HONG KONG: SFC Advises on Rebuilding Investor Confidence

Wednesday January 21 2009

The Hong Kong Securities and Futures Commission (SFC) has today produced their advice on rebuilding investor confidence in the fund industry, although at the same time commenting on the resilience of the Hong Kong funds market despite current significant retrenchments in the market and heavy redemptions.

Mrs Lam, the Deputy Chief Executive Officer and Executive Director, Policy, China and Investment Products recommends that robust regulation and sound management practices will help restore investor confidence in the fund industry. She also called on fund managers to be responsive to market demand under the current economic climate.

Further, Mrs Lam highlights the importance of adequate risk disclosures, proper suitability advice and investor education in regaining confidence that has been heavily battered in the recent market turmoil. She states “Now is the time to show investors that you understand their concerns, that you are willing to walk the extra mile to give them the information that makes it easier for them to understand.”

Mrs Lam pointed out that the SFC has also authorised more than 80 new funds since mid-September. She called for a constructive and two-way dialogue between the regulator and industry players to help rebuild market confidence.

Finally, as a footnote, we note with a little surprise Mrs Lam’s specific welcoming of innovative products to enable retail investors to gain short exposure to bear markets, specifically mentioning inverse/short ETFs. Please click here for Mrs Lam’s speech on The Financial Crisis and Lessons for the Fund Industry.