The Securities and Futures Commission (SFC) has reprimanded and fined EFG Bank AG (EFG Bank) $2 million for dealing in futures contracts without the required registration (Note 1).

The SFC found that between 1 April 2003 and 22 November 2016, EFG Bank executed 139 transactions in offshore listed index options for 11 clients without the required registration to deal in futures contracts (Notes 2 & 3).

The SFC is of the opinion that EFG Bank’s failure to ensure compliance with a registration requirement under the Securities and Futures Ordinance, amounting to a breach of the Code of Conduct, called into question the fitness and properness of EFG Bank as a regulated person (Notes 4 & 5) .

In deciding the disciplinary sanctions, the SFC took into account that:

  • EFG Bank initiated a review of its offshore listed index options activities and self-reported the unlicensed activities to the SFC;
  • there is no evidence to suggest that the non-compliance was intentional;
  • EFG Bank co-operated with the SFC in resolving the SFC’s concerns;
  • EFG Bank has taken remedial measures to strengthen its internal controls to avoid recurrence of similar issues; and
  • EFG Bank has an otherwise clean disciplinary record with the SFC.

End

Notes:

  1. EFG Bank is a registered institution under the Securities and Futures Ordinance (SFO) to carry on business in Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities.
  2. Under section 114 of the SFO, no person shall carry on a business in a regulated activity or hold himself out as carry on a business in a regulated activity without a licence or registration for the regulated activity.
  3. The offshore listed index option fell within the definition of “futures contracts” under the SFO.
  4. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct).
  5. General Principle 7 (Compliance) and paragraph 12.1 (Compliance: in general) of the Code of Conduct require a licensed or registered person to comply with, and implement and maintain measures appropriate to ensuring compliance with, all regulatory requirements applicable to the conduct of its business activities.