The Securities and Futures Commission (SFC) has reprimanded and fined Phillip Securities (Hong Kong) Limited (Phillip Securities) $1 million for failings over its sale of a fund to four clients.
Phillip Securities has also agreed to repurchase the fund from the clients at the principal amount less dividends plus interest if the amount had been invested in a 12-month fixed term deposit over the same period of time.
An SFC investigation revealed that Phillip Securities sold the American Pegasus Fixed Income Fund – Series II Segregated Portfolio to the four clients around August 2004, involving transaction amount of approximately $819,000. The fund was liquidated in July 2011 and the clients have not been able to recover their investment.
The SFC found that Phillip Securities failed to conduct adequate due diligence on the fund before selling it to clients. Provide adequate training and/or sufficient product information to its sales staff to ensure they fully understand the nature of the fund, the risks involved, and for which types of investors the fund would have been suitable; and implement sufficient measures to ensure that its sales staff had assessed the suitability of the fund to clients, and to monitor and review the selling process.
In deciding the sanction, the SFC took into account that Phillip Securities has co-operated with the SFC in resolving the disciplinary proceedings.
