Julia Leung, SFC Deputy CEO and Executive Director of Intermediaries
The Hong Kong Securities and Futures Commission has set out the key controls needed when securities and futures firms receive client orders through instant messaging applications such as WhatsApp and WeChat.
The circular, published on May 4, was issued in response to the rising use of instant messaging for communications among traders and their brokers. The SFC has penalized a number of brokers for taking orders via these apps, in part because no records are kept.
Since most IM service providers do not provide users with tools to save, retrieve or monitor IM communications, the SFC said intermediaries should properly understand their features and limitations and carefully assess the risks involved before allowing the use of these applications to receive client orders.
"Brokers should put in place adequate measures to ensure the security and reliability of instant messaging applications used for receiving client orders," said Julia Leung, the SFC's deputy chief executive officer and executive director of intermediaries. "Investors should fully understand that using instant messaging to place orders exposes them to potential risks such as phishing, account theft and impersonation."
The topics covered by the circular include: centralized record keeping, security and reliability, effective compliance monitoring, internal policies and procedures, and client awareness. The SFC said that if the requirements in the circular are not fully met, intermediaries should prohibit staff from accepting client orders through IM apps.