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The Securities and Futures Commission (SFC) issued a circular on 27 March 2020 reminding the industry of the importance of compliance with the suitability obligation. Deacons’ client alert, which you can access here provides a succinct summary of the sources of the suitability obligation and the SFC’s FAQs on the subject. The alert also drew attention to the sampling and monitoring obligations under FAQ 10, which are frequently overlooked.
On 7 May 2020 the SFC reported that it had publicly reprimanded and fined Mega International Commercial Bank Co., Ltd. (Bank) HK$7 million over the Bank’s internal system and control failures in relation to the sale of collective investment schemes. The SFC’s investigation was triggered by a referral from the Hong Kong Monetary Authority (HKMA). The Bank also engaged an independent reviewer to validate whether the shortcomings had been adequately addressed and undertook to submit the validation review report to the SFC and the HKMA as soon as it is available. The SFC’s statement of disciplinary action can be found here.
The SFC’s investigation revealed significant systems and controls failures in the Bank’s sales process, in particular in relation to:
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