The Securities and Futures Commission (SFC) has reprimanded and fined JS Cresvale Securities International Limited (JS Cresvale Securities) HK$2.5 million over serious deficiencies in relation to its sale of two unlisted investment products involving US$99 million between 2008 and 2010 (Note 1).
The disciplinary action followed an SFC investigation which found serious deficiencies in JS Cresvale Securities’ systems and controls for ensuring the suitability of the recommendations or solicitations it made to clients when selling the two products, namely, 浩騰科技信用連結債券and浩騰11海外可轉換公司債. The products were recommended and sold to 59 clients in 2008, 26 clients in 2009 and 4 clients in 2010.
Specifically, the SFC found that JS Cresvale Securities:
- did not conduct any product due diligence or risk assessment on the products;
- did not have complete risk profiles of its clients as no steps were taken to assess the clients’ risk tolerance levels;
- had no systems and controls to guide its representatives to conduct proper suitability assessment when selling the products; and
- did not maintain documentary records of the investment advice or recommendations given to its clients nor provide clients with a copy of the written advice.
In determining the penalty, the SFC took into account that:
- JS Cresvale Securities co-operated in resolving the disciplinary proceedings;
- it agreed to conduct an independent review of its systems and controls for distribution of unlisted investment products and to enhance its complaint handling procedures; and
- there is no evidence of client loss suffered from its distribution of the two unlisted products.
Note:
- JS Cresvale Securities is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities. JS Cresvale Securities’ licence for Type 2 (dealing in futures contracts) regulated activity has been suspended since September 2014.
A copy of the Statement of Disciplinary Action is available on the SFC website