MORNBFI Vol. 1 - Planters Development Bank

APP. Q-1609.12.31client and the officer authorized by the FI toadvise/sell/propose the recommendedproduct.An FI does not need to comply with therequirement of suitability review in caseswhere the client is classified as a marketcounterparty, considering its recognizedsophistication. However, an FI should beable to provide sufficient support for itsclassification.III. DisclosuresAn FI should always be mindful of itsstatements regarding its products/services,whether the statements pertain topromotion, marketing or sale thereof or inthe course of making the requireddisclosures. An FI must institute measuresto ensure that its clients understand thenature and risks in a derivatives transaction.These procedures may vary with thesophistication of its client. An FI can tailorfitinformation, marketing and salespresentations/materials in accordance withthe client classification under Sec. 4611Qand its Subsections. An FI should takefurther steps to adequately disclose theattendant risks of specific types oftransactions when dealing with anunsophisticated client, either generally orwith respect to a particular derivativestransaction (e.g., non-sophisticated client orsophisticated client with respect to complexproduct types). An FI should adopt standardsfor its publications/materials/disclosurestatements and review the aforementioneddocuments regularly to ensure that theymeet the standards.An FI, when providing information toits clients, including potential clients, mustnot knowingly misrepresent or give a falseimpression in any of its advertisements,electronic communications, writtenmaterials (whether publicly disseminated ornot) or oral representations regarding thefinancial derivatives offered. Amisrepresentation is any statement thatdeviates from the truth or omits a materialfact or even tends to mislead the recipients.a. Financial promotion (marketing andsales)An FI embarking on a financialpromotion, whether through a direct offeror information/sales publications, shouldensure it gives sufficient information toenable a client to make an informedassessment of the derivatives transaction,including its underlying. An FI mustprominently indicate its name in all itspromotional materials and must specify itsrole or capacity in the transaction (e.g., asissuer, dealer/distributor, broker).A financial promotion is consideredclear, fair and not misleading if all thefollowing requisites are present:(1) Any statement of fact, promise orprediction is clear, fair and not misleading.A statement should disclose relevantassumptions;(2) A client, by himself, can discernfrom the presentation whether the statementis a fact, promise or prediction.(3) The accuracy of all materialstatements of fact can be substantiated.(4) Any comparison or contrast of aproduct offered should be with anotherinvestment intended to meet the same needsor to serve the same purpose. The facts onwhich any comparison or contrast is madeare verified, or alternatively, that relevantassumptions are disclosed. The comparisonor contrast should be presented in a fair andbalanced way and includes all factors whichare relevant to the comparison or contrast.(5) The design, content or format of anypresentation does not disguise, obscure ordiminish the significance of any statement,warning or other matter which thepresentation should contain;(6) Disclosures on risks and warningsshould not be less prominent than any otherinformation on performance;(7) No reference to an approval by aregulatory body or its officials shall be made,Manual of Regulations for Non-Bank Financial InstitutionsQ RegulationsAppendix Q-16 - Page 3