On May 29, HK SFC fined Noah Holdings HK$5mn for sales controls.
- SFC fined Noah Holdings HK$5mn for system and control failure in product sales.
Alleged Violations
- Internal system, control failures, in sale and distribution of investment products.
- Failure to comply with requirements on know-your-client, product due diligence,
suitability assessment, information to clients and sales supervision and controls.
SFC Findings
- Action followed inspection and review which found concerns between 2014-2016.
- Defective questionnaires used to assess client risk appetite, risk tolerance levels.
- Failed to ensure features and risks of investment products sufficiently considered
when assigning risk rating to a product, as part of product due diligence process. - Consequently, the firm sold potentially unsuitable investment products to clients.
- Did not require sales staff to document rationale for advice or give clients a copy.
- Inadequate supervision, control mechanism in place for monitoring product sales.
Considerations
- Took into account, that firm engaged an independent reviewer to conduct review.
- To address SFC regulatory concerns, and review its internal systems and controls.
- Noah UK had agreed to reimburse affected clients for their loss from product sale.
- Took action to strengthen internal systems, controls, engaged external consultant.
- Undertook to provide SFC with report prepared by an reviewer within 12 months.
- Cooperated with SFC to resolve concern; had no disciplinary record with the SFC.
