The Securities and Futures Commission ("SFC") and the Hong Kong Monetary Authority ("HKMA") jointly engaged an external service provider, the Hong Kong Productivity Council, to carry out mystery shopping exercises between July and November 2010 to look into the selling practices of intermediaries involving unlisted securities and futures investment products to retail investors (and in respect of the banking sector, the scope of the exercise was expanded to include structured deposits). The mystery shopping exercise primarily focused on three key areas, namely the “know-your-client” ("KYC") procedures, explanation of product features and disclosure of risks, and suitability assessment. The SFC and the HKMA issued separate findings on licensed corporations and on authorised institutions respectively. The SFC report identified certain deficiencies in the selling practices of the selected licensed corporations (including insufficient explanation of product feature, inadequate risk disclosure and failure to take into account investors’ personal circumstances) and 16% of the cases were found to be unsatisfactory. The HKMA report identified that the banks in general had a high level of compliance with the KYC requirement, but there were areas such as risk disclosure and suitability assessments that required further enhancement by the banks. Where major deficiencies were noted, both regulators have asked the firms in question to take remedial action and will continue to monitor these firms to ensure that appropriate measures are put in place.