The Securities and Futures Commission (SFC) has reprimanded and fined Capital Global Management Limited (CGML) $1.5 million for its failures to ensure compliance with applicable laws and regulations in distributing investment funds and offering investment advice in Taiwan, and to adequately supervise the business activities of its representatives to ensure such compliance (Note 1).
In August 2015, the Prosecution Office of the Taipei District Court fined the former owners of CGML for distribution of offshore investment funds and offer of investment advice in Taiwan from 2005 to 2014 without obtaining prior approval, in contravention of Taiwan’s Securities Investment Trust and Consulting Act (Note 2).
The SFC’s investigation found that CGML’s licensed representatives operated and performed sales functions and distributed investment products to clients in Taiwan between July 2014 and April 2015.
CGML’s failures to ensure compliance with applicable laws and regulations in Taiwan and to adequately supervise its representatives have raised the SFC’s concern over its fitness and properness as a licensed corporation (Note 3).
In coming to the decision to take disciplinary action against CGML, the SFC has taken into account that CGML has no previous disciplinary record with the SFC.
The SFC issued a circular to intermediaries in January 2014 to remind them about their obligations when conducting cross-border business, including the importance of ensuring compliance with all relevant laws and regulations (Note 4). The SFC considers that compliance with applicable laws and regulations is fundamental to the reliability of an intermediary in carrying on its business in regulated activities.
Notes:
- CGML is licensed under the Securities and Futures Ordinance to carry on business in Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities. CGML was acquired by First Financial Holdings Limited in November 2016.
- Article 16 of the Securities Investment Trust and Consulting Act of Taiwan provides, among other things, that “No person may, itself or as an agent, engage within the Republic of China in the public offer, sale, or investment consultancy of offshore funds without first obtaining approval from the Competent Authority or effective registration upon filing with the Competent Authority.” The Competent Authority is the Financial Supervisory Commission R.O.C. (Taiwan).
- General Principle 7 and paragraph 12.1 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct) require a licensed corporation to comply with, and implement and maintain measures appropriate to ensuring compliance with, the law and applicable regulatory requirements. Paragraph 4.2 of the Code of Conduct requires a licensed corporation to supervise diligently persons employed to conduct its business.
- Please see the circular titled “Regulatory Compliance regarding Cross-border Business Activities” dated 28 January 2014.
A copy of the Statement of Disciplinary Action is available on the SFC website
