Key facts statements

The KFS templates which you can find on SFC's website are for illustrative purposes only. The information and form of presentation of an actual KFS may vary from product to product, and issuer to issuer. Let's take the KFS template of an SIP as an example. When you read the KFS of an SIP, you may find the following information:

• Name and type of product, and name of issuer

• Quick Facts
  
  This section gives you the SIP's basic information at a glance and may include the following information (if applicable):
  
  

  Offer period Issue price Denomination Minimum investment Maximum loss/gain

  Issue date Maturity/Expiry date Product type Principal protection at maturity/expiry Early termination by issuer

  A KFS may not contain all the above information, given that some of these terms are unique to specific series of the SIP.
• Type of product and how it works
  
  In this section, you can learn about:
  
  
  • the nature of the product;
  • how the product works to deliver any potential return; and
  • the scenarios for potential gain and loss.
• Key risks
  
  SIP may involve additional risks as they involve derivatives. The involvement of counterparties in structuring such products also results in additional risk exposure. In the case of an SIP, make sure you understand the following risks:
  
  
  • the maximum loss that you, as an investor, might suffer;
  • for a collateralised SIP, you, as an investor, may not always have first priority claim to the proceeds of realisation of the collateral;
  • whether the SIP is capital-protected;
  • any ceiling set on potential gain or any upside limit;
  • there is no liquid secondary market / only limited market-making arrangement for the SIP;
  • you will be bearing the credit risks of the issuer and any other counterparties; and
  • investing in the SIP is not the same as investing in the reference asset (e.g. the linked stock).
• Key features
  
  This section explains the product features and how they affect your potential gain or loss. Depending on the features of a particular SIP, it may state the following:
  
  
  • the conditions whereby the SIP will be early called by the issuer (if it involves a call feature) and what you may get in return under such circumstances;
  • any maximum potential gain that you may enjoy; and
  • describing different payout scenarios, including any coupon / distribution in the worst case scenario, and whether the product will be physically settled by delivery of the reference asset.
• Any guarantee or collateral
  
  This section tells you if the SIP has any guarantee or collateral and your rights and exposure as an investor. For collateralised SIP, find out the priority of your claim to any proceeds from the liquidation of the collateral. If you do not rank first, find out where you stand in the payment waterfall illustration. You should obtain independent advice if you are in doubt as this is a complicated area of law.

• Scenario analysis
  
  A scenario analysis demonstrates potential gain or loss situations, including at least the worst-case scenario.

• How to buy the product
  
  This section lets you know what you have to do if you wish to invest in the SIP, for example, contact the intermediaries which distribute the product and complete the application documentation as required by the intermediaries, etc.

• Mode of settlement
  
  Find out how the investment will be settled upon termination or maturity of the investment. Settlement can be in cash or physical delivery (of the linked stock). The KFS should tell you if you can choose the settlement method.

• Adjustments to terms and conditions
  
  This section tells you whether the terms and conditions of the SIP may be adjusted following the occurrence of certain extraordinary events. Find out more details in the offering documents.

• Fees and charges
  
  This section lists out the fees and charges applicable to the investment. You should know that any fee or charge payable will affect the potential gain or loss of your investment.

• Cooling-off period
  
  This section tells you if post-sale cooling off is applicable to the SIP. If it applies, this section will give you details such as how you may exercise such right, how long the cooling-off period may be and an explanation of how the refund will be calculated, and the possibility of a less-than-full refund.

• Can you sell the product before maturity?
  
  This section will answer the following questions:
  
  
  • Is there any market-making (Note 1)arrangement?
  • How often will such market-making arrangement be provided?
  • How do you obtain an indicative bid price?
  • Who determines the sell-back price?
  • Would the sell-back price be substantially lower than the original investment amount?
• Continuing disclosure obligations
  
  This section lists out some of the information which the issuer is required to disclose to investors during the term of the product. For example:
  
  
  • Inability of the issuer or its guarantor (if applicable) to meet its eligibility requirements; and
  • Information about the issuer, its guarantor or key product counterparty (if applicable) which may have a material adverse effect on its respective ability to fulfil obligations in connection with the SIP.
• Information on product arrangers (Note 2)or intermediaries
  
  This section indicates where you can find the contact information of the product arranger (if applicable) and the intermediaries. If you have any questions about the product, you should contact your intermediary. As always, if in doubt, you should seek professional advice.

The Code on Unlisted Structured Investment Products (SIP Code) became effective on 25 June 2010. Therefore, SIP issued or to be issued with offering documents authorized on or after 25 June 2010 are required to comply with the SIP Code and contain a KFS as part of the offering documents.

Please click here to view the illustrative templates of the KFS.

Note 1: For SIP with scheduled term of over 6 months, issuers are obliged to provide market-making. Issuers must make indicative bid prices available at least bi-weekly, and depending on the investor's execution instruction, are obliged to buy back the SIP at a price accepted by the investor.

Note 2: A Hong Kong-regulated product arranger meeting the eligibility requirements under the SIP Code must be appointed in situations where the issuer of the SIP is a special purpose vehicle or neither the issuer nor the guarantor, where applicable, is regulated by the SFC or HKMA in Hong Kong.