• INMA Chapter 9B INMA Chapter 9B Other investment-related activities

    • INMA Part 9B.1 INMA Part 9B.1 Investment research and investment recommendations

      • INMA 9B.1.1 Investment research — conflicts of interest and impartiality

        (1) This rule applies if:
        (a) an INMA firm publishes or disseminates investment research; and
        (b) either:
        (i) the firm holds the research out (in whatever terms) as being an impartial assessment of the value or prospects of the subject matter of the research; or
        (ii) it is reasonable for those to whom the firm has published or distributed the research to rely on it as an impartial assessment of the value or prospects of the subject matter of the research.
        (2) The INMA firm must do all of the following:
        (a) establish and implement a policy, appropriate to the firm, for managing effectively the conflicts of interest and material interests that might affect the impartiality of the investment research;
        (b) make a record of the policy and keep it for at least 6 years after the policy ceases to have effect;
        (c) take reasonable steps to ensure that the firm and its employees comply with the policy;
        (d) make a written copy of the policy available to any person on request;
        (e) take reasonable steps to ensure that the policy remains appropriate and effective.
        (3) The policy must identify the types of investment research to which the policy applies and must make provision for systems, controls and procedures that:
        (a) identify conflicts of interest and material interests that might affect the impartiality of the investment research to which the policy applies;
        (b) manage effectively conflicts of interest and material interests, to the extent that they arise or might arise within the INMA firm, in relation to each of the following:
        (i) the supervision and management of investment analysts;
        (ii) the remuneration structure for investment analysts;
        (iii) the extent to which investment analysts may become involved in activities other than the preparation of investment research;
        (iv) the extent to which inducements offered by issuers of securities, or other persons with material interests in the subject matter of investment research, may be accepted by investment analysts or senior employees of the INMA firm;
        (v) the persons who may comment on draft investment research before publication, and the procedure for taking account of their comments;
        (vi) the timing and manner of publication and distribution of investment research and of the communication of its substance;
        (vii) what information or disclosures are appropriate to include in investment research (taking appropriate account of matters required by law); and
        Guidance
        The matters enumerated in paragraph (b) are not exhaustive and the policy should allow the firm to manage conflicts of interest that arise or might arise in relation to other matters.
        (c) clearly indicate the extent to which the firm's policy relies on Chinese walls or other information barriers.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.2 Research recommendations — basic requirements

        (1) An INMA firm:
        (a) must take reasonable care to ensure that a research recommendation produced or disseminated by it in relation to relevant investments is presented fairly and is not misleading; and
        (b) must disclose any conflicts of interest or material interests that the firm has in relation to the relevant investments.
        (2) An INMA firm, in any research recommendation produced by it:
        (a) must disclose clearly and prominently the identity of the person responsible for its production, and in particular:
        (i) the name and job title of the individual who prepared the research recommendation; and
        (ii) the firm's name; and
        (b) must include the firm's regulatory status in a form required by GENE, Part 3.1.
        (3) The firm may comply with subrule (2) in relation to a non-written research recommendation by referring to the place where the disclosures can be easily accessed (for example, the INMA firm's website).
        (4) If an INMA firm produces or disseminates a research recommendation, the firm must take reasonable care to ensure that:
        (a) facts in the research recommendation are clearly distinguished from interpretations, estimates, opinions and other types of non-factual information;
        (b) its sources for the research recommendation are reliable or, if there is any doubt about whether a source is reliable, this is clearly indicated;
        (c) all projections, forecast and price targets in the research recommendation are clearly labelled as such and the material assumptions made in producing or using them are indicated; and
        (d) the substance of the research recommendation can be substantiated as reasonable if the Regulatory Authority so requests.
        (5) Subrule (4) does not apply to a non-written research recommendation if its requirements would be disproportionate to the length of the research recommendation.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.3 Research recommendations — additional requirements

        An INMA firm must comply with the additional requirements mentioned in Schedule 4 that apply to it.

        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.4 Research recommendations — recordkeeping

        (1) An INMA firm must make a record of:
        (a) each research recommendation it produces, including details of how the substance of the research recommendation can be substantiated as reasonable; and
        (b) each research recommendation it disseminates.
        (2) The record of a research recommendation must be kept for at least 6 years after the day the research recommendation is last disseminated.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

    • INMA Part 9B.2 INMA Part 9B.2 Dealing and managing

      • INMA 9B.1.5 Dealing and managing — best execution

        (1) If an INMA firm agrees, or decides in the exercise of its discretion, to execute a transaction with or for a customer in relation to a relevant investment, it must provide best execution.
        (2) However, the INMA firm need not provide best execution if:
        (a) it only arranges the transaction for the customer;
        (b) the market in the relevant investment is insufficient to allow for a meaningful price comparison;
        (c) the customer is a business customer and the firm has agreed with the customer that it will not provide best execution; or
        (d) another person is responsible for the execution of the transaction and has undertaken to provide best execution.
        (3) To provide best execution for the transaction, the INMA firm:
        (a) must take reasonable care to find out the best available price in the relevant market at the time for transactions of the same kind and size; and
        (b) must execute the customer order for the transaction at a price that is no less advantageous to the customer, unless the firm has taken reasonable steps to ensure that it would be in the customer's best interests not to do so.
        (4) To take reasonable care under subrule (3) (a), the INMA firm:
        (a) must calculate the best execution price before any previously disclosed charges that might be payable;
        (b) must not take a mark-up or mark-down;
        (c) must pass on to the customer the price at which it executes the transaction to meet the customer order; and
        (d) if it can access prices displayed by different exchanges and trading platforms and make a direct and immediate comparison — must execute the customer order at the best price available if it is in the best interest of the customer to do so.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.6 Dealing and managing — timely execution

        (1) If an INMA firm agrees, or decides in the exercise of its discretion, to execute a transaction for an existing customer order in relation to a relevant investment, it must execute the order as soon as practical.
        (2) However, subrule (1) does not apply if the INMA firm has taken reasonable steps to ensure that postponing the execution of the transaction for the order is in the best interests of the customer.

        Guidance for rule 9B.1.6 (2)

        Factors relevant to whether the postponement of an existing customer order may be in the best interests of the customer include the following:
        (a) whether the customer order is received outside of normal trading hours;
        (b) whether a foreseeable improvement in the level of liquidity in the relevant investment is likely to enhance the terms on which the INMA firm executes the transaction for the customer order;
        (c) whether executing the transaction for the customer order as a series of partial transactions over a period of time is likely to improve the terms on which the transaction as a whole is executed.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.7 Dealing and managing — recordkeeping

        (1) An INMA firm must ensure, by establishing and maintaining appropriate procedures, that it promptly records adequate information in relation to each of the following:
        (a) the receipt of customer orders;
        (b) the exercise of its discretion to decide to execute transactions for customer orders;
        (c) the execution of transactions for customer orders;
        (d) the passing of customer orders to other persons for execution of transactions;
        (e) the execution of own account transactions.
        (2) Subrule (1) (c) and (d) do not apply to the INMA firm if it is only arranging a transaction for a customer.
        (3) The records must record the information required by Schedule 5.
        (4) The INMA firm must keep records made under this rule for a customer order or own account transaction for at least 6 years after the day the transaction (or the last of the transactions) for the order is executed.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.8 Dealing and managing — aggregation of customer orders

        An INMA firm may aggregate a transaction for a customer order with transactions for other customer orders or for own account transactions if:

        (a) the firm believes on reasonable grounds that it is unlikely that the aggregation will disadvantage any of the customers whose transactions are to be aggregated;
        (b) the firm has disclosed orally or in writing to the customer that the transactions for the customer order may be aggregated and that the effect of aggregation may sometimes operate to the customer's disadvantage;
        (c) before the transactions are aggregated, the firm has made a record of the intended basis of allocation and the identity of each customer; and
        (d) the firm has in place a written policy on aggregation and allocation that it applies consistently and includes procedures for rule 9B.1.10.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.9 Aggregation of customer orders — allocation

        (1) This rule applies if:
        (a) an INMA firm aggregates a transaction for a customer order for a customer with transactions for customer orders for other customers or with own account transactions; and
        (b) part or all of the aggregated order is filled.
        (2) The INMA firm must promptly allocate the relevant investment involved in the aggregated order in accordance with rule 9B.1.10 (1).
        (3) To allocate a relevant investment promptly, an INMA firm:
        (a) must allocate the relevant investment within 1 business day; or
        (b) if only business customers or market counterparties are affected by the allocation and each of them agrees — must allocate the relevant investment within 5 business days.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.10 Aggregation of customer orders — fair allocation etc

        (1) For rule 9B.1.9, an INMA firm:
        (a) must allocate relevant investments in accordance with the intended basis of allocation recorded under rule 9B.1.8 (c);
        (b) must ensure the allocation is done fairly and uniformly by not giving excessive preference to itself or to any person for whom it deals; and
        (c) if the aggregated order includes both customer orders and own account transactions — must give priority to satisfying customer orders if all the orders cannot be satisfied, unless the firm can demonstrate on reasonable grounds that without its own participation it could not have executed the customer orders on such favourable terms, or at all.
        (2) The INMA firm must make a record of each of the following:
        (a) the date and time of the allocation;
        (b) the relevant investment;
        (c) the identity of each customer affected by the aggregation;
        (d) the amount allocated to each customer affected by the aggregation and to the firm;
        (e) if applicable, the agreement, under rule 9B.1.9 (3) (b), of each business customer or eligible counterparty to allocate the relevant investment within 5 business days.
        (3) The INMA firm must keep the records for at least 6 years after the day the relevant investments are allocated.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).
        Amended by QFCRA RM/2020-1 (as from 15th August 2020)

      • INMA 9B.1.11 Dealing and managing — customer order priority

        (1) An INMA firm must execute transactions for existing customer orders and own account transactions in relation to relevant investments fairly and in proper turn.
        (2) The INMA firm does not breach subrule (1) by executing an own account transaction in relation to the relevant investments while it has an existing customer order in relation to the relevant investments if:
        (a) it receives the existing customer order after it had decided to deal for itself;
        (b) the employee or agent taking the decision to deal for the firm was unaware of the existing customer order when making the decision; or
        (c) the firm believes on reasonable grounds that by postponing the transaction for the existing customer order it is likely to improve the terms on which the transaction for the order will be executed.
        (3) If subrule (2) (c) applies, the INMA firm must take care to ensure that customer orders that are advanced because of the postponement are also treated fairly.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.12 Dealing and managing — excessive dealing and switching

        (1) This rule applies to the following investment products:
        (a) a life policy (that is, a long term insurance contract other than a reinsurance contract or a pure protection contract);
        (b) a long term care insurance contract;
        (c) a unit in a collective investment scheme.
        (2) An INMA firm must not do any of the following with such a frequency, or in such amounts, that the transactions may be regarded as excessive:
        (a) in the exercise of its discretion, execute a transaction in relation to a relevant investment for a customer;
        (b) advise a customer to enter into a transaction in relation to a relevant investment;
        (c) advise a retail customer to switch within between products to which this rule applies or make or arrange a switch that gives effect to such advice; or
        (d) in the exercise of its discretion, make or arrange a switch within those products for a retail customer.
        (3) In complying with subrule (2), the INMA firm must be able to demonstrate that the transactions were fair, reasonable and in the customer's best interests when they were entered into, viewed both in isolation and in the context of earlier transactions.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.13 Dealing and managing — non-market-price transactions

        (1) An INMA firm must not enter into a non-market-price transaction with or for a customer, unless it has taken reasonable steps to ensure that the customer is not entering into the transaction for an improper purpose.
        (2) An INMA firm must:
        (a) make a record of the information it has obtained in satisfying subrule (1) in relation to a non-market-price transaction; and
        (b) must keep the record for at least 6 years after the day the information is obtained.
        (3) This rule does not apply to a non-market-price transaction if it is subject to the rules of an eligible exchange.
        (4) A transaction is a non-market-price transaction if the dealing rate or price paid by the firm or a customer differs from the prevailing market rate or price to a material extent.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).

      • INMA 9B.1.14 Dealing and managing — realising retail customer's assets

        An INMA firm must not realise a retail customer's assets unless it is legally entitled to realise the assets and has done either of the following:

        (a) set out in the firm's terms of business for the customer:
        (i) the action it may take to realise assets of the customer;
        (ii) the circumstances in which it may take the action; and
        (iii) each asset (if relevant) or type of asset over which it may exercise its rights to realise assets; or
        (b) given the customer written or oral notice of its intention to exercise its rights at least 3 business days before it exercises them.
        Inserted by QFCRA RM/2019-4 (as from 1st January 2020).