Sales process
Starting from 4 June 2011, intermediaries (e.g. banks, brokerages, investment advisers) will be required to disclose more information to enhance transparency with respect to the sale of investment products.
Enhanced disclosure
Under the new requirements, intermediaries selling investment products must disclose to investors any benefits it would receive from the product issuer - both monetary benefits such as commission rebates, as well as non-monetary benefits such as free access to research services. Furthermore, intermediaries are required to disclose to investors the trading profit made from transactions in which, after receiving buy orders from investors, they source the products externally and re-sell the products to the investors.
In addition, the intermediary must let you know whether it is acting as principal or agent in the transaction and whether it has any affiliation with the product issuer. They also must tell you generically the terms and conditions under which you may receive a discount of fees and charges.
How disclosure works
Disclosures should be made in writing prior to or at the point of sale. But if the information cannot be provided in writing before a transaction is completed, the intermediary should make the disclosures verbally, at least, and give you such information in writing as soon as practicable after the conclusion of the deal.
Enhanced disclosure of sales-related information is to ensure that you are in a better position to make informed decisions. Stay alert and watch out for any possible conflict of interest between the product issuer and intermediary. Know your right to know.
