Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined EFG Bank AG $10.85 million for failures relating to product due diligence, record-keeping and late reporting between January 2015 and December 2020 (Relevant Period).

The SFC’s investigation stemmed from a self-report from EFG and a referral of findings from the Hong Kong Monetary Authority (HKMA).

Regarding product due diligence, EFG failed to take into account special features of various products when conducting such assessment on 322 bonds and update its internal policies to reflect regulatory changes in a timely manner. It also failed to ensure that sufficient information and warning statements relating to the distribution of certain complex products were provided to customers before or at the point of each transaction.

As for record keeping and late reporting, EFG failed to keep product due diligence records for 141 bonds, and it did not immediately report to the SFC its product due diligence failures when it first suspected of them in July 2020.

In deciding the sanctions, the SFC took into account a variety of factors, including the fact that EFG has taken remedial measures to enhance its product due diligence framework, as well as EFG’s cooperation with the HKMA and the SFC in resolving the concerns identified in the investigations.