The Securities and Futures Commission (SFC) has found that EFG Bank executed non-compliance trading of offshore-listed index options for clients between 1 April 2003 and 22 November 2016, according to a statement from the regulator.
After receiving advice from lawyers, EFG Bank self-reported to the regulator that it had executed certain transactions for clients which might constitute a type 2 (dealing in futures contracts) regulated activity under the Securities and Futures Ordinance.
Over the 13-year period, EFG bank was a license holder of type 1 (dealing in securities), type 4 (advising on securities) and type 9 (asset management).
During the reported period, the bank had executed 139 offshore-listed index option transactions for 11 clients, without a type 2 registration, the SFC said in the statement. The transactions involved a premium [contract value] of about $65m and the bank earned $27,629 in commission from them over the 13-year period.
The SFC also stated that the bank’s non-compliance activity had steered away from some of the principles in the code of conduct provided by the regulator.
The SFC imposed a fine of HK$2m ($260,000) for the bank’s failure to put adequate controls in place to ensure compliance with registration.
In imposing the fine, the SFC said it took several factors into account:
- The bank had self-reported the activities to the Commission after receiving external legal advise
- There is no evidence to suggest that the non-compliance was intentional
- Following the reporting, the bank co-operated with the Commission in resolving the regulator’s concerns
- The bank has taken remedial measures to strengthen its internal controls to avoid recurrence of similar issues
- The bank has an otherwise clean disciplinary record with the regulator
In October 2016, the SFC took enforcement action against JP Morgan Securities (Asia Pacific) and JPMorgan Chase Bank and fined them HK$3m and HK$2.6m, respectively, for similar regulatory breaches.
The action prompted EFG bank to initiate an internal review to determine whether it had committed regulatory breaches and the bank sought external legal advice, according to the SFC.
