Hong Kong: Balancing Laissez-Faire and Investor Protection

The Global Financial Crisis was felt most acutely in Hong Kong by retail investors. A public outcry led to financial settlements with many complainants. For those investors that missed out on the settlements, legal action exposed the strength of contract terms. Following a period of introspection, significant reforms have been implemented in the retail investment context, many taking the form of non-binding but influential regulatory guidelines. The emphasis on disclosure remains but is supplemented with provisions expecting product providers to be fair in product design. Conduct during the sales process has also been scrutinised, with suitability emphasised as being at the heart of the regulatory philosophy and certain contract terms have been deemed unacceptable by the regulator. The courts have also taken the opportunity to use statutory protections from unfairness to find in favour of vulnerable investors.