SFC reprimands and fines Convoy Asset Management
The Securities and Futures Commission (SFC) has announced that it has reprimanded and fined Convoy Asset Management (CAM) HKD6.4 million for control failures in solicitation and recommendation of bonds to clients.
The SFC found that CAM referred clients to a third party platform between March 2015 and January 2017 to execute 30 transactions of bonds listed under Chapter 37 of the Main Board Listing Rules (Chapter 37 Bonds), some of which involved solicitation or recommendation made to clients, the regulator said in a press release.
In recommending Chapter 37 Bonds to clients, CAM failed to conduct proper and adequate product due diligence on these bonds before making recommendation or solicitation; have an effective system in place to ensure that the recommendation or solicitation in relation to bonds was suitable for and reasonable in all the circumstances; maintain proper documentary records of the investment advice or recommendation given to its clients and provide each of them with a copy of the written advice; and have adequate and effective internal controls and system in place to diligently supervise and monitor the sale of bonds through the third party platform and to ensure its compliance with applicable regulatory requirements.
In deciding the disciplinary sanctions, the SFC took into account that CAM failed to put in place an effective system to ensure product suitability despite the SFC’s repeated reminders to licensed corporations on the importance of compliance with the suitability obligations and the specific guidance regarding the selling of fixed income products, complex and high-yield bonds; a strong message has to be sent to the market to deter similar misconduct; there is no evidence suggesting complaints or losses by CAM’s clients; CAM has decided to cease selling Chapter 37 Bonds to clients; CAM is now under the management of a new team of directors and managers-in-charge; CAM cooperated with the SFC in resolving the SFC’s concerns; and CAM has an otherwise clean disciplinary record.
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