Hong Kong's Securities And Futures Commission Reprimands And Fines FWD Life Insurance Company (Bermuda) Limited $2.4 Million For Regulatory Breaches

The Securities and Futures Commission (SFC) has reprimanded and fined FWD Life Insurance Company (Bermuda) Limited (FWD Life) $2.4 million for failures in complying with the key personnel requirements under the SFC Code on MPF Products (MPF Code) and the Fund Manager Code of Conduct (Notes 1, 2 & 3).

The SFC found that FWD Life failed to ensure there were at least two key personnel who met the minimum five-year investment experience requirement in managing retirement funds or public funds under the MPF Code at all times.

Specifically, from December 2012 to November 2016, FWD Life had only one key personnel in place who met the minimum investment experience requirement.  FWD Life only discovered it had insufficient key personnel when the Mandatory Provident Fund Authority made enquiries in January 2017 (Note 4). 

The SFC also found that FWD Life failed to implement policies and procedures for the designation and monitoring of key personnel and to communicate to relevant staff members of their designation as key personnel.  FWD Life’s failure in this respect contributed to the duration of its breach of the MPF Code (Notes 5 & 6).

In deciding the disciplinary sanctions, the SFC took into account all circumstances, including:

• FWD Life’s regulatory breaches lasted almost four years;
• FWD Life had engaged an independent reviewer to review the cause, extent and impact of its breach of the MPF Code, and the adequacy of its internal controls;
• FWD Life had no previous disciplinary record with the SFC;
• FWD Life had taken steps to implement written policies and procedures for the designation and monitoring of key personnel to ensure compliance with the MPF Code; and
• FWD Life’s cooperation in resolving the SFC’s concerns.

Notes:

1. FWD Life is currently licensed under the Securities and Futures Ordinance to carry on Type 9 (asset management) regulated activities.
2. FWD Life’s business was acquired by Pacific Century Group in February 2013.
3. Paragraph 6.4 of the MPF Code provides that the investment manager must comply with the Fund Manager Code of Conduct issued by the SFC.
4. Paragraph 6.6(a) of the MPF Code requires the key personnel of the investment manager to possess at least five years investment experience managing pooled retirement funds or other public funds with reputable institutions.  The expertise gained should be in the same type of investments as those for the pooled investment fund or constituent fund(s) of the MPF scheme seeking authorization.
5. Paragraph 6.6(d) of the MPF Code provides that the SFC must be satisfied with the overall integrity of the investment manager.  Investment managers must provide reasonable assurance of the adequacy of its internal controls and the existence of written procedures, which should be regularly monitored by its senior management for updatedness and compliance.
6. Paragraph 1.2 of the Fund Manager Code of Conduct requires a fund manager to, among other things, maintain satisfactory internal controls and written compliance procedures which address all applicable regulatory requirements.