Hong Kong Regulations

LEVERAGED FOREIGN EXCHANGE TRADING (BOOKS, CONTRACT NOTES AND CONDUCT OF BUSINESS) RULES - SECT 5

Client agreement

Caution: This is a past version. See the current version here.

PART III

CLIENT PROCEDURES

(1) A licensed trader shall, before entering into a contract with or on behalf
of a person-

   (a)  inform the person that a client agreement is required to be entered
        into between them in writing in either English or Chinese;

   (b)  explain to that person the contents of the client agreement; and

   (c)  enter into a client agreement with that person.

(2) The client agreement shall include-

   (a)  the full name and address of the client;

   (b)  the full name and address of the licensed trader and details of the
        licence it holds, including any conditions imposed on the licence;

   (c)  a statement by the client-

        (i)    that the client is trading on his own behalf; or

        (ii)   if the client is not trading on his own behalf, of the name of
               the ultimate beneficiary on whose behalf the client is trading;

   (d)  a statement by the client as to whether he is to operate his account
        by giving orders himself or by appointing another person to give
        orders on his behalf, and in the latter case, the name and address of
        the person appointed, to be accompanied by an appointment in writing;

   (e)  a statement by the licensed trader that none of its employees or
        representatives shall accept appointment by the client as agent to
        operate the client's account for the purposes of paragraph (d) unless
        a separate agreement is entered into in accordance with section 8;

   (f)  a statement by the licensed trader as to whether it may take the
        opposite position to a client's order;

   (g)  a statement as to whether or not any employee or representative of the
        licensed trader may be allowed to trade contracts on his own account
        pursuant to the policy established under section 17(3);

   (h)  a statement that all telephone conversations between the licensed
        trader and the client made in the course of business will be recorded
        on a centralized tape recording system operated by the licensed
        trader;

   (i)  details of the basis on which charges, commission, brokerage and other
        remuneration are to be paid by the client;

   (j)  specification of all services and contracts which the licensed trader
        may provide to, transact with, or undertake on behalf of, the client
        and of all terms and conditions attached to those services and to the
        trading of contracts;

   (k)  where the terms of its licence so requires, a statement that in
        relation to any dispute between the licensed trader and the client,
        the licensed trader shall, if the client so requires, agree to refer
        the dispute to arbitration in accordance with the
        Leveraged Foreign Exchange  Trading (Arbitration) Rules ( Cap 451 sub.
        leg.);

   (l)  details of margin requirements and the time within which any initial
        margin or other margin deposits must be paid;

   (m)  the circumstances in which contracts transacted with or undertaken on
        behalf of the client may be closed out without the client's consent;

   (n)  a statement as to whether the client, the licensed trader or any other
        person will be entitled in whole or in part to interest, dividends or
        other benefits derived from the client's margin collateral;

   (o)  a description of the methods or procedures adopted by the licensed
        trader in choosing the prices or interest rates for the purposes of
        marking to market the client's open positions and in calculating the
        client's interest income and expenses;

   (p)  a statement that the client may be affected by any curtailment of, or
        restriction on, the capacity of the licensed trader to deal in respect
        of open positions as a result of action taken by the Commission under
        the Ordinance or for any other reason, and that in such circumstances,
        the client may be required to reduce or close out his open positions
        with the licensed trader; and

   (q)  a statement to the effect that the client agreement and all rights,
        obligations and liabilities under it shall be governed by and
        construed in accordance with Hong Kong law.

(3) The following items, which shall be placed on separate sheets of paper
forming part of the client agreement, are required to be signed or
acknowledged, as the case may be, by the client under each item-

   (a)  the risk disclosure statement prescribed by section 7(2);

   (b)  undertakings by both the licensed trader and the client that each will
        notify the other of any material change to the information provided in
        the client agreement;

   (c)  a statement by the client that he will immediately notify the licensed
        trader of any change in his address; and

   (d)  a statement by the client that he understands the contents of the
        client agreement and accepts its terms and conditions.

(4) No licensed trader shall include terms and conditions in any agreement or
documentation with the client which are inconsistent with its obligations to
the client under the Ordinance or any rules made thereunder.

(5) A licensed trader shall file with the Commission its standard form of
client agreement together with-

   (a)  confirmation from its responsible director that the standard form of
        client agreement will govern all contracts entered into with or on
        behalf of its clients; and

   (b)  confirmation from its responsible director and the legal advisers of
        the licensed trader that the standard form of client agreement
        complies with the requirements of subsections (2) and (3).

(6) A licensed trader shall submit to the Commission any proposed amendments
to the standard form of client agreement, together with confirmation from its
responsible director and legal advisers that the standard form of client
agreement as so amended complies with the requirements of subsections (2) and
(3).

(7) A licensed trader shall not-

   (a)  enter into an agreement with a client on the basis of the standard
        form of client agreement; or

   (b)  implement any changes to the standard form of client agreement, before
        a copy has been filed with the Commission in accordance with
        subsections (5) and (6), provided that a breach of this provision
        shall not of itself invalidate any agreement that is otherwise valid.

(8) A licensed trader shall notify each of its clients in writing as soon as
possible of any change to its licence, including changes to the conditions
imposed thereon. (Enacted 1994)