Practice Note 12.6.1 — Contract Notes

Issue Date	Cross Reference	Enquiries
Added on 1 July 2016 1 July 2016	Rule 12.6.1	Please contact Member Supervision: Facsimile No : 6538 8273

1. Introduction

1.1. Rule 12.6.1 requires a Trading Member to send its customer a contract note for the purchase or sale of securities or Futures Contracts.

1.2. This Practice Note provides guidance on:

1.2.1. other Rules which are of relevance to the requirement to send contract notes to customers; and

1.2.2. the internal controls that Trading Members should have with respect to operational processes for sending contract notes to customers.

2. Other Relevant Rules

2.1. Rule 12.6.1 should be read together with the following Rules:

2.1.1. Rule 12.9.1 requires a Trading Member to communicate directly with its customers in respect of statements, contract notes, or all other information, whether in writing or electronically, unless the customer has authorised otherwise in writing;

2.1.2. Rule 12.9.2 requires that a Trading Member must not allow any person other than the customer to collect any cash, share certificates, contract notes, credit or debit notes, cheques or statements, unless the customer has authorised that person in writing; and

2.1.3. Rule 12.14.1 requires a Trading Member to have processes in place to minimise and manage any conflicts of interest, including but not limited to separating its front office and back office functions to prevent any conflict of interests.

3. Internal Controls with Respect to Contract Notes

3.1. Trading Members should have appropriate internal controls in place to ensure that no contract note is omitted or suppressed. Basic controls that Trading Members should have in place include the following:

3.1.1. proper controls to maintain the accuracy of customers' contact information;

3.1.2. robust controls over the generation and dissemination of contract notes;

3.1.3. proper segregation between the personnel responsible for trade execution and the personnel responsible for generating and disseminating contract notes; and

3.1.4. ensuring that appropriate channels are available for customers to enquire about or verify transactions reflected in their contract notes.