing samples of completed questionnaires by checking the answers of the completed questionnaires against the relevant audio-recordings and provide the regulators with statistics of the answers in the completed questionnaires.
• The service provider will administer the mystery shopping interviews (e.g. follow up with the shoppers on completion of the questionnaire, debrief the shoppers after the first few mystery shopping interviews to resolve any unanticipated problems and perform quality control on data gathered, which includes but is not limited to an independent review on the completeness and accuracy of all the completed questionnaires).
• After the first two weeks of commencement of interviews conducted by the mystery shoppers, the regulators will select samples conducted during that period, review the documents received by, and questionnaires (if any) completed by, the shoppers and listen to the audio recordings to test the adopted working approach carried out by shoppers and other elements of the MSP and provide feedback to the service provider.
• The service provider should establish and maintain such measures and procedures to provide for the safe custody and proper handling of information (including audio recordings and materials received by the shoppers) obtained in the MSP and to prevent unauthorised access to, or use of, such information. The service provider shall also comply with all instructions of the regulators relating to the handling and storage of the information obtained in the MSP.
• The service provider will provide bi-weekly status report to the regulators summarising issues identified, and task progress, etc.
• The service provider will analyse the results of the completed questionnaires and summarise the findings for the purpose of preparing reports to the regulators.

(Jack's comment: Thanks HKMA and SFC for creating employment opportunities. I am interested in assisting the service providers for training the mystery shoppers.)