Hong Kong Securities and Futures Commission reprimands and fines EFG Bank AG HKD 10.85 million for product due diligence, record-keeping and late reporting failures

The Hong Kong Securities and Futures Commission (SFC) has reprimanded and fined EFG Bank AG (EFG) HKD 10.85 million for regulatory breaches and internal control failures relating to product due diligence, record-keeping and late reporting between January 2015 and December 2020. The action followed an investigation stemming from EFG’s self-report and a referral of findings from the Hong Kong Monetary Authority (HKMA), with the press release issued jointly by the SFC and HKMA. EFG’s product due diligence shortcomings included failing to take account of special features when assessing 322 bonds, not updating internal policies in a timely manner to reflect regulatory changes, and not ensuring customers received sufficient information and warning statements for certain complex products before or at the point of each transaction. The SFC also found that EFG failed to keep product due diligence records for 141 bonds and did not immediately report its due diligence failures to the SFC after first suspecting them in July 2020. In setting the sanctions, the SFC considered EFG’s remedial measures and its cooperation with the HKMA and the SFC, and noted that EFG will implement Enhanced Complaint Handling Procedures to review complaints from customers who acquired affected products during the period. EFG’s impact assessment indicated it might have failed to take into account special features for 351 products, and the complaint process will apply to complaints relating to any of those products.