New Analyst 'Conflict Of Interest' Guidelines Released In Hong Kong
by Mary Swire, Tax-News.com, Hong Kong
04 November 2004

The Hong Kong Securities and Futures Commission announced yesterday the publication of conclusions and guidelines resulting from the consultation on regulations to address analysts’ conflicts of interest.

Expressing the belief that it has struck a balance between investor protection and free flow of information, the SFC revealed that a number of changes to the consultation proposals have been made as a result of feedback from the finance industry.

For greater investor protection, the trading blackout following the issuance of research has been extended to three days, whilst there will be safe harbours for quiet periods and trading blackouts so that firms’ normal business is not disrupted.

The guidelines will also impose more stringent requirements on investment banks, and will seek to prevent conflicts of interest from arising by prohibiting their research analysts from making sales pitches or participating in sales road shows.

Furthermore, analysts must make more disclosures in media appearances about their identity, a provision intended to protect retail investors, who often act upon their advice.

The guidelines will apply only to registered or licensed persons. However, the SFC has stressed that all media commentators will continue to be bound by the market misconduct principles laid down in Securities and Futures Ordinance. However, the regulator said it was keen not to “fetter the free flow of information.”

Praising the new guidelines, Alexa Lam, the SFC’s Executive Director of Intermediaries and Investment Products noted that they “seek to establish clear industry benchmarks.”

“Together with investor education, the SFC believes that once these guidelines are in place, market forces will push towards better information flow and transparency in the market place, as well as higher professional standards in the industry,” she observed.

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