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Article 24
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A securities firm that provides structured instrument trading services to a customer other than a professional institutional investor or high net worth juristic person investor shall carry out the following assessments:
- The securities firm shall assess the customer's characteristics to ascertain whether the customer is a professional customer or an ordinary customer, and shall perform an overall assessment of the customer's degree of risk tolerance on the basis of factors including the customer's age, investing knowledge and experience, status of assets, trading objectives, and understanding of the product. At least three discrete levels of risk tolerance shall be distinguished.
- The securities firm shall undertake an assessment of the product's characteristics, and shall retain a written record for verification. The assessment shall include at least the items listed below:
- Assessment and confirmation of the legality of the given structured instrument, the related investment assumptions, the reasonableness of the risk/return profile, the appropriateness of the transaction, and whether there are any conflicts of interest.
- Overall assessment and confirmation of the degree of risk inherent in structured instruments, in which at least three discrete levels of risk are distinguished, with respect to factors such as their characteristics, the risk and probability of principal loss, liquidity, structural complexity, and the term of the instruments.
- Assessment and confirmation of the adequacy and accuracy of the disclosures made in the product information and marketing documents provided to the customer.
- Confirmation of whether only professional customers can invest in the given structured instrument.
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