Contract notes, statements of account and receipts

General

Q1 : There is a requirement to include in the contract note and monthly statement of account a reference to the date of their preparation. Is the preparation date still required if it is the same as the contract note’s trade date or the statement's month-end date?

A: The documents should make it clear in such circumstances that the date on which the relevant contract is entered into or the statement’s month-end date (as the case may be) is also the date of preparation of the document.

(Key references: Paragraphs 9.33(c)(iii)(IV) and 9.33(e)(iii) of the VATP Guidelines)

Contract notes

Q2 : Are contract notes required to reach clients within two business days after entering into the relevant contract?

A: No, but for a contract note to be issued in time it must be created and, for example, posted to the client within that time, as required under paragraph 9.33(n) of the VATP Guidelines.

(Key references: Paragraphs 9.33(b) and 9.33(n) of the VATP Guidelines)

Q3 : What does the term “nature of the dealing” under paragraph 9.33(c)(iii)(II) of the VATP Guidelines mean?

A: The nature of a dealing refers to, for example, buying and selling of virtual assets.

(Key references: Paragraph 9.33(c)(iii)(II) of the VATP Guidelines)

Statements of account

Q4 : How should charges levied on a transaction (which have already been disclosed in the contract note under paragraph 9.33(c) of the VATP Guidelines) and charges levied at the account level be disclosed in a statement of account?

A: Where the charges levied on the transaction itself have already been disclosed in the contract note, the transaction amount inclusive of those charges could be shown as one entry in the movements of the account in the monthly statement of account. Charges levied at the account level would need to be shown by additional entries since they are not included in the respective transaction amounts.

(Key references: Paragraphs 9.33(f)(vi) of the VATP Guidelines)

Q5 : In the case where the monthly accounting period ends on the last day of the month, for example, 31 October, if virtual assets are received from a client on 31 October but the receipt is actually prepared and provided on 2 November (which is in compliance with paragraph 9.33(h) of the VATP Guidelines), is the Platform Operator required to disclose this receipt in the October or November monthly statement of account?

A: The receipt of virtual assets should be disclosed in the October monthly statement of account since the date when the requirement to provide a receipt is triggered (ie, 31 October) is the reference date.

(Key reference: Paragraph 9.33(f)(iv) of the VATP Guidelines)

Q6 : If a client has terminated his account relationship and withdrawn all assets from the Platform Operator in the middle of an accounting month, is the Platform Operator still required to issue the monthly statement of account at that month end?

A: Yes, since according to paragraph 9.33(d) of the VATP Guidelines, a statement of account is required to be provided to a client in respect of a monthly accounting period if there are client’s assets held for the account of the client at any time during that period.

(Key reference: Paragraph 9.33(d) of the VATP Guidelines)

Q7 :
Is a Platform Operator required to include in a monthly statement of account:

(a) client’s moneys held at the beginning of the month?
(b) client’s virtual assets held at the beginning of the month?

(a) Yes.
(b) No.

(Key reference: Paragraph 9.33(f) of the VATP Guidelines)

Receipts

Q8 : For receipt of a cheque, is the two day time limit for the issuance a receipt counted from the time of receiving the cheque or from the day on which the cheque has been cleared?

A: A Platform Operator is expected to issue a receipt within two business days after receiving a cheque from a client. The Platform Operator should have proper controls in place to ensure that cheques are promptly deposited with banks. The time limit runs from the day on which the cheque is received rather than when it has been cleared.

(Key references: Paragraph 9.33(h) of the VATP Guidelines)

Q9 : Does the term “the account” refer to the client account under paragraph 9.33(j)(iv)(II) of the VATP Guidelines? Paragraph 9.33(j)(iii) also requires the receipts to state the name and account number of the client. Would subsection (j)(iv)(II) become duplicated?

Where the "account number" of the client disclosed under paragraph 9.33(j)(iii) of the VATP Guidelines uniquely identifies and it is clear to the client that it is same as the client's account into which the client assets have been deposited, then paragraph 9.33(j)(iv)(II) is duplicative and the account needs not be stated twice. On the other hand, the requirement caters for other possibilities, for example, sub-accounts are attached to the client's primary account.

(Key references: Paragraph 9.33(j)(iv)(II) of the VATP Guidelines)

Provision of documents

Q10 : When a Platform Operator provides the contract note, statement of account or receipt to its clients by access through the Platform Operator’s website, what operational safeguards should be implemented by the Platform Operator?

A Platform Operator should implement the following operational safeguards.

(a) Client consent

1. The Platform Operator should obtain positive, revocable consent from the client for using the Access Service¹ .

2. The consent to the Access Service could be obtained from new clients by incorporating express clauses into the terms and conditions (T&C) for the client’s access to and use of the Platform Operator’s online trading platform in a client agreement executed at the time of account opening pursuant to paragraph 9.11 of the VATP Guidelines.

3. Where the Platform Operator wishes to obtain the consent to the Access Service from existing clients by adding such T&C clauses to their client agreements, the Platform Operator should send individual notifications to the clients that the additional clauses will take effect from a specified date only if the clients give their consent:

(i) in writing;

(ii) electronically; or

(iii) by the act of logging in to their account on the Platform Operator’s online trading platform² once, regardless of whether a transaction is also executed in the online account.

4. The notification sent by the Platform Operator or the consent given by the existing clients should specify clearly that by giving consent to the added T&C clauses, the clients also acknowledge their understanding and acceptance of the access arrangements set out in paragraph 8 below.

5. Upon identifying that an existing client has given his consent, the Platform Operator should send a notice to the client confirming the commencement date of the Access Service as well as setting out the methods of revocation of consent. There should be a lead time (of at least one month) between the date of the notice and the commencement date unless the client requests an earlier commencement date.

6. The notification for the added T&C clauses and notice of commencement date of the Access Service should be sent to the clients using a means of communication that is effective to draw the clients’ attention (whether by written notice, statement insert, prominent message in a statement of account, e-mail, short message service (SMS) or other electronic means which supports effective communication).

7. Proper records or an audit trail should be maintained by the Platform Operator relating to the consent obtained (for example, the form and date of the consent)³.

(b) Disclosure of access arrangements

8. The consent to the Access Service of both new and existing clients should be accompanied by the client’s acknowledgment that he understands and accepts the following arrangements:

(i) Appropriate hardware and software, internet access⁴ and a specific email address, mobile phone number or other electronic address provided and designated by the client for receiving email, SMS or other electronic notifications from the Platform Operator are required for using the Access Service.

(ii) Internet, email, SMS and other electronic information services may be subject to certain IT risks and disruption.

(iii) Revocation of consent to the Access Service will be subject to the giving of such advance notice by the client through such methods as specified by the Platform Operator.

(iv) The client may be required to pay a reasonable charge for:

obtaining a copy of any trade document that is no longer available for access and downloading through the Platform Operator's website; or
requesting the Platform Operator to provide trade documents to him, in addition to the request for the Access Service, by other means.

(v) In order to avoid missing notifications, the client needs to inform the Platform Operator as soon as practicable upon a change in the designated email address, mobile phone number or other electronic address.

(c) Revocation of consent

9. The Platform Operator should offer more than one convenient method for the clients to revoke their consent to the Access Service at any time.

10. The required period of advance notice of revocation of consent should not be more than two months⁵.

(d) Notification of the posting of trade documents on the website

11. The client should be alerted when trade documents are posted on the Platform Operator's website on any particular day by sending an individual notification to the client using a prompt and effective means of communication.

12. The notification should remind the client to promptly review the trade documents posted on the Platform Operator's website to ensure that any errors are detected and reported to the Platform Operator as soon as practicable. In addition, the client should be reminded by the notification or a prominent message in the trade documents to save an electronic copy in the client’s own storage or print a hard copy of the trade documents for future reference.

(e) Security and functionality of the information technology (IT) systems for posting trade documents

13. Access to the trade documents posted on websites should be protected by user IDs and passwords⁶ , and the Platform Operator should adopt sufficient and comprehensive IT measures to ensure the integrity, security and confidentiality of the posted trade documents.

14. The trade documents posted on the Platform Operator's website should be downloadable in a printer-friendly format and should be capable of being saved by the client electronically.

15. The trade documents should continue to be available for access, review and downloading by the client for not less than the following respective specified retrieval periods from the date of the notification to the client of their posting.

(i) Daily statement of account, contract note and receipt: three months

(ii) Monthly statement of account: two years

(f) Contingency plan

16. The Platform Operator shall monitor and maintain proper records or audit trails of posting trade documents on its website for access by the client and of sending notifications to the client. The Platform Operator should have handling procedures in place to contact clients whose notifications are not delivered and update the client’s designated email address, mobile phone number or other electronic address as soon as practicable.

17. The Platform Operator should use any of the means of service specified under paragraph 9.33(n) of the VATP Guidelines to provide the trade documents to clients as soon as practicable if it fails to post them on its website for access by the clients by the due date required under the VATP Guidelines due to system failure or any other reason⁷.

18. The Platform Operator should also have a proper contingency plan for the provision of trade documents in the case of an outage of its website or any other IT incident preventing access to trade documents through the website.

(Key references: Paragraph 9.33(n) of the VATP Guidelines)

¹ Access Service refers to the provision of contract notes, statements of account and receipts (collectively referred to as “trade documents”) required to be provided to clients under paragraph 9.33 of the VATP Guidelines through access to these documents posted by the Platform Operator on its websites.
² Where the Platform Operator operates an online service platform, clients logging in to their account on that platform should not be considered to be logging in to their account on the online trading platform unless the clients will automatically have access to the online trading platform without additional login steps.
³ The Platform Operator should establish and maintain effective retention policies for the records or audit trail which ensure that all relevant legal and regulatory requirements are complied with, and which enable the Platform Operator, its auditors and other interested parties to carry out routine and ad hoc comprehensive reviews or investigations.
⁴ If the website is on an intranet, the Platform Operator should specify the relevant access requirements.
⁵ In the exceptional case where a client logs in to his account on the Platform Operator's online trading platform in circumstances set out in paragraph 3(c) above but wishes to revoke his consent soon thereafter or upon notification by the Platform Operator of the commencement date of the Access Service, the Platform Operator should give effect as soon as practicable to the revocation of the consent given.
⁶ Reference should also be made by the Platform Operator to paragraph 12.12(b) of the VATP Guidelines.
⁷ Where applicable, the Platform Operator should observe the requirement of paragraphs 11.17 and 16.7 of the VATP Guidelines to notify the SFC accordingly in writing.

Last update: 1 Mar 2024