The Securities and Futures Commission (SFC) has reprimanded and fined Convoy Asset Management HK$6.4m ($830,000) for control failures in solicitation and recommendation of bonds, according to a statement from the regulator.
Between March 2015 and January 2017, the firm referred clients to a third-party platform to execute 30 transactions of Chapter 37 bonds, which are debt securities offered only to professional investors.
However, the firm’s due diligence on the products was inadequate, the statement said.
It also lacked proper documentation procedures as well as internal controls to monitor the sale of the bonds through the third-party platform.
“[D]espite the SFC’s repeated reminders to licensed corporations on the importance of compliance with the suitability obligations and the specific guidance regarding the selling of fixed income products, complex and high-yield bonds, the firm failed to put in place an effective system to ensure product suitability”, the statement said.
The regulator added that there were no client complaints or losses and Convoy has decided to stop selling Chapter 37 bonds.
Convoy AM is a subsidiary of listed independent financial adviser Convoy Financial Group in Hong Kong. The firm provides a range of financial products including insurance and MPF mutual funds, securities and mortgages, according to the firm’s website.
The asset management arm holds three licenses from the SFC: dealing in securities (type 1), advising on securities (type 4) and asset management (type 9), according to the regulator’s website.
SFC re-appoints CEO
In a separate statement, the SFC said it has re-appointed Ashley Alder as the CEO for another three-year term, effective from 1 October 2020.
Alder was first appointed as the CEO on 1 October 2011 and his current term will end on 30 September 2020.
“After a careful re-assessment of the circumstances now facing Hong Kong and global economies and financial markets, and having discussed the situation with the government, I have accepted an invitation to remain at the helm of the SFC at a time when regulatory clarity is more important than ever to ensure that the financial system functions reliably and with integrity throughout a period of exceptional stress,” Alder said in the statement.