In the future, banks can only sell equity-linked securities (ELS) products in designated separated spaces within branches. When selling high-risk financial investment products other than ELS, they must also be dealt with at counters separate from those handling deposits.
Kim So-young, the vice chair of the Financial Services Commission, noted on the 26th that a plan addressing the Hong Kong H Index ELS incident was announced. From now on, banks can only sell ELS at flagship branches that have physically separated spaces through separate entrances or floor divisions. Furthermore, bank employees selling ELS must have product sales experience of a certain duration. The Financial Services Commission expects that only about 5-10% of all branches will meet these criteria.
The sale of high-risk financial investment products other than ELS will also be restricted. Products other than ELS can still be handled at general branches as before, but the sales counters must be separated from general counters. Banks must differentiate the colors of partitions and seats in high-risk financial investment product sales counters to reduce consumer confusion. Complex branches operated jointly by banks and securities firms are also subject to the same regulations.
The range of consumers eligible to receive recommendations for high-risk financial investment products will also be limited. Banks must verify six pieces of information, including consumers' investment risk tolerance, according to suitability and appropriateness assessment principles. Consequently, if consumers are assessed as having low product comprehension or unsuitable risk tolerance for high-risk financial investment products, banks cannot suggest the sale of those products.
Additionally, the Financial Services Commission stated that it will promote improvements in banks' performance-based compensation systems (KPI) to eliminate practices of incomplete sales of products. During the previous Hong Kong H Index ELS incident, it was pointed out that banks included sales performance in KPI items, leading to aggressive sales practices within branches.
The Financial Services Commission plans to significantly change the penalty surcharge standards for financial companies that commit violations of the Financial Consumer Protection Act, such as incomplete sales practices. Vice Chair Kim noted, "We are preparing to amend the Financial Consumer Protection Act and plan to raise the level of penalty surcharges," adding, "We aim to have the amendment prepared by September this year."