Unauthorized Portfolio Management

In HK, there have been enforcement cases against financial consultants who mis-advised clients of frequent fund switching. The situation would be even worse if such switching activities are not authorized by clients.

FSA fined Charterhouse Consulting Wealth Management Ltd £122,500 for carrying out discretionary portfolio management without permission and for various conduct of business failings.

Charterhouse regularly switched a number of clients between funds although the firm did not have permission to operate in this way. It would often send clients an email before 6.30am in the morning proposing the switching of funds and requiring a response by 8.00 am. Switches would then take place without any further instruction from the client.

Charterhouse also failed to:

• record sufficient client information to demonstrate the suitability of its advice;
• ensure transactions were appropriate for its customers' attitude to risk; and
• communicate with its clients in a clear, fair and not misleading manner.

Charterhousethe has taken mitigating steps to regularize its business activities which included the cessation of business activities falling outside its permitted activities. As a result of agreeing to settle at the earliest opportunity Charterhouse has received the maximum 30%, discount afforded under FSA's "Discount Scheme". The fine would otherwise have been £175,000.