SFC reprimands and fines Credit Suisse (Hong Kong) Limited, Credit Suisse Securities (Hong Kong) Limited and Credit Suisse AG $39.3 million for regulatory breaches

8 Feb 2018



The Securities and Futures Commission (SFC) has resolved its concerns with Credit Suisse (Hong Kong) Limited (CSHK), Credit Suisse Securities (Hong Kong) Limited (CSSHK) and Credit Suisse AG (CSAG) (collectively, Credit Suisse) over internal control failures.

Under the resolution, the SFC reprimanded and fined Credit Suisse a total of $39.3 million for regulatory breaches, including failures in segregating client securities, reporting direct business transactions, complying with short selling requirements, electronic trading requirements and contract notes rules as well as failures in internal controls designed to ensure that investment products sold to customers were suitable (Notes 1 & 2).

The SFC’s disciplinary action followed independent reviews agreed by the SFC and Credit Suisse and an SFC investigation, which found that (Note 3):

CSHK had:

CSSHK had:

CSAG had:

The SFC considers that Credit Suisse’s systems and controls were inadequate and failed to ensure compliance with the Securities and Futures (Client Securities) Rules, Securities and Futures (Short Position Reporting) Rules, Securities and Futures (Contract Notes, Statements of Account and Receipts) Rules, short selling provisions of the Securities and Futures Ordinance, Trading Rules of the SEHK, and various provisions of the Code of Conduct (Notes 5 & 6).   

The SFC’s Executive Director of Enforcement, Mr Thomas Atkinson, said: “In this instance, Credit Suisse’s prompt and extensive co-operation have significantly expedited the effective resolution of the issues that caused the SFC’s concerns.  Otherwise, the sanctions for similar failures would have been substantially higher.”

In reaching this resolution, the SFC took into account all circumstances, including:

End

Notes:

  1. CSHK is licensed under the Securities and Futures Ordinance (SFO) to carry on business in Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 5 (advising on futures contracts), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities.  CSSHK is licensed under the SFO to carry on business in Type 1 (dealing in securities), Type 4 (advising on securities) and Type 7 (providing automated trading services) regulated activities.  CSAG is registered to carry on business in Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities.
  2. In respect of CSAG, the failures in question concerned the business activities of the Hong Kong branch of CSAG.
  3. The SFC and Credit Suisse jointly engaged independent reviewers in the last quarter of 2016 in light of self-reports submitted by Credit Suisse and a referral from the SEHK.  Prior to the engagement of the independent reviewers, the SFC had also investigated concerns in relation to CSHK’s failure to report reportable short positions to the SEHK from June 2012 to October 2014.
  4. As part of the independent reviews, the suitability of 123 risk mismatch transactions excluded from CSAG’s monitoring reports which resulted in a loss to clients was reviewed.  Six transactions were found to be unsuitable for the relevant clients while the suitability of four other transactions were inconclusive because CSAG failed to maintain adequate documentation of the sales process.
  5. Details of the relevant regulatory requirements are set out in the Statement of Disciplinary Action.
  6. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct).

A copy of the Statement of Disciplinary Action is available on the SFC website



Page last updated : 8 Feb 2018