Professional investors

Q1 : What are the “appropriate corporate structure” and “investment process and controls” (ie, the assessment criterion stipulated under paragraph 1(a)(i) of Schedule 1 to the VATP Guidelines) that Platform Operators should look for in its assessment?

Platform Operators should take into account all reasonable and substantive considerations to assess how investment decisions are made by the corporate professional investor. Platform Operators should exercise their professional judgment as to whether the corporate professional investor has an appropriate corporate structure, investment process and controls (eg, resources and systems) in place to make investment decisions and manage the risks of the investment portfolio as a financially sophisticated firm. For example, a corporate professional investor would be more likely to be regarded as having an appropriate corporate structure and substantive investment process and controls if it satisfies any of the following criteria:

(a) has an in-house treasury, investment or similar function comprising competent and suitably qualified professionals responsible for its investment strategies and investment process;

(b) has a designated investment committee comprising competent and suitably qualified professionals responsible for its investment strategies and investment process; and (i) such a committee makes investment decisions on behalf of the corporate professional investor or (ii) the corporate professional investor makes informed investment decisions taking into account the advice or recommendation of such committee;

(c) engages an external investment advisory team comprising competent and suitably qualified professionals responsible for its investment strategies and investment process; and (i) such a team makes investment decisions on behalf of the corporate professional investor or (ii) the corporate professional investor makes informed investment decisions taking into account the advice or recommendation of such team, and in each case this external team is:

independent of the Platform Operator;
subject to regulatory oversight (where required); and
in an investment advisory capacity in advising the corporate professional investor on investment strategies, advice and recommendations;

(d) relies on and follows the investment strategies, advice and recommendations of its related corporation provided that such related corporation:

(i)      has an in-house treasury, investment or similar function;
(ii)     has a designated investment committee; or
(iii)    engages an external investment advisory team that meets the conditions set out in paragraph (c) above, that comprises competent and suitably qualified professionals responsible for the investment strategies and investment process of the corporate professional investor; or

(e) is ultimately owned by or established for the ultimate benefit of an individual or individuals (such as family members) and it relies on competent and suitably qualified professionals to manage the investments of the corporate professional investor, where either:

(i)     the professionals are authorised to make investment decisions on behalf of the corporate professional investor; or
(ii)     the corporate professional investor makes informed investment decisions taking into account the advice or recommendation of such professionals; and
(iii)    the professionals are responsible for the investment strategies and investment process of the corporate professional investor.

As regards the considerations that Platform Operators should take into account in determining whether a person acting within the capacities mentioned in the subparagraphs above is competent and suitably qualified for investment strategies and investment process of the corporate professional investor, please refer to FAQ 2 below.

(Key references: Schedule 1 to the VATP Guidelines)

Q2 : How should Platform Operators assess (a) the background of the person(s) responsible for making investment decisions on behalf of a corporate professional investor under the assessment criterion stipulated under paragraph 1(a)(ii) of Schedule 1 to the VATP Guidelines and (b) whether a person is competent and suitably qualified for investment strategies and investment process of the corporate professional investor (as referred to under FAQ 1 above)?

In assessing the background of the person(s) responsible for making investment decisions on behalf of a corporate professional investor and whether a person is competent and suitably qualified for investment strategies and investment process of the corporate professional investor, Platform Operators should ensure that such person is competent and suitably qualified in relation to virtual assets. The Platform Operators should take a holistic approach and take into account all relevant and reasonable considerations, such as:

investment experience and history (including personal investments and investments for the account of others) which are directly relevant and related to virtual assets, taking into account the level of responsibility, for how long and how long ago;

work experience in the financial sector (including investment management, investment research, recommending or selling investment products), which is directly relevant and related to the virtual assets, taking into account the level of responsibility, for how long and how long ago; and

academic or professional qualifications relating to virtual assets.

(Key references: Schedule 1 to the VATP Guidelines)

Q3 :
Can Platform Operators rely on a written representation from the corporate professional investor confirming that it meets the criteria stipulated under paragraph 1(a) of Schedule 1 to the VATP Guidelines (Assessment Criteria)? To what extent would Platform Operators be expected to obtain supporting documentation to evidence the above?

It would not be acceptable for Platform Operators to purely rely on a written representation from the corporate professional investor confirming that it meets the Assessment Criteria (eg, via acknowledgements on the account opening documents). Instead, Platform Operators should holistically review and assess the information and documents provided by their client and make their professional judgment as to whether the Assessment Criteria are satisfied.

Platform Operators should as far as possible obtain supporting documentation from the corporate professional investor to evidence their assessment. Platform Operators should maintain proper audit trails of the enquiries made and the information and documents obtained and their assessment results, including a written account and conclusions of their final assessment based on, amongst other things, discussions with the corporate professional investor and the review of relevant supporting documentation.

(Key references: Schedule 1 to the VATP Guidelines)

Q4 : Can a corporate professional investor be assessed to meet the Assessment Criteria on the premise that the investment decision is made by its shareholder(s) who is(are) financially experienced individual(s)?

Platform Operators should assess whether the corporate professional investor has the appropriate corporate structure, investment process and controls as a corporation. If the necessary substantive investment processes and controls are lacking in a corporation and the corporation is effectively controlled by a single individual or a small number of individuals such as married couples, it is unlikely to be able to satisfy the Assessment Criteria even though they themselves are financially experienced. In general, a corporate professional investor established primarily for tax planning or property or investment holding purposes with investment decisions being made by its shareholder(s) is less likely to be able to satisfy the Assessment Criteria.

(Key references: Schedule 1 to the VATP Guidelines)

Last update: 31 May 2023