Sounding Board
Dear Reader,
Among the enquiries and complaints we received from the public, we noticed that investors at times appeared not to fully recognise the risks involved in investing until they have suffered a loss, or have been charged a fee that they were not aware of, etc. A common theme runs through these issues is investors' oversight of the implication of signing sales documents.
The act of signing, be it a contract, agreement, application form or even a reply slip, confirms one's understanding of and agreement with the content of a document and all possible consequences of the commitment.
Since mid-2010, the SFC has introduced various measures to raise standards of selling practices in the financial industry. The measures include requiring intermediaries to assess an investor's knowledge of derivatives and disclosing to the investor sales-related information. Given that selling of investment products is and should be an interactive process, it is crucial that investors realise they also play an important role in protecting themselves. Below are a few points to bear in mind before signing on the dotted line:
- Make sure that the forms you sign are in a language that you fully understand.
- Never sign on blank forms as any terms can be inserted later, possibly to your disadvantage.
- Ask about the downside risk and maximum loss related to your investment under the worst-case scenario.
- Always get a copy of what you have signed so that you can go over it again carefully afterwards, especially during the cooling-off period (This applies to unlisted structured products with a scheduled term of more than one year).
Our latest television commercial walks you through the process of finding out the basis whereby your intermediary draws your risk profile, knowing the rationale of the investment recommendation, and understanding the associated downside risks.
In times of many economic uncertainties and high market volatility, investments inevitably will be exposed to higher risks. For the same reason, it is vital to assess your own circumstances and risk tolerance level before committing to any investment, which you acknowledge using your signature.
May 2012 bring you profit from prudent investing!
Andrew Wan
CFO and Senior Director, Corporate Affairs