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The SFC’s recent public reprimand and fine of HK$6.3 million against a licensed corporation (the Company) brings various provisions of the Code of Conduct and Internal Control Guidelines to the forefront. It also highlights the need for licensed corporations to fully comply with any licensing conditions. Outlined in this article are the key facts of this case and a summary of what licensed intermediaries can learn from this disciplinary action.
Factual background leading up to the disciplinary action
The Company, which holds type 1, 4 and 9 licences, was subject to the following licensing conditions:
The SFC found that the Company had breached its licensing conditions by:
Following the SFC’s investigation, a number of other significant findings were made relating to product due diligence, suitability of recommendations, documentation of investment advice, and disclosure of monetary benefits. As a result, the fitness and properness of the Company to carry on regulated activities were called into question.
Key reminders to licensed intermediaries
The various breaches committed by the Company should be a stark reminder to other licensed intermediaries that, in addition to adherence to licensing conditions, they need to have systems and controls in place ensuring:
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