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Hong Kong regulator to axe ‘execution-only’ business

Hong Kong regulator to axe ‘execution-only’ business

Hong Kong’s upcoming regulatory change requiring the classification of all products sold. The move comes as the emergence of online trading by HNWIs (high-net-worth individuals) has led to a gap in the accountability of the sales process.

Effectively, disclaimers and checkboxes ubiquitous in the financial world online allow false or partial “reverse inquiry” transactions (also commonly referred to as “execution-only”) to bypass the traditional compliance net, finews.asia reports.

“What would often happen is an RM (relationship manager) would push an uncovered product to a client but say that he or she would need to jump through hoops to successfully transact in the normal channel,” a regional product head told the specialised news outlet.

“And then the client would be suggested to go online, click all the ‘I agree’ buttons and trade. This way, the RM does not need to go through the standard processes,” he added.

the industry believes that the rules will disrupt an even playing field as larger banks are not only better positioned to receive more due diligence requests and attract more client assets but also at a more competitive rate and lower minimum amount due to economies of scale.