Investment Adviser Fined

In the two reports on thematic inspections of investment advisers, SFC stated that it had identified certain malpractices of Hong Kong's investment advisers. So far not too many cases have been concluded and announced, thus the following one is remarkable.

This week SFC issued a reprimand to Mr Choy Kwong Wa Christopher, a former responsible officer of Pacific World Asset Management Ltd (then licensed for RA4 & RA9), and fined him $570,000.

SFC found that Choy:

• mis-stated in a fund's marketing materials the credit rating of the notes in which Pacific World invested through the fund;
• accepted commission from the notes issuer without disclosing this to his clients, which may create a potential conflict of interests in that Pacific World's advice as to the suitability of this fund may have been influenced by that commission;
• failed to ensure that Pacific World's clients received updated information about a reduction in the fund's net asset value and surrender price from the fund launchers;
• failed to ensure that Pacific World's investment advisers kept a record of advice they gave their clients; and
• did not supervise the suitability of investment advice given to clients.

Pacific World has already ceased businesses of regulated activities and therefore Choy alone bears the overall responsibility. The magnitude of the fine reflects the seriousness of this case. What other IA firms would follow?