The discretionary account agreement is an essential document that outlines the relationship between the investment manager and their clients. The agreement gives the investment manager the power to make investment decisions on behalf of the client. The Securities and Futures Commission (SFC) is the regulatory body that oversees the management of discretionary accounts in Hong Kong.

The SFC requires that all investment managers who manage discretionary accounts must have a discretionary account agreement in place with their clients. The agreement must be in writing and should outline the scope of the investment manager`s authority, the investment objectives of the client, and the terms and conditions of the agreement.

The scope of the investment manager`s authority will specify the types of investment instruments that the investment manager can invest in and the level of risk management the client is comfortable with. The investment objectives of the client will outline the desired investment outcomes, such as income generation or capital growth, and the investment time horizon.

The terms and conditions of the agreement will include details about fees and charges, termination and withdrawal procedures, reporting and communication protocols, and dispute resolution mechanisms. Investment managers must provide regular reports to their clients on the status of their investments and ensure that they comply with all relevant regulations and guidelines.

The SFC is responsible for monitoring the activities of investment managers who manage discretionary accounts to ensure that they comply with the relevant laws and regulations. Failure to comply with these requirements may result in penalties, suspension or revocation of licenses, and other legal consequences.

In conclusion, the discretionary account agreement is a critical document that sets out the relationship between the investment manager and their clients. The SFC`s regulatory oversight ensures that investment managers comply with these requirements to protect the interests of their clients and maintain the integrity of Hong Kong`s financial markets. It is therefore essential for investment managers to understand their obligations and ensure that their discretionary account agreements are up-to-date and compliant with SFC regulations.