Cross-boundary WMC – Investor protection and compliant handling of the Northbound Scheme

The transactions carried out by Northbound Scheme investors via their dedicated investment accounts with Mainland banks are subject to the protection of the Mainland laws and regulations and regulatory regime.

Prior to opening the dedicated remittance/investment account, investors should have a thorough understanding of the following:

• Details of the whole scheme (including the respective roles and obligations of Hong Kong banks and brokers, and Mainland partner banks and brokers, funding and remittance arrangements, closed-loop funds flow and two-way fund transfer management requirements and quota management, complaint handling mechanism);
• Associated risks of investments; and
• Handling of non-compliance or breaches by investors.

Prior to making an investment decision, investors should:

• Ensure that they understand the rules and procedures relevant to the Mainland investment product market, nature and risks of the investment and have the ability to bear potential losses;
• Take note that Mainland investment products are not principal guaranteed. Do not focus on the return only and neglect the risks.
• Ask questions and seek clarifications from the banks/ brokers if in doubt and make sure they fully understand the features and risks of the investment products; and
• Select products that suit their personal circumstances.

In order to strengthen information disclosure to investors, the relevant Mainland banks/ brokers will:

• Conduct due diligence on the investment products they distribute under the Northbound Scheme and assess the risk ratings of these investment products according to the relevant supervisory requirements.
• Provide adequate product information to potential investors to enable them to make informed investment decisions.
• Assess the risk tolerance level of investors and ensure that the risk profile of investors matches the risk ratings of investment products. Specifically, banks/ brokers should only sell investment products with risk ratings that match the risk profile of investors. However, upon request by an investor, a bank/ broker may sell a public securities investment fund with a risk rating that is higher than the investor’s risk tolerance level to him/her after issuing a special warning to the investor and confirmation by the investor.

Generally speaking, Hong Kong banks/ brokers and the Mainland partner banks/ brokers will not proactively conduct cross-boundary solicitation or make cross-boundary recommendation. Investors may make enquiries about the investment services and individual investment products to a Mainland partner bank/ broker directly or request the Mainland partner bank/ broker to provide them with related information in order to enable them to make informed investment decisions. However, if an investor chooses to visit a Mainland bank/ broker in person to make an investment, the Mainland bank/ broker concerned may conduct solicitation or make recommendation.

Hong Kong investors may lodge complaints about Northbound Scheme investment products and services with the relevant Mainland banks. Hong Kong banks will also assist investors in referring such complaints to the Mainland partner banks for follow-up. Similarly, Hong Kong brokers will refer the complaints in relation to the Northbound Scheme to the Mainland brokers for follow up and assist investors as appropriate.

For complaints about cross-boundary fund remittances, Hong Kong investors may lodge the complaint with the relevant Hong Kong banks and/ or brokers. Should Hong Kong investors consider that the relevant Hong Kong banks have failed to duly handle their complaints, they may lodge a complaint with the HKMA（https://www.hkma.gov.hk/eng/smart-consumers/complaints/complaints-about-banks/）; Similarly, should investors consider that the relevant Hong Kong brokers have failed to duly handle their complaints, they may lodge a complaint with the SFC（https://www.sfc.hk/en/Lodge-a-complaint/Against-intermediaries-and-market-activities）.

For complaints involving Mainland banks, Hong Kong investors may lodge their complaints with the following regulatory authorities according to the principle of territorial administration:

• Complaints involving account opening, cross-boundary remittances, quota management may be filed to the Guangdong Provincial Branch or Shenzhen Branch of the PBoC;
• Complaints involving wealth management products may be filed to the National Financial Regulatory Administration (NFRA) Guangdong Office or Shenzhen Office;
• Complaints involving fund products may be filed to the CSRC Guangdong Office or Shenzhen Office.

To lodge complaints involving Mainland banks, please refer to the following (available in Chinese only):
http://guangzhou.pbc.gov.cn/guangzhou/129196/4332364/4332382/4332386/4350580/index.html

For complaints involving Mainland brokers, Hong Kong investors may lodge their complaints with CSRC Guangdong Office or Shenzhen Office.