The Securities and Futures Commission (SFC) announced the reprimand and fine of Convoy Asset Management Limited $6.4 million for control failures in solicitation and recommendation of bonds to clients.
The Commission found that of Convoy Asset Management referred clients to a third-party platform between March 2015 and January 2017 to execute 30 transactions of bonds, some of which involved solicitation or recommendation made to clients.
The SFC found that Convoy Asset Management failed to conduct proper and adequate due diligence on these bonds before making its recommendations. The company did not have effective system in place to ensure that its recommendations was suitable for and reasonable in all the circumstances and failed to maintain proper documentary records of the investment advice given to its clients. Moreover, Convoy Asset Management lacked adequate and effective internal controls and system in place to diligently supervise and monitor the sale of bonds through the third-party platform and to ensure its compliance with applicable regulatory requirements.
In the disciplinary actions taken, the SFC noted that Convoy Asset Management failed to ensure product suitability despite the SFC’s repeated reminders to licensed corporations on the importance of compliance with the suitability obligations and the specific guidance regarding the selling of fixed income products, complex and high-yield bonds. However, there is no evidence of complaints or losses from the company’s clients. Convoy Asset Management is now under new management team and has cooperated with the SFC to resolve the Commission’s concerns.
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