Understanding the current protections when trading gold and its related products
Before investing in London Gold or other gold investment tools, you must first understand how to protect your investment interests.
On top of physical gold, investors can access a wide array of gold investment tools in HKEX, banks and gold dealers. At present, gold ETFs, gold futures contracts and gold derivatives warrants traded in HKEX, and paper gold schemes, gold funds, and gold-linked deposits sold in banks must be authorised by the Securities and Futures Commission (SFC) before they can be sold to the Hong Kong public. The product issuers must provide offering documents, and the products must be sold by an intermediary licensed by or registered with the SFC.
Conversely, under the prevailing regulatory regime, trading of spot gold including London Gold is not regulated. Gold dealers who do not engage in the regulated activities under the Securities and Futures Ordinance do not need to be licensed by or registered with the SFC. They do not need to register with the Hong Kong Monetary Authority as authorised institutions if they are not banks or deposit taking companies. When investors trade London Gold, they should note the following:
The companies and brokers who trade London Gold on behalf of you may not have any licences or registrations, and may not have any professional credentials.
As there are no offering documents for London Gold contracts, investors may lack sufficient information to make informed investment decisions.
London Gold trading activities are not regulated. In the event of disputes, investors may have no place to file their complaints, and they may not be properly protected.
The Chinese Gold & Silver Exchange Society
The Chinese Gold & Silver Exchange Society (CGSE) is a self-regulating organisation. Its functions include providing a platform, facilities and related services for precious metals trading, as well as establishing and implementing rules and regulations, and normalising transactions for the industry.
The CGSE operates under a membership system. Members of the Society must be registered as companies. Society members can use the trading platform of the Society for precious metals trading. London Gold is traded via an e-trading platform of the Society, where the recognised e-trading members can process clients' transactions (with the option to trade clients' transactions on the e-trading platform with other members, or to directly trade with clients and then declare to the Society). Transactions processed through the recognised e-trading member of the Society come with a transaction number, which can be used by investors to retrieve information about the transaction.
However, investors should note that current gold dealers who carry out spot gold trading are not limited to the CGSE members. There is no legal requirement that gold dealers must join the Society to participate in spot gold trading.
14 February 2018