[Hong Kong ELS Compensation] What Is My Compensation Ratio? Calculate It... Detailed Guidelines for Dispute Mediation Criteria

The financial supervisory authorities have released a draft dispute resolution standard (draft standard) related to the large-scale loss incident involving Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) based equity-linked securities (ELS). As before, a basic compensation ratio (20~40%) is set, but this is adjusted by factors such as the distributor weighting (3~10%), investor factors ±45 percentage points, and adjustment factors ±10 percentage points.

The factors are broadly divided into distributor factors and investor factors. Since the distributor factor is determined by each bank or securities firm, the key element in deciding the individual investor’s compensation ratio is the investor factor, which can vary by as much as ±45 percentage points. Investment experience in ELS products (-2~-25%) and purchase (subscription amount) and profit scale (-5~-15%) are considered. Cases with no investment experience and clear evidence of mis-selling will be subject to a high compensation ratio, but investors who had repeatedly invested in ELS products and realized significant profits before this incident are expected to have a compensation ratio approaching 0%.

The draft dispute resolution standard below specifies in detail how these can be applied, allowing individuals to assess their own compensation ratio based on their circumstances.

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