Enforcement collaboration between HKMA and SFC – SFC reprimands and fines EFG Bank AG HK$10.85 million for regulatory breaches and internal control failures

Enforcement collaboration between HKMA and SFC – SFC reprimands and fines EFG Bank AG HK$10.85 million for regulatory breaches and internal control failures      
     The SFC’s investigation stemmed from a self-report from EFG and a referral of findings from the Hong Kong Monetary Authority (HKMA) (Note 3).
      
     Regarding product due diligence, EFG failed to take into account special features of various products when conducting such assessment on 322 bonds and update its internal policies to reflect regulatory changes in a timely manner. It also failed to ensure that sufficient information and warning statements relating to the distribution of certain complex products were provided to customers before or at the point of each transaction.
      
     As for record keeping and late reporting, EFG failed to keep product due diligence records for 141 bonds, and it did not immediately report to the SFC its product due diligence failures when it first suspected of them in July 2020 (Note 4).
      
     In deciding the sanctions, the SFC took into account all relevant circumstances, including:
           A copy of the Statement of Disciplinary Action (appended with a list of the 351 products) is available on the SFC website    
Note 1: This press release is issued jointly by the SFC and the HKMA.
Note 2: EFG is registered to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance.
Note 3: The HKMA referred its findings to the SFC following an investigation into EFG’s self-report on its product due diligence failures.
Note 4: Contrary to the Code of Conduct for Persons Licensed by or Registered with the SFC and the Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the SFC.
Note 5: The ECHP is designed to ensure that EFG conducts an intensive review into the relevant transactions to ensure that complaints are resolved in a fair and reasonable manner. According to an impact assessment by EFG, it might have failed to take into account special features for 351 products when conducting product due diligence during the Relevant Period. EFG shall apply the ECHP to any complaints which may be made by customers who have acquired any of these 351 products during the Relevant Period.
Issued at HKT 16:40