SFC-Led Investigation of Honk Kong Brokers Reveals Serious Conduct Flaws

SFC-Led Investigation of Honk Kong Brokers Reveals Serious Conduct Flaws

The SFC regulator of Hong Kong launched an investigation campaign into 50 licensed firms offering FX trading or similar services. As a result of the examination, the Securities and Futures Commission uncovered some troubling deficiencies. The survey focused on client onboarding practices, overall services, marketing techniques, and types of products offered.

The watchdog revealed that many firms did not conduct the client verification process properly and according to industry regulations, stating that some companies did not even make sure if a provided bank account was based in Hong Kong or not.

Moreover, non face-to-face onboarding had also been under the radar of the broker, as it noticed some serious lapses in both facial recognition technologies and further client verification procedures that have to do with ID documents. Lapses in these may result in impersonators that trade on behalf of the user without his/her knowledge. This can cause considerable damage when considering that in the past 12 months 96% of all new accounts that have been opened in Hong Kong local brokers were the result of non face-to-face procedures. These worrying numbers might have acted as a catalyst for the SFC to launch its survey.

The SFC also found that many financial firms were not appropriating enough resources in providing due diligence for some crucial regulatory requirements, like client personal information confidentiality.

Other lapses include in the lack of monitoring activities concerned with information posted on the firms’ sites, and inadequate risk profiling.

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