Hong Kong's Securities and Futures Commission (SFC) has reprimanded CIC Investor Services and fined it HK$4 million ($516,000) for failing to comply with regulations on treating clients as professional investors and keeping adequate records of investment advice to clients.
The French firm is licensed to deal in and advise on securities in Hong Kong, where it employs 40 people. The SFC says the duration of the failures stretched from 2004 to 2010.
The SFC states that CIC Investor Services failed to provide evidence, either by certificate or custodian statements in the last 12 months, that its clients met the requirements of professional investor, as set out under the Securities and Futures Ordinance (either alone or by joint account they had at least $8 million or equivalent in foreign currency).
CIC also failed to assess the investment experience of its clients; to obtain signed declarations from clients on their agreement to be treated as professional investors; and to maintain adequate documentary records of its investment advice given to clients.
“Intermediaries have to know and assess the investment experience of the professional investors in terms of the investment products they have traded, the frequency and size of their trades, the years of experience in the relevant markets and their awareness of the risks involved in the relevant market," the SFC says in its statement.
"One of the consequences of being treated as a professional investor is that certain provisions of the [SFC’s] code of conduct designed to protect investors can be waived,” it adds, such as ensuring product suitability for customers.
As a result of the SFC’s action CIC agreed to engage an independent reviewer to examine its internal controls and to implement all recommendations by the reviewer.
CIC Investor Services’ Asia headquarters in Singapore offers private banking, corporate and structured finance, and treasury products.