Hong Kong Monetary Authority and Securities and Futures Commission support disciplinary action as the SFC fines EFG Bank AG HKD 10.85 million for product due diligence and reporting failures

The Hong Kong Monetary Authority and the Securities and Futures Commission (SFC) published a joint enforcement update after the SFC reprimanded and fined EFG Bank AG (EFG) HKD 10.85 million for failures relating to product due diligence, record-keeping and late reporting between January 2015 and December 2020. The case followed EFG’s self-report and a referral to the SFC of findings from the Hong Kong Monetary Authority. The SFC found that EFG did not take into account special features when assessing 322 bonds and did not update internal policies to reflect regulatory changes in a timely manner, and it failed to ensure sufficient information and warning statements were provided to customers for certain complex products before or at the point of transaction. EFG also failed to keep product due diligence records for 141 bonds and did not immediately report its product due diligence failures to the SFC when it first suspected them in July 2020, contrary to the SFC Code of Conduct and relevant internal control guidelines. In setting the sanctions, the SFC took into account remedial measures and EFG’s cooperation with both authorities, and noted EFG’s plan to implement Enhanced Complaint Handling Procedures to review complaints relating to affected products; EFG’s impact assessment indicated it might have failed to take into account special features for 351 products during the relevant period.