Hong Kong SFC disciplines and fines securities firm over handling of professional investors and documentation of advice

15 Nov 2012

The Hong Kong Securities and Futures Commission (SFC) has announced that it has reprimanded CIC Investor Services Limited (CIC) and fined it HK$4 million for failures to comply with regulatory requirements when treating clients as professional investors and to keep adequate records of its investment advice to clients.

The SFC stated that an investigation had revealed CIC had failed to:

• evidence that clients had met the requisite professional investor requirements under the Hong Kong Securities and Futures Ordinance (Professional Investors) Rules;
• adequately assess the investment experience of its clients as required under the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC (Code of Conduct); and
• obtain signed declarations from clients who agreed to be treated as professional investors as required under the SFC’s Code of Conduct.

In addition, the SFC stated that CIC failed to maintain adequate documentary records of its investment advice given to clients as required by the SFC’s Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the SFC.

The SFC stated that CIC had agreed to engage an independent reviewer, to be agreed by the SFC, to review its internal controls in relation to identification and treatment of professional investors and the provision of investment advice. The SFC confirmed that CIC had also agreed to implement all recommendations to be made by the reviewer.

In its consideration of the disciplinary action, the SFC said that it had taken into account the duration of CIC’s failures (between 2004 and 2010), CIC’s clean disciplinary record and the cooperation of CIC in the resolution of the disciplinary proceedings.

Copies of the Statement of Disciplinary Action and the SFC’s press release are available.