SFC has just suspended the licence of Ms Kou Sao Peng for three months from 4 August 2010 to 3 November 2010. SFC's investigation found that Kou, while acting as a consultant of TTG (HK) Ltd, an investment adviser, introduced a non-SFC authorised fund to several clients in 2008.
The introduction of the fund preceded the completion of due diligence process by TTG. As such, the fund was not yet approved by TTG for recommendation to clients. In order to sell the fund to her clients, Kou asked her clients to sign a form acknowledging themselves as "execution only" clients who specifically requested to purchase the fund. Kou should not have done so given the fund was actually introduced by her to the clients.
An "execution only" transaction usually means a transaction executed by a firm upon the specific instructions of a client without solicitation or recommendation by the firm, where the firm does not, and is not expected to give investment advice relating to the merits and suitability of the transaction.
Moreover, Kou did not consider TTG’s due diligence on the fund before introducing it to the clients and ignored an instruction from her supervisor to monitor the fund for a longer period before introducing it to any clients.
In suspending Kou, SFC did not consider that Kou had acted dishonestly. Had there been a finding of dishonesty, the SFC would have imposed a more severe sanction.
Jack's comment: In the past, there were many investment consultants who attempted to deny solicitation of clients for purchasing non-authorized products by asking the clients to sign the "execution only" acknowledgement. This case reveals that such arrangement may not work.
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