Hong Kong SFC Fines Noah Holdings $640,000 for Mismatch Transactions and Defective Risk Profiling

Hong Kong SFC Fines Noah Holdings $640,000 for Mismatch Transactions and Defective Risk Profiling

Hong Kong’s Securities and Futures Commission (SFC) has fined Noah Holdings $640,000 (HK$5 million) for regulatory breaches.  Noah HK, one of Hong Kong’s leading wealth management firm had lapses in control failures that led to incidents such as 1,243 potential mismatch transactions involving $532 million and defective Risk Profile Questionaires (RPQ).

” Hong Kong SFC Fines Noah Holdings $640,000 for Regulatory Breaches “

• Noah HK’s risk profiling questionnaires for assessing clients’ risk appetite and risk tolerance level were defective in certain areas;
• Noah HK failed to ensure the features and risks of certain investment products were sufficiently considered when assigning a risk rating to the product as part of the product due diligence process;
• Noah HK had sold clients potentially unsuitable investment products as a result of its deficient risk profiling questionnaires and product risk rating framework.
• Noah HK did not require its sales staff to document the rationale underlying the investment advice or recommendations prior to March 2016, nor did it require them to provide clients with copies of such information; and
• Noah HK did not have an adequate supervision and control mechanism in place for monitoring the sale of investment products.

Notes:

• The independent reviewer identified that a total of 1,243 transactions worth about US$523 million, involving 757 clients, were affected by the identified concerns.  All of these affected clients were classified by Noah HK as “professional investors” as defined in the SFO and its subsidiary legislation.
• In respect of each affected client who had redeemed the investment with a net realised loss or who is still holding the investment, Noah HK agrees to reimburse the client for the realised loss and/or make an offer to redeem or sell the client’s holding and reimburse the client for any loss resulting from the redemption or sale (as the case may be).

Source: SFC